TaxTMI 
TaxTMI 
2023 (8) TMI 466
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....damus or any other appropriate Writ, order or direction by quashing and setting aside the two orders dated 17.06.2019 mutating Entry no. 8056 and Entry no. 8057 (Annexure-B1, Annexure-B2) passed by the Ld. City Survey Superintendent, Rajkot in the interest of justice; (D) YOUR LORDSHIPS may be pleased to issue a Writ of Mandamus or Writ in Nature of Mandamus or any other appropriate Writ, order or direction by directing the respondent Authorities to allow the application dtd. 13.03.2019 (Annexure-C) and further mutate the names of the petitioners in the City Survey records for land bearing survey Ward no. 14, City Survey no. 465 and 469 admeasuring 483-39 sq. mtrs including the construction on area admeasuring 34-04 sq. mtrs. Situated at Bhilvaas, Rajkot in the interest of justice; (E) YOUR LORDSHIPS may be pleased to issue a Writ of Mandamus or Writ in Nature of Mandamus or any other appropriate Writ, order or direction by quashing and setting aside the order dtd. 11.06.2019 passed by the State Tax Officer, Circle 5, Unit 94, Office of the Assistant Commissioner of Commercial Tax (Gujarat-State) (Annexure-D) in the interest of justice; (F) Pending admiss....
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....Venu Nanavaty for the petitioners made the following submissions: 9.1 The petitioners are admittedly not the defaulters of any VAT dues and are registered Sale deed owners with possession and the sale deed is not questioned before any civil court. 9.2 The petitioners have purchased the parcels of land from Manish Rasiklal Bavariya who is undisputedly the sole owner of the properties since 04.10.2006. 9.3 The authority is mandated under the Code to mutate names of registered sale deed owners, in this case though not obliged the petitioners have also applied since 13.03.2019 for mutation of their names 9.4 Instead of allowing the application dated 13.03.2019, unheard of and a novel approach is adapted by the respondents in straightaway mutating a hopelessly time barred claim of Eagle Motors Pvt. Ltd. a private limited company by creating Charge on the personal properties, though at the time of registered sale deed no proceedings were initiated on these parcels of land and it was only on 11.06.2019 that for the first time (after registered sale deed and petitioners' application) communication was sent directing the City Survey Superintendent to create charge. 9.5 It is ....
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.... It is submitted that the rejection of the application of the petitioner is based on a probable action to be taken in future on the basis of some instructions that charge has to be created (in future). The rejection is also based on some instruction received from the tax authorities wherein attachment and the proceedings were pending. It is not only shocking to note that such approach is being adopted to prejudice the rights of the petitioner but also surprising to see how all these aspects came to the light only after the application was made by the petitioner. Till that point, the authorities did not bother to take any steps with regard to any of the proceedings as claimed by them. 9.11 That the petitioners purchased the said properties after clearing all the encumbrances and hence, the petitioners being bona-fide purchasers for consideration after due diligence can not be made to suffer on account of the tax dues running in the name of the company of the original owner. Registered sale deed is executed on dated 26.02.2019 for which the petitioners submitted an application dated 13.03.2019 to the authority for entering their names in the revenue records, the order of the Tax A....
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....reby the authority has the power to initiate action within 4 years from the end of the year in respect of which or part of which the tax is assessable. 9.15 In the present case the proceedings have been initiated after more than 5 years from the default on the part of the earlier owners of the properties. Therefore, proceedings initiated after an unexplained and unreasonable delay which is beyond the mandatory period provided under the statute ought not to be permitted and deserve to be quashed and set aside in the interest of justice. 9.16 The law under the Bombay Land Revenue Code, 1879 (Section 135C) is settled that when a document of registered sale deed is produced before the authority, the revenue authorities are bound to give effect to the same. There is no obligation cast on registered sale deed owners to even apply for entering the names in the revenue records and/or City Survey Records as the case may be. 9.17 It is a well settled principle of law that when registered document is produced, the authorities are bound to record the same in the revenue records. As held in Jhaverbhai Savjibhai Patel vs. Kanchanben N. Patel and others reported in 2005 (3) GLR 2233 that....
