TaxTMI 
TaxTMI 
2018 (3) TMI 1327
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....0 cents, by way of sale in public auction held on 17.04.2003, conducted by the Recovery Officer II, Debt's Recovery Tribunal I, Chennai, fourth respondent herein, for a sale consideration of Rs. 1,20,10,000/- in execution of Certificate No.150/2002, dated 27.08.2002 issued in O.A.No.1032/1998 by the Debt's Recovery Tribunal, Chennai - 2, for recovery of debts due to State Bank of India, represented by its Branch Manager, fifth respondent herein, from M/s.Moolchand Industries Ltd., and 10 others. 3. Petitioner has further contended that, after clearing all the Income Tax formalities, the Recovery Officer II, Debt's Recovery Tribunal I, Chennai, fourth respondent herein, issued a sale certificate, dated 22.05.2003 in favour of the petitioner and the same was duly registered as Document No.828/2003 on the file of the Joint Sub-Registrar-II, Saidapet, Chennai-15. Since 22.05.2003, the petitioner is in absolute possession and enjoyment of the property. 4. Vide order of this Court, in C.P.No.254/1994, dated 22.06.2000, Official Liquidator was appointed for M/s.Moolchand Exports Limited, (In Liquidation), Chennai. Petitioner has also purchased another immovable property ....
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....hat they were not aware of the statutory liabilities of the defaulter company, and that without even waiting for the completion of 7 days, as given in Form 4 notice dated 05.01.2006, the Commercial Tax Officer, Alandur Assessment Circle, first respondent herein, has issued an attachment notice in Form 5 dated 16.01.2006. 10. Contending inter alia that the petitioner is not liable to pay tax stated to have been defaulted by M/s.Moolchand Exports Limited and that the Commercial Tax Officer, Alandur Assessment Circle, first respondent herein, has failed to consider the fact that the petitioner had purchased the immovable property for valuable consideration without notice of the sales tax arrears and thus a bonafide purchaser, protected under the Transfer of Property Act, 1872, and placing reliance on the decisions of the Hon'ble Division Bench of this Court in the case of M/s.R.K.Steels, reported in 108 STC Page 161 (Madras) and the decision of the Hon'ble Supreme Court in the case of Shreyas Papers (P) Ltd., reported in 2006 (1) CTC 290, instant writ petition has been filed to quash the proceedings dated 16.01.2006 of the Commercial Tax Officer, Alandur Assessment Circle. ....
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....t the property, which admittedly, is in the hands of the writ petitioner. 16. Heard the learned counsel for the parties and perused all the materials available on record. 17. Section 24 of the Tamil Nadu General Sales Tax Act, 1959, reads thus:- "24. Payment and recovery of tax -- (1) Save as otherwise provided for in sub-section(2) of Section 13, the tax assessed or has become payable under this Act from a dealer or person and any other amount due from him under this Act shall be paid in such manner and in such installments, if any, and within such time as may be specified in the notice of assessment, not being less than twenty-one days from the date of service of the notice. The tax under sub-section (2) of Section 13 shall be paid without any notice of demand. In default of such payments the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act. (2) Any tax assessed on or has become payable by, or any other amount due under this Act from a dealer or person and any fee due from him under this Act, shall, subject to....
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....to be in excess on final assessment or revision of assessment, or as a result of an order passed in appeal, revision or review, the excess amount shall be refunded to the dealer after adjustment of arrears of tax, if any, due from him. Where the excess amount is not refunded to the dealer within a period of ninety days from the date of the order of assessment or revision of assessment and in the case of order passed in appeal, revision or review, within a period of ninety days from the date of receipt of the order, the Government shall pay by way of interest, where the amount refundable is not less than one hundred rupees, a sum equal to a sum calculated at the rate of one per cent or part thereof such amount for each month or part thereof after the expiry of the said period of ninety days. Explanation- For the purpose of this section, the expression order passed in appeal, revision or review shall not include order passed in such appeal, a revision or review with direction to make fresh assessment order. 24-A. Transfers to defraud revenue void:- Where, during the pendency of any proceeding under this Act or after the completion thereof, any dealer creates a charg....
