TaxTMI 
TaxTMI 
2016 (1) TMI 1223
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....ue authorities came to be challenged in separate writ petitions. 2. The writ petitioners are the appellants in W.A.No.1835/2008. They challenge the judgment in W.P.C.No.26177 of 2008 by which the learned Single Judge as per judgment dated 01/09/2008 relegated the writ petitioners to prefer a revision before the Government under Section 83 of the Kerala Revenue Recovery Act (hereinafter referred to as 'the RR Act'). 3. W.P.C.No.16382/2009 is also filed by the appellants in W.A.No.1835/2008, seeking for a direction to consider Ext.P3 representation before taking any further proceedings to recover any amount from them. 4. Contempt Case No.661/2011 has been filed by the appellants in W.A.No.1835/2008 alleging wilful disobedience of the interim order passed by the Division Bench staying further proceedings for recovery of amount. It is contended that despite the order staying further proceedings, steps were taken to attach the properties of the petitioner. 5. All the other writ petitions were tagged together for hearing along with W.A.No.1835/2008 as it was submitted that common issues arise for consideration in those writ petitions. 6. First of all, we shall cons....
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....he son of E.V.Thomas. He later sold a portion of his property in the name of his wife Ansamma Saji. Having found that the sale was fraudulent, the documents were declared null and void. The appellants contended that they purchased the properties as per three separate sale deed nos.1875/2007 dated 27/04/2007, 1890/2007 dated 28/04/2007 and 2680/1/2007 dated 17/05/2007. They purchased the properties from respondents 6, 8, 9 and 10. They were served with notices under Section 44(2) of the Act alleging that the properties were liable for sales tax due from Sri.E.V.Thomas. Petitioners submitted a reply stating that they were bona fide purchasers for value and they purchased the property unaware of any sales tax dues or attachment. At the time of purchase they were not aware of any such liability. An enquiry came to be made on the basis of the direction issued by this Court in O.P.No.33609/2002 filed by the son of the defaulter. The appellants contended that Sri.E.V.Thomas, the defaulter and his family own substantial assets in Thalappilly Taluk of Thrissur District and strangely no action had been taken by the revenue authorities against them whereas they have now proceeded against the ....
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.... Single Judge of this Court, having taken note of the fact that the writ petitioner was only 17 years age at the time of acquisition of property and the defaulter's other son was only 21 years, observed that there was no reason to set aside the observation made by the revenue authorities that the acquisition of the properties was with the funds of the defaulter. The petitioners therefore submitted Ext.P3 representation dated 12/03/2009 requesting the District Collector to drop further proceedings initiated against the appellants in the light of the said judgment. The relief sought for in the said writ petition is to consider and pass appropriate orders in Ext.P3 representation especially in the light of the judgment in O.P.No.33609/2002. 9. The other writ petitions ventilate a slightly different set of facts. W.P.C.No.24720/2007 has been filed by one Augustine and Lizamma. Their contention is that they acquired 1 acre 80 cents of property from one Joy as per document No.989/1990. Sri.Joy had purchased the property from Sri.E.V.Thomas and his wife Chinnamma. Chinnamma had acquired the property as per sale deed No.996/83 dated 15/11/1983. The first petitioner also purchased 4 ....
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....s stated that at the relevant time when they purchased the property, there was no charge on the aforesaid assets. It is further alleged that in so far as the revenue recovery proceedings were initiated only in the year 1998, the properties purchased by the petitioner would not become liable for the alleged debt. Hence the writ petition has been filed seeking to quash Exts.P7 and P11 notices issued by the revenue authorities attaching an extent of 58.500 cents and rejecting their contentions that their properties are not liable for attachment. Counter affidavits has been filed on behalf of 2nd respondent inter alia observing that when possession and non- attachment certificates have been issued to Sri.N.V.Mathew and Sri.N.M.Sunny, there was no file pending in the office of the District Collector to recover any amounts from the defaulter. It is stated that necessary action can be initiated against the defaulter in respect of the property he transferred as the transfer is void as per Section 26A of the KGST Act. 11. W.P.C.No.24024 of 2008 has been filed by one Sunny inter alia contending that he is the owner in possession of 20.500 cents of paddy land in Sy.No.275/1-2 of Kalloorkka....