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.... records. 9.20 The recording charge in revenue records under section 135B and/or section 135C is without any basis because what is to be recorded under Chapter X-A of the Bombay Land Revenue Code is legal and valid claim which can be by way of mortgage but to record a charge in the record of rights or city survey records without there being any dues of the legal owner or legal occupier of the immovable property, no 'charge' can be recorded. 9.21 That when an entry is to be mutated under Chapter X-A, it is not a clerical or an administrative function, there has to be application of mind and prima facie proof of recording what is submitted and factually there has to be a basis even from bare perusal of the said document or claim as it may be. 9.22 Section 135D(1)(b)(ii) is a section post section 135D(1)(b)(i) and it states that it is only upon the completion of action as per section 135D(1)(b)(i) that mutation can be made and only thereafter notice of transaction shall be served to the persons interested therein. 9.23 That the Revenue Authority/Officer has committed error of jurisdiction on the face of record in the matter of certification of the entry despite a mandate p....
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....SSMENT DETAIL YEAR OF ASSESSMENT ORDER PASSED DATE ON DEMAND RAISED REMARKS A/O SERVE DATE 2008-09 25.10.2012 160340 VAT 04.04.2013 2009-10 11.03.2014 67989 VAT 19.03.2014 2010-11 24.02.2015 1768754 VAT 31.03.2015 2011-12 22.03.2016 32889659 CENTRAL 25.05.2016 2012-13 30.03.2017 47237067 VAT 13.04.2017 2013-14 13.03.2018 166653913 VAT 31.03.2008 TOTAL 249820110 10.3 No appeal has been preferred by the assessee against these orders and hence they had become final. 10.4 Mr. Trivedi would further submit that the Tax Authority had written a Letter on 02.07.2015 to the City Survey Superintendent seeking details of properties which belong to the Directors of the Company and after an exchange of letters the proceedings could not be carried out as the tax authority could not provide the details of the properties. He would submit that for the company Eagle Auto Pearl Limited the authorities had carried out assessments as under: EAGLE AUTO PEARL PVT. LTD. VAT NO. 24091806339 ASSESSMENT DETAIL YEAR OF ASSESSMENT ASSESSMENT DATE DEMAN....
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....ls and the Entry no. 1756 is also certified on dt. 08.11.2006 mutating the name of Manish Bavariya - the person from whom the petitioners purchased the properties. 4 2009 to 2014 As per the say of the respondent the authority carried out assessment proceedings between 2012 to 2018 for Eagle Motors Pvt. Ltd. 5 09.01.2015 The State Tax Authority made attachment of the property of Eagle Motors Pvt. Ltd. (undisputedly not of the property purchased by the petitioner). 6 02.07.2015 For the above mentioned assessment, Tax Authority sent a communication to the City Survey Superintendent, Rajkot wherein the tax authority sought the details of the property which belonged to the Directors of the Company being Eagle Motors Pvt.Ltd. Subsequently the tax authority is not in a position to find out the survey number therefor the authority had not carried out the proceedings qua the aforesaid company. 7 2013 to 2015 The authority carried out assessment qua another Eagle Auto Pearl Pvt.Ltd. 8 13.09.2017 26.02.2019 The owner of the property Manishkumar Rasiklal Bavariya executed registered Agreement to Sell (with possession) dtd. 13.09....
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.... 12.07.2019 16.07.2019 Entry no. 8056 and no. 8057 creating Charge ('Bojo') was recorded in both the properties in question (purchased by the petitioners) due to the so-called dues of Eagle Motors Pvt. Ltd. The petitioners filed objections dtd. 12.07.2019/ 16.07.2019 to the mutation of Entry no.8056 and Entry no. 8057. 19 12.07.2019 Vide application/ communication dtd. 12.07.2019 the petitioner requested for clarification/reasons as to why the application dtd. 13.03.2019 (for mutation of their names) is neither decided nor any further communication has been addressed to the petitioner, nor any further procedure has been initiated. The petitioners also requested for recording Entry of the sale transaction in favour of the petitioners in the revenue records. 20 03.08.2019 The City Survey Superintendent, Rajkot - respondent No. 2 rejected the objections raised by the petitioners against mutation of Revenue Entries no. 8056 and no. 8057. 21 04.08.2020 The petitioners sent a legal notice dtd. 04.08.2020 to the seller describing all the issues and to clear their dues and provide a N.O.C to the petitioners. 11.1 What emerges from such chronology is ....
