2024 (11) TMI 114 - HC - VAT / Sales Tax

Seeking declaration that the action of the respondent No.2-Sales Tax Department of continuing charge over the property in question was invalid and illegal on the ground that the petitioner is a successful auction purchaser of the property in public auction held by the secured creditor - HELD THAT - It would be germane to refer to the relevant paras of the decision of this Court in case of PARTNERS OF SIDDHESHWAR TAX FAB ORS. VERSUS STATE OF GUJARAT ORS. 2024 (7) TMI 1547 - GUJARAT HIGH COURT wherein the question as to whether the auction purchaser would be liable to discharge the dues of the sales tax department is no more res integra. This Court in the aforesaid decision has held the charge in respect of the property in question created for sales tax dues or VAT dues is of no avail and has no efficacy in law in view of the provisions of SARFAESI Act and the RDB Act. The property in question was sold by respondent no.6-Bank under the provisions of SARFAESI Act and the petitioners were successful purchasers and the sale certificate is issued and sale deed is also executed by which the petitioners have become absolute owners of the property and therefore considering the existing position of law the charge created by the respondent State over the property in question in the year 2018 cannot be sustained and is accordingly quashed and set aside and as a consequence the mutation entries in revenue records also stands deleted. The respondent authorities are directed to remove the charge in respect of the property in question created for sales tax dues in view of the provisions of the RDB Act as the sale certificate and sale deed is executed and the petitioner has become the absolute owner of the property. Accordingly the charge created by the respondent-State over the property in question in the year 2014 cannot be sustained and is quashed and set aside and as a consequence mutation entry in revenue record being Entry No. 5303 also stands deleted. Petition disposed off.

Summary

Issues:
Challenge to the validity of charge by Sales Tax Department on property purchased in public auction.

Analysis:
1. The petitioner challenged the charge by the Sales Tax Department on a property purchased in a public auction, claiming to be the successful auction purchaser. The petitioner argued that the charge was invalid and illegal as they had acquired the property through a public auction conducted by the secured creditor after the borrower defaulted on a loan from Corporation Bank.

2. The petitioner, relying on a previous court decision, contended that the charge by the Sales Tax Department should be removed as the petitioner, as the successful auction purchaser, should not be liable to discharge the dues of the Sales Tax Department. The court noted that the petitioner had acquired the property under the provisions of the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) for recovery of the dues of the secured creditor.

3. The Assistant Government Pleader for the respondent-State did not dispute the petitioner's argument that the Sales Tax Department could not continue the charge over the property post its sale under the RDB Act. However, the respondent contended that as there was no charge mutated in the revenue record by the secured creditor, the Sales Tax Department could initiate proceedings to claim priority over the sale proceeds realized from the auction.

4. The court referred to a previous judgment and held that the charge created by the Sales Tax Department on the property in question was not sustainable in law. The court quashed the charge and directed the authorities to remove it, as the petitioner had become the absolute owner of the property post the auction sale. The court also ordered the deletion of the mutation entry in the revenue records related to the charge.

5. The court clarified that while the charge by the Sales Tax Department was quashed, the respondent-State could still raise their claim against the sale consideration realized from the auction sale of the property. The court disposed of the petition accordingly, with no order as to costs, and discharged the notice.

This analysis highlights the key arguments, legal principles, and court's decision regarding the challenge to the charge by the Sales Tax Department on the property purchased in a public auction under the RDB Act.