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2006 (7) TMI 588 - HC - VAT and Sales TaxSeeking recovery of arrears of tax - Tamil Nadu General Sales Tax Act, 1959 ("TNGST Act") - Liability of an auction purchaser of a property - HELD THAT:- In the instant case, the property was sold by public auction on March 10, 2003. The sale was conducted in execution of the recovery certificates issued by the Debts Recovery Tribunal for recovery of dues to the City Union Bank. The appellants had paid the entire amount due on March 25, 2003 and the sale was confirmed in their favour on April 23, 2003. There is no indication of any sales tax arrears in the advertisement for auction sale and there was no application from any statutory or public authority seeking to set aside the sale. For the first time, by letter dated June 25, 2004 the Commercial Tax Officer required the second respondent to create an encumbrance with regard to the property and consequently an entry was made in the register in respect of encumbrance of the first respondent. Thus, it is evident that the appellants had no actual notice of the charge prior to the transfer. There is also no material to show that the appellants had constructive notice of the charge and no submissions were made by the learned Special Government Pleader on this issue. Hence, we are of the view that the appellants were the purchasers for value without notice for the sales tax arrears of the defaulting company or the consequent charge on the property. Thus, the property in the hands of the appellants was free of the charge and it is not open to the first respondent to enforce the liabilities of the defaulting company in this manner against the appellants. Insofar as the alternative submission of the learned Special Government Pleader that the charge created u/s 23 of the TNGST Act will have priority over the mortgage created in favour of the City Union Bank, it is not necessary for us to express any opinion thereon in the present case, since the bank is not a party to the present proceedings. The first respondent is entitled to adopt such proceedings as permissible in law to establish its rights against the bank. Thus, the appellants herein, as transferees of the property for valuable consideration without notice of the charge, are entitled for protection and consequently, the proceedings of the first respondent are liable to be set aside and are accordingly set aside. The writ appeal is accordingly allowed. Consequently, W. A. M. P. is closed.
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