Tax recovery attachment requires strict proof of director liability and revenue-defeating transfer before property can be attached.

Director liability under the VAT Act arises only where the company is wound up and tax dues cannot be recovered from it; because the company was still in existence, joint and several liability had not crystallised, so attachment could not rest on that basis. Attachment of transferred property under the VAT and GST provisions is permissible only where the transfer is made to defeat revenue after tax dues have become payable and crystallised; because the property had already been transferred before the attachment order and was no longer owned on that date, third-party attachment was unsustainable. The prohibitory communication and check slip were quashed, and registration of the sale deed was directed without insisting on a no objection certificate.

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Issues: (i) Whether the impugned attachment could be sustained on the basis of the director's alleged personal liability under the VAT regime; (ii) Whether the transfer of the property and the absence of an attachment on the date of transfer barred attachment of the subject property under the VAT and GST provisions.

Issue (i): Whether the impugned attachment could be sustained on the basis of the director's alleged personal liability under the VAT regime.

Analysis: Section 37 of the VAT Act was applied on the footing that a director's personal liability arises only where the company is wound up and the tax dues cannot be recovered from the company. The company concerned was still in existence and had not been wound up. On that basis, joint and several liability of the director had not crystallized so as to justify attachment of the property.

Conclusion: The attachment could not be sustained on the basis of the director's personal liability.

Issue (ii): Whether the transfer of the property and the absence of an attachment on the date of transfer barred attachment of the subject property under the VAT and GST provisions.

Analysis: Sections 43 of the VAT Act and 82 of the GST Act were treated as applying only where a transfer is made to defeat revenue after tax dues have become payable and crystallized. The property had already been transferred before the attachment order was issued, and on the date of attachment it was no longer owned by the company or the director. The Court also held that third-party property cannot be attached unless the statutory conditions are strictly satisfied.

Conclusion: The impugned attachment over the subject property was illegal and unsustainable.

Final Conclusion: The writ petitions succeeded and the prohibitory communication and check slip were quashed, with a direction to register the sale deed without insisting on a no objection certificate.

Ratio Decidendi: Tax recovery attachment cannot be sustained against property transferred before the attachment order unless the statutory prerequisites for director liability or avoidance of revenue-defeating transfer are strictly established.

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