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....hange of communications and relying on some communication dated 27.04.2018, which is not on record did instructions go forward by the Tax Authorities to the Revenue Authorities to record a charge on the property which was already sold by the Director. Apart from it being a personal property, nothing has come on record to satisfy this Court as to what proceedings were undertaken by the authorities to attach the properties in question, when they were still in correspondence seeking details thereof. 11.8 It was incumbent upon the Revenue Authorities in exercise of powers under Section 135 C of the Bombay Land Revenue Code to record the entries. There is no obligation, as rightly submitted by the learned counsel for the petitioner, to even apply for entering the names in the revenue records. When a registered document is produced, the authorities are bound to record the same in the revenue records. 11.9 As held in the case of Jhaverbhai Savjibhai Patel (supra) when a registered document is produced the authority must prima-facie post an entry in the record of rights leaving it for the competent Court or Authorities to adjudicate on the dispute. 11.10 Paras 6 to 8 of the decisi....
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....ht to be challenged. That question cannot be decided by revenue authorities in RTS proceedings. In such situation, the correct procedure to be followed would be to refer the matter to the authority empowered under the Tenancy Act for his decision. The necessary mutation entry may be made only after the decision of that authority under the Tenancy Act is received. It would, however, not be open to revenue authorities in RTS proceedings to decide that question." 8. Therefore, keeping in view of the aforesaid observations made by this Court in the above referred judgement, it appears that it would not be proper to hold that even if there are breaches under other enactment or such transfer is barred under the other enactment, the revenue authorities exercising power under Code could have ignored the same for the purpose of recording the mutation. At the same time, the authorities exercising power under the Code will have to exercise the jurisdiction within the limits of the statutory provisions of the Code. Therefore, on reconciling of both the aspects, it appears that in a case where the transfer of a land is made by registered sale deed and if the revenue authority prima fac....
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....ude as to whether the breach of the other enactment by the impugned transfer or registered sale deed is made or not. 9. In view of the above, it cannot said that the orders passed by all the authorities on the basis that the Mamlatdar has not inquired into the aforesaid three aspects namely as to whether there is any breach of the provisions of the Prevention of Fragmentation Act or the provisions of Tenancy Act, are absolutely without any basis and the orders can be maintained only to the extent that in case it is found by the Mamlatdar after remand that there are prima facie breach of the other enactment by the transfer in question, the revenue authority exercising power under the Code may refer the matter to the appropriate authority under the other enactment or may relegate the affected party to resort to appropriate proceedings under the other enactment and the entry may be considered subject to the final outcome in the proceedings under the other enactment, as observed hereinabove in earlier paragraphs." 7. The very decision came to be considered by this Court even in the matter, where the validity of the registered sale deed was under challenge by preferrin....
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.... property. It is well settled even otherwise also, the exercise of suo motu power cannot be undertaken after an unreasonable period and further revenue entries are having values for fiscal purposes and they never confer any title, nor do they alter any right in the property, which otherwise exists as per the provisions of Transfer of Properties Act or the relevant law for the time being in force. 5. Under the above circumstances, the impugned orders passed by the revenue authorities cancelling the entry No.1900 and subsequent entry No.2248 dated 16.8.1976 and entry No.2067 dated 20th September, 1975 and No.2068 dated 20th September, 1975 are restored to the revenue record with the clarification and the qualification that the same shall be subject to the outcome of the Regular Civil Suit No.4180 of 2004 and No.9275 of 2003 pending in the concerned Civil Court and also subject to the outcome of the proceedings of revision pending before the Tribunal in connection with the proceedings under Section 84C of the Tenancy Act. It is further made clear that it would be open to the aggrieved parties to pursue their rights, if any, pertaining to the property/ies in respect of which e....
