TaxTMI 
TaxTMI 
2024 (9) TMI 765
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....ndent. It may also be mentioned that the 5th respondent is the father-in-law of the petitioner. 3. The 1st respondent, by proceedings dated 14.09.2007, under Section 17-A of APGST Act read with Section 80 of the APGST Act had declared the purchase of the aforesaid property, by the petitioner, as void on the ground that the said transaction had been conducted for the purposes of evading payment of tax under the APGST Act. 4. The back ground for the said order was that, the 5th respondent was one of the directors of the 6th respondent, which was a private limited company. The 6th respondent-Company had fallen into arrears of A.P. Sales Tax, under the APGST Act, to the tune of Rs. 63,19,981/-, for the period 1992-93 to 1998-99. Admittedly, by the time of the passing of the impugned order, the 6th respondent was under liquidation. Under section 16B of the Andhra Pradesh General Sales Tax Act, 1957, every director of a private limited company, which goes into liquidation, is liable to pay the tax dues, provided that he can deny such liability if he can show that non-payment of such dues, by the private limited company was not on account of the director 's gross negligence, misfeas....
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.... any proceedings under the Act, the said transaction cannot be declared to be void. In the present case, payment of Rs. 3,51,000/- in the year 2000, for the property in question is payment of adequate consideration and that the petitioner had no knowledge of the arrears of the 6th respondent. Consequently, the protection of the proviso would have to be given to the petitioner. 5) A Division Bench of the erstwhile High Court of Judicature for the State of Telangana and the State of Hyderabad in Damera Ramakrishna and Ors vs. Commercial Tax Officer (Fac), Vijayawada and Ors (2005) 142 STC page 515 had held that Section 17-A of APGST Act, 1957 can be invoked by the department only when the department is able to show that the transfer was made to defraud the revenue and thereafter the burden shifts to the petitioner to show it is a bonafide transaction. The 1st respondent, in the impugned proceedings, has not placed any material to show that there is a basis to say that the transfer was to defraud the revenue. 7. The learned Government Pleader for Commercial Taxes, on the other hand, would contend that the petitioner is no other than the son-in-law of the 5th respondent and....
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....th a provision to safeguard recovery of revenue by permitting an authority under the Act to declare any transaction which takes away an asset out of the reach of the department. Needless to say, this provision would be available only where it is shown that such property had been alienated for adequate consideration and the purchaser was unaware of the liability of the vendor in alienating such property. There could be a situation where a dealer, who is aware of the financial position of the dealer, takes steps to alienate property to evade payment of taxes, even before any assessment of the taxes is made or even before the assessing authority wakes up to the fact that the dealer had not paid the taxes declared under the periodic returns filed by the dealer. The said power to declare an alienation of property as void, need not be only after the tax liability has been fixed. Any other view would render this provision otiose. 11. This provision came to be considered by a Division Bench of the erstwhile High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in the case of Damera Ramakrishna and Ors vs. Commercial Tax Officer (Fac), Vijayawad....
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....ty by demonstrating that non-payment of tax was not on account of his negligence, misfeasance or breach of duty. It is only after the Director is given an opportunity to demonstrate that non-payment of tax by the Private Limited Company was not on account of his negligence, misfeasance or breach of duty and after rejecting any such representation by the Director, that the tax authority can recover the tax dues of the liquidated private company from its Directors. 15. In the present case, though the company is admitted to be in liquidation, no steps have been taken against the 5th respondent by issuance of a notice calling upon him to pay the tax dues of the 6th respondent Private Limited Company nor was the 5th respondent given an opportunity of hearing to demonstrate that there was no liability to pay such taxes. In the absence of such an opportunity being given to the 5th respondent, tax liability cannot be fastened upon the 5th respondent. 16. The 6th respondent became liable to pay sales tax between 1992 to 1998. The alienation of property took place in the year 2000 and the proceedings declaring the alienation, as void, took place in the year 2007. Thereafter, no steps h....