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....i 600 002. DATE AND TIME OF AUCTION: On 17.04.2003 at 3.00 p.m. DESCRIPTION OF PROPERTY: 1. All that place and parcel of land together with superstructure thereon situated at Door No.2/4, MOUNT POONAMALLEE ROAD, RAMAPURAM, CHENNAI 600 089 comprised in Survey No.151/2 of No.102, RAMAPURAM VILLAGE, SAIDAPET TALUK, CHENGALPATTU MGR DISTRICT in patta No.184, measuring 50 cents and bounded on the north by poonamallee to Madras Road, South and East by land belonging to B.K.METAL PRODUCTS, west by land belonging to SOUTH INDIA SURGICAL COMPANY. UPSET PRICE: Rs. 1,20,00,000/- (Rupees one crore and twenty lakhs only) 2. All that place and parcel of land situated at OTHIVAKKAM VILLAGE, KATTANKOLATHUR PANCHAYAT UNION, CHENGALPAT TALUK, KANCHEEPURAM DISTRICT comprised in Survey Nos.46/17, 17D, 17E and 17F admeasuring about 18.38 acres located at GUDAVANCHERRY THIRUPORUR ROAD AT OTHIVAKKAM VILLAGE. UPSET PRICE: Rs. 22,00,000/- (Rupees Twenty Two Lakhs only). For further details contact the undersigned or the Manager of the Bank personally or on phone Nos.28603234, 2860 3243. CONDITIONS: 1.The property can be inspec....
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....thari No.151/1,Mount Poonamallee 3. Mr.Santhosh Kothari Road, Ramapuram, 4. M/s.Moolchand Export Ltd., Chennai 89. 5. Mr.Moolchand Kothari 6.Mrs.Kantha Bhattad 7.Mr.Om Prakash Kothari 8.Mr.Jayaprakash Kothari 9.Mrs.Rajkumar Bisani 10.Mrs.Saroj Kumari Rathi No.28, Ramaswamy Street 11.Mrs.Rekha Kabra T.Nagar, Chennai 17. And the said sale has been duly confirmed by the undersigned and becomes absolute. SPECIFICATION OF PROPERTY All that piece and parcel of land together with superstructure thereon bearing Door No.2/4, Mount Poonamalle Road, Chennai 89, as detailed below situated in 102, Ramapuram Village, Saidapet Taluk, Chingelput District, comprised in part of S.No.151/2, in Patta No.184 measuring 50 cents (9 grounds & 180 Sq.ft.) bounded on the North by Ponamallee to Madras Road, South and East by land belonging to B.K.Metal Products and West by land belonging to Sough India Surgical Company, land having linear measurement of East to West on the Northern side 90 links (about 60 ft.); on the Southern side 90 links (about 60 ft.); North to South on the Eastern side....
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.... The upset price for the landed property is Rs. 77,10,000/- (Rupees Seventy Seven Lakhs and Ten Thousand Only) and Rs. 50,000/- (Rupees Fifty Thousand Only) for furniture and other articles. In respect of subject landed property to title deeds are available with Official Liquidator and the property is in the custody of this Hon'ble Court upon liquidation of the subject company, pursuant to Section 456(2) of the Companies Act, 1956 and the Official Liquidator has taken possession of the said property under Section 456(1) of the said Act and a notice calling objection, if any, for the sale has been published on 30.7.2004 in this Newspaper but no objection was received by Official Liquidator in this regard till date. Details of Earnest Money Deposit to be paid with the tenders are available in the Terms and Conditions which can be obtained alongwith Tender Form from the Office of the undersigned from 20.8.2004 to 27.8.2004 during office hours. The last date of receipt of tender is 27.8.2004 upto 4.00 p.m. The tenders shall be opened on 30.8.2004 by the Hon'ble High Court, Madras (in the Court presided over by Hon'ble Mr.Justice Kulasekaran) in the presenc....
