2024 (10) TMI 1033 - HC - GST

Property Auction Suspended: Tax Recovery Dispute Paused, Transactions Under Scrutiny and Alienation Blocked

HC of Andhra Pradesh halted property auction for tax recovery under CGST Act. Court stayed proceedings due to disputed transactions, prohibited property ... Declaration of transactions as void under Section 81 of the Central Goods and Services Tax Act, 2017 - sham transaction - requirement of determination by a competent authority before treating transactions as void - stay of recovery/auction proceedings - prohibition on alienation of attached property during pendencyDeclaration of transactions as void under Section 81 of the Central Goods and Services Tax Act, 2017 - sham transaction - requirement of determination by a competent authority before treating transactions as void - Section 81 of the CGST Act cannot be invoked to treat registered sale transactions as void unless a competent authority authorized under the Act or Rules has determined that the transactions are sham and fall within Section 81. - HELD THAT: - The Court observed that while Section 81 contemplates declaration of certain transactions as void, the provision contains provisos and safeguards and does not itself supply the machinery for adjudicating whether particular transactions are sham. In the absence of a finding by a competent authority authorised under the Act or the Rules that the transactions are sham, the Court concluded that the provisions of Section 81 cannot be pressed into service to defeat titles asserted under registered deeds of sale. This conclusion was reached subject to contentions the respondents may raise and does not foreclose determination by the proper authority under the statutory scheme. [Paras 5, 6, 7]The Court held that a finding by a competent authority is prerequisite before treating the petitioners' registered sale transactions as void under Section 81.Stay of recovery/auction proceedings - prohibition on alienation of attached property during pendency - Further proceedings pursuant to the notice dated 26.06.2024 attaching the petitioners' immovable properties are stayed, subject to the petitioners not alienating the lands during the pendency of the order. - HELD THAT: - On the prima facie view that Section 81 could not be invoked without prior determination by a competent authority, the Court directed an interim stay of all further proceedings in pursuance of the attachment notice dated 26.06.2024. Concurrently, the Court imposed a prohibition on alienation of the lands by the petitioners for the duration of the order to preserve the status quo until the matter is finally adjudicated or the competent authority acts under the Act. [Paras 7, 8, 9]Stay of further proceedings under the attachment notice is granted and the petitioners are restrained from alienating the lands during the pendency of this order.Service of process by registered post with acknowledgement due (RPAD) - leave to file counter affidavit - Learned counsel for the petitioners was permitted to serve personal notice on the respondents by RPAD and file proof of service by the next date; respondents were granted time to obtain instructions and file a counter affidavit. - HELD THAT: - The Court granted leave to the petitioners' counsel to effect personal service on the respondents by RPAD and to file proof of service at the next hearing. The Court also recorded that the Government Pleader for Commercial Taxes sought time to obtain instructions and to file a counter affidavit, and allowed that request. [Paras 1, 2]Permission granted for personal service by RPAD and respondents given time to obtain instructions and file counter affidavit.Final Conclusion: Interim relief granted: proceedings pursuant to the attachment notice dated 26.06.2024 are stayed and the petitioners are restrained from alienating the attached lands; the Court held that Section 81 of the CGST Act cannot be invoked to void registered sale transactions without a prior finding by a competent authority; procedural directions were issued for service and filing of counter affidavit, and the matter was posted for further hearing. The High Court of Andhra Pradesh stayed further proceedings on auctioning property for tax recovery due to disputed transactions under Section 81 of the CGST Act, pending a determination by a competent authority. The petitioners were allowed to serve notice on the respondents and were prohibited from alienating the properties during the case. Next hearing scheduled for 23.10.2024.