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....ed with effect from 01/04/1999. It is contended that the said provisions have no application at the time when the sales tax arrears became due and therefore there could not have been any charge on the property of the defaulter and the transfers cannot be held void, at the relevant time when the defaulter sold the properties. All the transfers were made prior to the amendment coming into force. With reference to Section 44 of the RR Act, it is contended that there was no prior demand to invoke Section 44(1). Section 44(2) also cannot be invoked as public revenue due on land had not fallen in arrears at the relevant time. Section 44(3) can apply only in respect of transfer of immovable property to a near relative or for grossly inadequate consideration after the public revenue due on any land has fallen in arrear. The Section only raises a presumption until the contrary is proved. Therefore, it was open for any person to have adduced evidence to show that the sale was for valid consideration and in such an event, no steps could be taken for effecting any recovery from the said property which was acquired by paying valid and proper consideration. Sri.Mayankutty Mather also relied upon....
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....d by way of damages for wrongful detention of the amount. This Court further held that the "tax payable" or "tax due" is that amount which becomes due ex hypothesi on the turnover and taxable turnover shown in or based on the return or as to which an order of assessment has been made. 8. In view of the law laid down by the Constitution Bench, we are clearly of the opinion that the liability of the assessee-appellant to pay sales tax could have arisen either on return of turnover being filed by way of self-assessment or else on an order of assessment being made. No doubt Rule 27(7-A) of the Kerala General Sales Tax Rules, 1963 casts an obligation on the assessee to file a return of total turnover and taxable turnover accompanied by proof of payment of the amount of tax due within 20 days of the previous quarter but such a return was not filed by the appellant. A failure to file return of taxable turnover may render the assessee liable for any other consequences or penal action as provided by law but cannot attract the liability for payment of penal interest under sub-section (3) of Section 23 of the Act on the parity of reasoning that if a return of turnover would have been filed....
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....a fide purchaser before attachment, the property cannot be sold for the purpose of dues of the defaulter. 17. Sri.Peeyuz.A.Kottam, learned counsel placed reliance on the judgment in Krishna Kumar.T v. State of Kerala and Others [2012 KHC 2973]. That was a case in which a learned Single Judge of this Court had occasion to observe that Section 26A of the KGST Act applies only if the property of the defaulter is transferred after 01/04/1993. It is held that in so far as the properties of the defaulter is transferred in the year 1990 and 1992, Section 26A has no application. 18. Another judgment relied upon is State of Karnataka and Another v. Shreyas Papers [C.A Nos.3170 to 3173 of 2000]. That was a case in which the Supreme Court was considering the question whether the purchaser of assets of a concern sold by a State Financial Corporation under Section 29 of the State Financial Corporations Act, 1951 would be liable to pay arrears of sales tax of the concern under the Karnataka Sales Tax Act, 1957 and under what circumstances, a charge created on a property becomes unenforceable against transferee of such a property. It was observed that the sale was not as a going conce....
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....execution of a mortgage decree. When the Municipal Corporation purported to exercise their charge over the property, the purchaser in court auction filed a suit for a declaration that he was the owner of the property and that the arrears of municipal taxes due by the transferor were not recoverable from him by proceeding against the property purchased in auction. In the appeal before this Court, the Municipal Corporation's main argument was that where the local law provided for the creation of a charge against a property for which municipal taxes were due, transferees of such properties were imputed with constructive knowledge of any charge created against the properties that they had purchased. This argument was, however, rejected. This Court held that while constructive notice was sufficient to satisfy the requirement of notice in the proviso to Section 100 of the TP Act, whether the transferee had constructive notice of the charge had to be determined on the facts and circumstances of the case. In other words, this Court held that there could be no fixed presumption as to the transferee having constructive notice of the charge against the property. In fact, the principle lai....