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....gs could be issued is an issue which begs a question, however not considered as even otherwise, we are inclined to hold that the property in question was of the personal ownership of the Director and therefore could not have been attached. 11.13 It would be relevant to consider the decision of this Court in the case of Chokshi Texlen Private Limited (supra). Paras 16-18 of the decision in the case of Chokshi Texlen Private Limited (supra) read as under: "16. In this regard, it may be germane to refer to the decision of the Supreme Court in the case of Tax Recovery Officer II v. Gangadhar Vishwanath Ranade, (1998) 6 SCC 658, wherein the court, in the context of section 281 of the Income Tax Act, 1961, which is in pari materia with section 47 of the GVAT Act, held thus:- "7. The question which is now required to be answered is whether in a proceeding under Rule 11 of the Second Schedule to the Income-tax Act, the Tax Recovery Officer can declare a transfer as void under Section 281. Section 281, as it stood at the relevant time provided as follows:- "Section 281: Where, during the pendency of any proceeding under this Act, any assessee creates a charge o....
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....om an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive." [emphasis ours] 9. The Tax Recovery Officer, therefore, has to examine who is in possession of the property and in what capacity. He can only attach property in possession of the assessee in his own right, or in possession of a tenant or a third party on behalf of/for the benefit of the assessee. He cannot declare any transfer made by the assessee in favour of a third party as void. If the Department finds that a property of the assessee is transferred by him to a third party with the intention to defraud the Revenue, it will have to file a suit under Rule 11(6) to have the transfer declared void under Section 281." "13. In the present case the Tax Recovery Officer could not have examined whether the transfer was void under Section 281 of the Income-tax Act. His adjudication of the transfer as void under Section 281 is without jurisdiction. The Tax Recovery Officer has relied upon the earlier order of the Income Tax Officer dated 9.5.....
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....e department that the transfer in favour of the petitioner is void on the ground that Varun Filaments Private Limited has transferred the same to the petitioner with the intention of defrauding the Government revenue, then the respondents are required to approach the civil court for a declaration that the transfer is void. Moreover, this court in the case of Chetna Vijay Shah v. State of Gujarat, rendered on 25.1.2018 in Special Civil Application No. 14823 of 2017, has, in the context of the provisions of section 47 of the GVAT Act, held that the only recourse available to the VAT authority under section 47 of the Act is to approach the civil court to annul the transfer on the ground that it was made with an intention to defraud the Government. It is in the light of the above factual and legal position that the impugned order of attachment dated 9.9.2011, made by the second respondent cannot be sustained. However, the right of the department to have the transfer declared as void under section 47 of the GVAT Act is not thereby taken away. If at all the respondents seek such a declaration, it is always open for them to approach the civil court by instituting appropriate proceedings."....
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....on to exercise the power under Rule 86A of the Rules. We fail to understand how Rule 86A could have been invoked in the present matter. In our opinion, the issue, as such, stands squarely covered by three decisions of this High Court, i.e, (i) Mr. Choksi vs. State of Gujarat (SCA No.243 of 1991) (ii) Different Solution Marketing Private Ltd. vs. State of Gujarat (SCA No. 19949 of 2015) and (iii) Paras Shantilal Savla vs. State of Gujarat (SCA No.7801 of 2019). 17. In view of the aforesaid, we are left with no other option but to allow this writ application and the same is hereby allowed. The respondent No. 2 is directed to unblock the input tax credit available in the credit ledger account of the writ applicant at the earliest. We clarify that this order shall not preclude the department from recovering the dues of Dolphin Metals (India) Ltd. by any other mode of recovery permissible in law." 11.18 Be it noted that the Division Bench of this Court has relied on the decisions of this Court in the case of Different Solutions (supra) and Paras Shantilal (supra). 11.19 In the case of Manharlal Viradiya (supra) the Court held as under: "8. Having heard the learne....
