TaxTMI 
TaxTMI 
2018 (3) TMI 1473
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....der the provisions of the MCS Act. It was engaged in the same business. Respondent No. 1 is the State of Maharashtra represented through its Secretary, Finance Department, respondent No. 2 is the Assistant Sales Tax Commissioner, while respondent No. 3 is the Maharashtra Cooperative Bank Ltd. 4. The factual matrix of the matter is that respondent No. 4, while carrying on the business of manufacturing of sugar by crushing sugarcane, obtained financial assistance from respondent No. 3 Bank, which is a secured creditor. Respondent No. 4 had mortgaged its immovable property with respondent No. 3 and created an interest in favour of respondent No. 3 within the meaning of the term "secured interest" under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act", for short). Respondent No. 4 stopped its business of manufacturing sugar. Respondent No. 4 committed default in repaying the loan that was obtained from respondent No.3. Therefore, by invoking the powers under the SARFAESI Act, respondent No. 3 took possession of the movable and immovable properties of respondent No. 4 on 1st March, 2011. Respondent No. 3 called upo....
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....ssets of respondent No. 4. Respondent No. 3 further informed respondent No. 2 that the secured assets of respondent No. 4 were seized under the provisions of the SARFAESI Act and sold out to the petitioner for Rs. 48.51 crores. Thereafter, respondent No. 2 issued the impugned communications to the petitioner for recovery of the dues outstanding against respondent No. 4 to the tune of Rs. 7,04,10,624/towards sugarcane purchase tax and arrears of State Sales Tax and Central sales tax. 7. The learned Senior Counsel for the petitioner submits that the petitioner has purchased the secured assets of respondent No.4 and not the business interest. Respondent No. 4 had already stopped its business of manufacturing sugar by crushing sugarcane. The petitioner did not purchase running business of respondent No. 4. The amount due and payable from respondent No. 4 towards sugarcane purchase tax and arrears of State sales tax and Central sales tax, which are not the dues against the secured assets, but against the business of respondent No.4, cannot be recovered from the petitioner. The learned Senior Counsel further submits that the above referred dues outstanding against respondent No. 4 were ....
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....sugar in the immediate next crushing season of 201314. Therefore, the petitioner would be considered as the transferee of business interest of respondent No. 4 and would be under an obligation to clear the outstanding statutory dues payable by respondent No. 4 to respondent No. 2. On these grounds, he submits that the Writ Petition may be dismissed. 9. As stated above, the notice for sale of the secured assets of respondent No. 4 was published in "Daily Sakal" newspaper on 16th January, 2012. The last date for submission of bids was 14th February, 2012. The date of opening bids was 16th February, 2012. Since the petitioner was the highest bidder, its bid was accepted on 16th February, 2012. The tender notice and tender document show that the Authorised Officer himself was empowered to accept the bids and was not required to obtain approval from any other Authority prior to accepting the highest bid. Thus, the auction sale practically was concluded on 16th February, 2012 itself when the bid of the petitioner was accepted unconditionally. 10. Respondent No. 2 seems to have moved the Talathi and Circle Officer for placing the charge of the dues outstanding against respondent NO. 4 t....
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....a complete title due diligence and obtained 7/12 extract in respect of the secured assets which recorded the name of Iccon Oil Ltd. as the owner. In the said 7/12 extract, no charge of the Sales Tax Authorities was reflected at that time. Considering that 7/12 extract, the petitioners decided to bid for the secured assets. When the petitioners could not obtain registration of the sale certificate on account of the excessive stamp duty demanded by the Registering Authority, the petitioners again applied for and obtained the latest 7/12 extract dated 9th January, 2014 in respect of the secured assets. At that time, they were shocked and surprised to know that in that 7/12 extract, there was an additional entry showing charge of Rs. 2,77,72,073/of the Sales Tax Authorities. 13. The petitioners therein contended that they had bonafide purchased the secured assets by paying full consideration to SICOM on 21st March, 2013, without knowledge of the alleged encumbrance of the Sales Tax Authorities. Therefore, they challenged the legality and validity of the attachment order dated 29th April, 2013, issued by the Sales Tax Authorities. 14. Considering the facts and circumstances of the cas....
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....of a person to whom such property has been transferred for consideration and without notice of the charge." 20. As the section itself unambiguously indicates, a charge may not be enforced against a transferee if she/he has had no notice of the same, unless by law, the requirement of such notice has been waived. This position has long been accepted by this Court in Dattatreya Shanker Mote v. Anand Chintaman Data r [(1974) 2 SCC 799, 811 (para 18)] and in Ahmedabad Municipal Corpn. of the City of Ahmedabad v. Haji Abdulgafur Haji Hussenbhai [(1971) 1 SCC 757, 75961 (paras 3 & 4) : AIR 1971 SC 1201, 120204( para 3)] (hereinafter "Ahmedabad Municipal Corpn."). In this connection, we may refer to the latter judgment, which is particularly relevant for the present case. 21. Ahmedabad Municipal Corpn. [(1971) 1 SCC 757, 75961 (paras 3 & 4) : AIR 1971 SC 1201, 120204( para 3)] was a case where a person was in arrears of property tax, due under the Bombay Provincial Municipal Corporation Act, 1949. Consequently, the Municipal Corporation created a charge over the property of the defaulter. However, the property was sold in execution of a mortgage decree. When the Municipal Corporation pur....
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....s tax and Central sales tax and asking respondent No. 3 to recover the same on priority basis treating them as a first charge over the saleproceeds of the property of respondent No. 4. It is the specific case of the petitioner that respondent No. 3 did not inform about the said dues to the petitioner and further respondent No. 3 deliberately replied the letter dated 6th March, 2012 belatedly on 1st/2nd February, 2013. As stated above, the last date for submission of bids was 14th February,2012 and the date of opening thereof was 16th February, 2012. It is, thus, clear that when the auction notice was published and the bids were opened, there was no communication by the Sales Tax Authorities made with even respondent NO. 3 about the dues pending against respondent No. 4. Therefore, the communication dated 6th March, 2012 made by the Sales Tax Officer to respondent NO. 3 would not be of any help to respondent No. 2 to show that the petitioner was made aware about the dues standing against respondent No. 4 prior to placing of the bid for purchase of the secured assets of respondent No. 4. Had the said dues been brought to the notice of the petitioner, the petitioner certainly would ha....
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....hus, clear that the petitioner has not purchased and succeeded the business interest of respondent NO. 4. 19. The learned Senior Counsel for the petitioner cited the judgment in the case of National Steel and Agro Industries Limited, Mumbai Vs. State of Maharashtra and others 2015 DJLS (Bom) 88, to which one of us (S.C. Dharmadhikari, J.) was a party, wherein, almost under the similar circumstances, it has been held that the dues of the sales tax are not the dues against the property, but against the business. The transfer of ownership of business requires that the business should be sold as an ongoing concern so as to render the transferee as a successor in business interest of the transferor. Only in such an eventuality, the transferee would be liable for the transferor's sales tax liabilities. In the present case, respondent No. 3 did not transfer the business of respondent No. 4 either in whole or in part to the petitioner. Consequently, the petitioner cannot be held liable to pay the sugarcane purchase tax and arrears of sales tax due from respondent No.4. 20. In the case of Sherwood Resorts Pvt. Ltd. and another (supra), the sale certificate was not registered. Even the....