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....4 to 1996-97 and the defaulters were having a Land and Building at No.151/1, Mount Poonamallee Road, Ramapuram, Chennai-89. The arrears were accrued during the year 2000. 2) It is learnt that you have purchased the said land and building situated at No.151/1, Mount Poonamallee Road, Ramapuram, Chennai 89 by way of public auction in execution certificate No.150/2002 dated 27.08.2002 issued in O.A.No.1032/1998 by the Hon'ble Presiding Officer, Debt Recovery Tribunal, Chennai. 3) The defaulters sold the property without discharge his sales tax liability. As a result of section 24(1) of the TNGST Act 1959, a charge was created over the property for the sales tax amount due by the transferee even before the transfer was actually effected and the said charge can be enforced against the property transferred which are in the hands of the transferee. Thus even if transferer is not taken to be defaulter, the property in his hands can be proceeded against R.R.Act. 4) In view of the above circumstances, you are requested to reply as to why Revenue Recovery Proceedings should not be enforced against you for the recovery of arrears of sales tax due by Tvl. Moolchan....
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.... Take notice that as you have not paid or shown sufficient cause for the non payment of Rs. 3,85,99,770/- (Rupees Three Crores Eighty Five Lakhs Ninety nine thousand sevan hundred and seventy only) TNGST/1990-94 to 1996-97 Although the said sum has been duly demanded in writing from you, the landed property belonging to you is hereby placed under attachment, and that unless the arrear due by you with interest and other charges be paid within SEVEN days the 23rd day of January, 2006, the landed property will be brought to sale in due course of lay. You will further take notice that from the date of this attachment notice until the date of sale of your land hereby attached. You are, and will be held liable for all kists thereon accruing and the said kists will be demanded of. Station: Chennai-600016. Dated : 16.01.2006. Commercial Tax Officer, Alandur Assessment Circle To Thiru.Dr.S.Gupta, Managing Partner, Tvl. Gupta and Company, No.8 & 11, Ekkattuthangal Road, Guindy, Chennai 600 032.)" 28. Vide proceedings in Rc.120/2006/A3, dated 16.01.2006, Commercial Tax Officer,....
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....stion (b) is concerned, the same is stated to relate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of Section 31B, as it includes "secured debts due and payable to them by sale of assets over which security interest is created". 7. We, thus, answer the aforesaid reference accordingly." 31. Thus, after reference, instant writ petition filed in the year 2006, is placed before us. In B.Suresh Chand Vs. State of Tamil Nadu, rep. by the Secretary, Revenue Department, Fort St. George, Madras-9 and another, reported in 2006 (4) CTC 805, a Full Bench of this Court, after considering a catena of judgment, at para 20 held as follows:- "20. Therefore we hold that in view of the Honourable Supreme Court's judgment approving the law laid down in Deputy Commercial Tax Officer, Thudiyalur Assessment Circle, Coimbatore and another v. R.K.Steels, 108 STC 161 (referred to above) by its decision in State of Karnataka and another v. Shreyas Papers (P) Ltd., and others, 2006 (1) CTC 290 : 2006 (1) SCC 615, the law down by the Division....
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....e memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern." The non obstante clause shall not only prevail over the contract but also other laws.(See Priyar & Pareekanni Rubbers Ltd. v. State of Kerala)." In the light of the above discussions, the issue as to whether the right of the secured creditor over the subject property mortgaged will prevail over crown debt is no longer res integra. 32. On the aspect of protection of a bonafide purchaser, without notice, in Rukmani vs. Deputy Commercial Tax Officer I, Pattukottai I, Assessment Circle, Pattukottai, reported in (2013) 62 VST 369 (Mad), one of us (Mr.Justice S.Manikumar) considered a similar case, as to whether a bonafide purchaser, without notice is protected. After considering M/s.R.K.Steels, reported in 108 STC Page 161 (Madras), D.Senthilkumar's case reported in (1998) 108 STC 161, on the facts and circumstances of the case in Rukmani's case disc....
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.... Act'), when the firm is liable to pay tax under the Act, the firm, and each of the partners of the firm shall be jointly and severally liable for such tax. Under this section, for the liability of the firm, the partners also are made liable and therefore their properties cannot escape for the tax liability. When such a person has effected transfer of his property during the pendency of the proceedings under the Act or after the completion thereof, it cannot be stated that he did not intend to evade the tax and therefore if the sale was to defraud the Revenue, the sale will be ab initio void. But, at the same time, the Legislature has intended to protect an honest person who had purchased the property from such a seller, if he had not colluded with the seller and he had no notice of the liability of the vendor. Under the proviso (i) to section 24A of the Act, not only adequate consideration, but also the want of notice, are the two ingredients to safeguard the purchaser. ... 6. A reading of section 3 of the Transfer of Property Act, 1882, leads to the conclusion that, not only a wilful abstention from an enquiry which a person ought to have made, but the gross....