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.... examining the applicability of the principle of lifting such veil would be requiqred to be examined. In neither of the two petitions raising the controversy, the authorities have passed any specific order fastening the liability on the Directors personally, much less any factual foundation has been laid to invoke the doctrine of lifting the corporate veil. Hence it is not necessary to dilate on the said principle any further." For the reasons aforesaid, the reliance placed by the learned AGP on Section 78 is misconceived. Resultantly, considering the observations made by the Co-ordinate Bench of this Court in the cases of C.V. Cherian (Supra) and in the case of Mr.Choksi (supra), the issue has already been decided and therefore, there is substance in the submission made by the learned advocate for the petitioner. In the result, present petition is allowed. The impugned order passed by the respondent No. 1 dated 17.05.2019 and the impugned action of the respondent No. 3 dated 21.05.2019 are hereby quashed and set aside. Present petition stands disposed of accordingly. In the facts and circumstances of the case, there shall be no order as to costs." 11.20 Readin....
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....s." 11.22 In the case of Different Solutions (supra) a Division Bench of this Court considering the decision in the case of Chokshi Texlen Private Limited (supra) in paras 7-8 held as under: "7. Mr. Uchit Sheth, learned advocate for the petitioners, submitted that entering the charge and attachment on the property of the petitioners for the alleged dues under the GVAT Act of the erstwhile owner of the property is wholly without jurisdiction and illegal. It was submitted that the petitioners had purchased the subject property before the charge came to be entered on the property by the Value Added Tax Department and that no charge was registered in respect of the alleged value added tax dues of the previous seller prior to registration of the sale deed. It was submitted that the assessment order, on the basis of which the attachment was made, was passed on 31.3.2011; however, such order came to be set aside in appeal and the matter was remanded to the adjudicating authority and that the order in respect of the said year as well as subsequent years were all made long after the subject property came to be transferred to the petitioners. It was contended that in the absence ....
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....2016, Varun Filaments Private Limited was held liable to pay tax of Rs. 23,15,631/- for assessment year 2011-12. 8.1 It was submitted that in the light of the provisions of section 44 of the GVAT Act, the respondent authorities had created a charge over the property in question on 12.9.2011, which came to be certified on 16.6.2012. It was submitted that Varun Filaments Private Limited was well aware of its liability under the GVAT Act as it had participated in all the assessment proceedings and was fully conversant with the fact that the assessment proceedings were initiated way back in the year 2008, despite which, Varun Filaments Private Limited sold the subject property to the present petitioners on 14.7.2011. It was submitted that Varun Filaments Private Limited has sold its property with a view to defraud the Government revenue and hence, the transaction between Varun Filaments Private Limited and the petitioners is void as the transaction is with a view to defraud the Government exchequer. 8.2 The attention of the court was invited to the provisions of section 47 of the GVAT Act, to submit that in view thereof, the transaction between Varun Filaments Private....
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....ears to be substance in the submission made on behalf of the petitioners that Section 26 containing the said provision regarding liability to pay tax in certain cases covers several contingencies such as the liability in respect of the business carried on by an individual dealer after his death, the liability in respect of the dues where the dealer was an HUF and there is partition amongst various members or group of members; there is dissolution of a partnership firm and also in case of transfer of business in whole or in part. Unlike Section 179 of the Income-tax Act, 1961, there is no provision in the Sales-tax Act fastening the liability of the Company to pay its sales-tax dues on its Directors. 12. Reliance placed by the learned AGP on the provisions of Section 78 is misconceived. The section specifically deals with offences by companies and the criminal liability is fastened on the Directors who were in charge of and were responsible for the conduct of the business of the Company, but does not at all provide for any personal liability of the Directors to pay the sales-tax dues of the Company nor does it empower the authorities to proceed against the personal properti....
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.... (1) Special Civil Application No. 19949 of 2015; Different Solution Marketing Private Ltd. Vs. Assistant Commissioner of Commercial Taxes; decided on 30.06.2016. (2) 2019 (7) TMI 350 (Gujarat) Paras Shantilal Savla Vs. State of Gujarat (3) Special Civil Application No. 3032 of2022 Nehal Ashwinkumar Shah Vs. State of Gujarat. In the following decisions, this Court has taken the view that the authority under the Value Added Tax Act, 2003 [for short 'The Act, 2003'] has no power to attach any private movable or immovable property of a Director of a Company including the bank account of the Director for the purpose of recovering the dues payable by the Company under the Act, 2003. 3. This Court has made it very abundantly clear that Section-86 of the Act pertains to the offence by companies and contains certain provisions where for the offence of the company, every person who at the time the offence was committed was incharge of, and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence. In essence, this provision makes the person in-charge of the com....