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....nts to enforce the liabilities of the Defaulting Company in this manner against the First Respondent. The Liability of the State Financial Corporation " 19. Learned Government Pleader also placed reliance on a report prepared by the Deputy Superintendent of Police, CBCID in which it was indicated that the landed property acquired by the wife and children of the defaulter in Palakkad District were not purchased by their own source as stated by the District Collector, Palakkad and that the sale effected by the defaulter and his wife were hit by the provisions of Section 44 of the RR Act read with Section 43 of the Transfer of Property Act and Section 26A of the KGST Act. It was also observed that the sales were effected during 1990 in respect of the properties at Enanalloor Village in Muvattupuzha Taluk which was after demand notices were issued by the Assistant Commissioner, Commercial Taxes on 18/12/1987, 22/05/1989, 28/07/1989 and by the Tahsildar on 17/10/1989 which were prior to the dates of transfer of the property. It is contended that the sale of properties by the defaulter and his wife were fraudulent sales with an intention to defeat payment of sales tax arrears and ther....
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....lter after public revenue due on any land from him has fallen in arrear, with intent to defeat or delay the recovery of such arrear, shall not be binding upon the Government. (3) Where a defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has fallen in arrear, it shall be presumed until the contrary is proved, that such transfer is made with intent to defeat or delay the recovery of such arrear, and the Collector or the authorised officer may, subject to the order of a competent Court, proceed to recover such arrear of public revenue by attachment and sale of the property so transferred, as if such transfer has not taken place: Provided that, before proceeding to attach such property, the Collector or the authorised officer shall- (i) give the defaulter an opportunity of being heard; and (ii) record his reasons therefor in writing. Explanation.- For the purpose of this section, "near relative" includes husband, wife, father, mother, brother, sister, son, daughter, step son, step daughter, uncle, aunt, son-in-law, daughterin-law, brother-in-law, nephew or niece of t....
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....ble to be first charge on the property:- Notwithstanding anything to the contrary contained in any other law for the time being in force, any amount of tax, penalty, interest and any other amount, if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of the dealer, or such person." Section 26A had come into effect from 01/04/1993 and Section 26B from 01/04/1999. By virtue of Section 26A, any transfer made during the pendency of any proceedings under the Act which includes creation of a charge, transfer of possession by sale, mortgage, gift etc. is treated to be void as against any claim in respect of any tax or other sum payable by the assessee under the Act. Similarly, Section 26B creates a first charge on the property of the dealer in respect of any amount of tax, penalty, interest etc. Even assuming that the above provisions have no application to the case on hand, the moment a notice of demand had been issued to a dealer or any person liable to pay tax, a charge is created on the property of such person and the amount could be recovered as an arrear of land revenue. 23. Now, coming to the RR Act, arrear of public revenue....
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....roved. In these cases, it is evident that the transfer was effected after the demand was made by the sales tax authorities. In that view of the matter, the revenue authorities were justified in taking action against the petitioners. 25. Shreyas Papers (supra), was a case in which the question was whether the purchaser of the property had notice of the charge. It was held that no provision of law has been cited before the Court which exempts the requirement of notice of the charge for its enforcement against the transferee, who had no notice of the same. But that was a case in which the purchaser had purchased the property when the property was put to sale under Section 29 of the State Financial corporations Act. And that apart, the bid offer contained a provision specifically excluding any statutory liabilities including sales tax. On facts, therefore, it was found that purchaser was a person who had purchased property for value without notice of sales tax arrears of the defaulting company. 26. It is argued on behalf of the writ petitioners that, in the present case also, they were not aware of the charge. It is not in dispute that Section 23(2)(a) of the KGST Act clearly ind....
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....ived by sale of properties at Muvattupuzha. Since we have already held that it is open for the revenue authorities to take steps to recover the amount from the properties sold by the defaulter at Muvattupuzha, we do not think that the revenue authorities will be justified in proceeding against the property of the appellants in this case. The appellants have a case that they are the subsequent purchasers of the property and that they were not aware of the sales tax arrears. They also have a case that there is no charge created on the properties purchased by them. It is apparent from the materials on record that though it will be proper on the part of the revenue authorities to proceed against the properties in the hands of the defaulter, his wife and children, in the absence of any statutory provision which creates a charge on such properties or creates a legal impediment to treat such transfer void, it may not be possible for the revenue authorities to proceed against the properties in the hands of the appellants. Even according to the appellants, they purchased the properties as per sale deed dated 27/04/2007, 28/04/2007 and 17/05/2007. At the time when the properties were purchas....