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....ransaction as a bona fide sale." 15. N. Padma Coffee Works' case [1999] 114 STC 494 (TNTST), has been relied on by a honourable judge of this court, while dismissing a Writ Petition (MD). No. 1277 of 2005, dated February 28, 2005 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer III, Thoothukudi). The appeal preferred by the subsequent purchaser in W.A. (MD). No. 130 of 2005, has been dismissed on February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer). However, in D. SenthilKumar's case reported in [2006] 148 STC 204 (Mad), the First Bench of this court, presided over by the honourable Chief Justice, who was also a party to the unreported judgment in W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer), has considered a similar issue, as to whether a purchaser of a property in execution of the recovery certificate issued by the Debts Recovery Tribunal and who was not aware of the arrears of sales tax dues under the Act, can claim exemption from the action for recovery of the said arrears and whether a charge can be enforced against the transferee, if he had no no....
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....ble Division Bench, at paragraph No. 8, held as follows (pages 208-211 in 148 STC): "8. The short question is whether the charge created on a property under the TNGST Act is enforceable against a transferee of such property. The expression 'charge' is not defined by the TNGST Act. However, this concept is well-known in law of transfer of property and has been defined by section 100 of the Transfer of Property Act, wherein the word 'charge' is defined as follows: 'Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simply mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such prope....
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....reme Court held as follows (paras 18 and 19 in 144 STC): '22. In the present case, firstly, no provision of law has been cited before us that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same. It remains to be seen, therefore, if in the facts of the present case, the first respondent had notice-actual or constructive-of the charge. At the outset, in the advertisement/notice dated March 17, 1992, issued by the Corporation, mention is only made of the sale of the defaulting company's assets and there is no indication, whatsoever, of any sales tax arrears. Further, the bid offer made on behalf of the first respondent on June 5, 1992 specifically excludes any statutory liabilities, including sales tax. This offer was accepted by the Corporation on July 15, 1992. Even at that stage, there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreement dated August 12, 1992 in which a specific clause was inserted that the first respondent would be liable to pay all property taxes, other taxes, electricity bills, water taxes and rents from the date of the agreement (i....
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.... 20. It is a well-settled legal position that a judgment rendered by a court, taking into consideration of the later judgment of the Supreme Court, on the same issue is binding. Later judgment of the Supreme Court, on the point of law, would prevail over the former. One of the issues considered by another Division Bench of this court in A. Senthilkumar v. Assistant Commissioner (CT), Koyembedu Assessment Circle reported in [2011] 1 CTC 828, was whether the arrears of sales tax would prevail upon the claim of the secured debtors, like a bank, on the basis of the charge over the property and if the purchaser establishes that he is a bona fide purchaser, without notice, in a valid sale, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for brevity, "the SARFAESI Act"), whether the property can still be brought for public auction, for recovery of sales tax arrears, due to the Government. In the above reported A. Senthilkumar's case [2011] 1 CTC 828, at paragraph No. 10, the honourable Division Bench has held as follows: ". . . The tax due would be a charge as per section 24(1) of the Ac....
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....ng proviso to section 24A of the Act, is to protect a honest person, who had purchased the property from a seller and further observed that there should not be any collusion with the seller, but the necessary ingredients of section 24A of the Act should be there, i.e., the sale effected should be for adequate consideration and want of notice. Unless the charge is duly registered in the Registration Department, it would not be possible for any prospecting buyer to know whether there is any charge over the property, for any arrears of tax or any statutory dues to be paid to the Government or statutory body. That apart, there are no materials to indicate that the petitioner had any constructive notice of the charge. There is no pleading to the effect and rightly, no arguments have been advanced, and therefore, this court is of the view that the case on hand would squarely also fall within the ambit of the apex court in Ahmedabad Municipal Corporation's case reported in [1971] 1 SCC 757; AIR 1971 SC 1201 also. On the facts and circumstances of this case, this court is of the view that the legislative protection has to be extended to the petitioner." 33. Mr.V.Ramesh, learned coun....