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.... Directors, in absence of any provision to that effect under the Gujarat Sales-tax Act, 1969. Consequential reliefs are also prayed for in the petition. 2. Special Civil Application No. 3103 of 1991 also challenges the constitutional validity of the provisions of sub-section (4A) of Section 47 of the Gujarat Sales-tax Act, 1969 (for brevity, "the Act") and consequential reliefs are prayed for. 3. Special Civil Application No. 7578 of 1991 is filed by the two Directors of the Kutch Agro Industries Pvt. Ltd. and similar proceedings initiated by the Sales-tax Officer, Bhuj and the Recovery Officer, respondents No.1 and 3 herein, for recovery of salestax dues of the said Company from the petitioners. In this petition also the proceedings are challenged on the same ground as in Special Civil Application No. 243 of 1991. 4. Since these petitions raise common question about constitutional validity of sub-section (4A) of Section 47 and/or about personal liability of Directors for the sales-tax dues of their respective Companies, we have heard Mr Hasurkar and Mr YS Mankad learned counsel for the petitioners and also heard Mr Gori, learned AGP for the respondent-au....
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....ed time or the specified period and which has not been paid. Interest is made payable because Government to that extent is deprive of the use of money which otherwise it could have got at an earlier point of time. The liability arising under section 47(4-A) is absolute in nature. The rate of interest payable is fixed by the Legislature itself and no discretion in that behalf is left with the sales tax authorities. Once it is found that the dealer has not paid tax within the prescribed time the liability to pay interest arises under the Act and it is not open to the sales tax authorities to waive it for any reason. Separate provision has been made by the Legislature for levy of penalty. The rate of interest under section 47(4-A) is also not so high as to render it penal in nature. Considering the purpose for which the withheld amount can be utilised by the State Government, the prevailing rate of interest in the market, the rate of 24 per cent per annum cannot be regarded as too high to retain its compensatory character. Section 47(4-A) is in reality and substance not a provision for imposition of levy of penalty and, therefore, it was not necessary for the Legislature to lay down g....
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....the decisions in Desirajur Vennkatakrishna Sarma, In re, (1955) 25 Company Cases 32, Kundan Singh vs. Moga Transport Co.(P.) Ltd. & Ors., (1987) 62 Comp. Cases 600 and in Tikam Chand Jain vs. State Government of Haryana & Anr., (1987) 62 Comp. Cases 601. 9. On the other hand, Mr Gori, learned AGP for the respondents has vehemently submitted that since the arrears of sales-tax could not be recovered from the respective Companies, the respondent authorities are justified in taking recourse to the properties of the Directors. Mr Gori has referred to the provisions of Section 78 of the Gujarat Sales-tax Act and has submitted that the analogy is required to be drawn from the said provisions which lay down that where an offence has been committed by a Company, every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of the business of the Company as well as Company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. In the alternative, Mr Gori has submitted that even if the Company and its Directors are separate legal entities, it is open to the author....
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....ion 179 of the Income-tax Act, 1961, there is no provision in the Sales-tax Act fastening the liability of the Company to pay its sales-tax dues on its Directors. 12. Reliance placed by the learned AGP on the provisions of Section 78 is misconceived. The section specifically deals with offences by companies and the criminal liability is fastened on the Directors who were in charge of and were responsible for the conduct of the business of the Company, but does not at all provide for any personal liability of the Directors to pay the sales-tax dues of the Company nor does it empower the authorities to proceed against the personal properties of the Directors. The very fact that the same Legislature has in the same Act provided for criminal liability of the Directors without providing for any personal liability of the Directors or their personal properties for payment of sales-tax dues of the Company in question, the provisions of Section 78 lend support to the case of the petitioners rather than the case of the authorities. 13. As regards the faint plea of lifting the corporate veil, as per the settled legal position, the corporate veil is not to be lifted lightly. ....