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TMI Blog2006 (7) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the issue is covered by the judgment in the case of N. Padma Coffee Works v. Commercial Tax Officer, Rock Fort Assessment Circle, Trichy [1999] 114 STC 494 (TNTST) and the contention that the (1)Printed at page 205 supra. appellants are bona fide purchasers has to be established only before a civil court by adducing proper evidence and not in a writ petition filed under article 226 of the Constitution. 3. The property, which is the subject-matter of controversy, has been purchased by the appellants, for a sum of Rs. 23,50,000 pursuant to the sale held by public auction conducted on March 10, 2003. The sale under auction had been conducted in execution of Recovery Certificate Nos. 47 of 2001 and 93 of 2001 dated February 5, 2001 and April 30, 2001, respectively in terms of the order passed by the Debts Recovery Tribunal in O.A. Nos. 356 of 2000 and 848 of 2000, respectively dated December 6, 2000 for the purpose of recovery of the debts due to the City Union Bank, Erode, from M/s. New Fashion Parks and two others. 4. The entire amount had been paid by the appellants on March 25, 2003 and the sale was confirmed on April 23, 2003, as there was no application from any statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration without notice and in the absence of any provision requiring to dispense with such notice under the TNGST Act, it would not be permissible for the sales tax authorities to proceed against the transferee who has purchased the property for valuable consideration without notice. 7. In reply, the learned Special Government Pleader appearing for the Department submitted that since a charge over the property of the defaulting firm had been created under the TNGST Act, the appellants, as the transferees of the said property, hold the property subject to that charge. In the alternative, the learned Special Government Pleader submitted that the Act creates a first charge on the property of the dealer or any other person for any amount of tax, penalty, interest, or other sum payable by a dealer or the other person under the Act, clearly giving priority to the statutory charge over all other charges on the property, including a mortgage and hence, the claim of the Sales Tax Department that their dues be paid from out of the proceeds of the sale of the property took priority over the claim of the Bank as a mortgagee of the property in question and therefore, the Department shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creation of a charge against a property for which municipal taxes were due, transferees of such properties were imputed with constructive knowledge of any charge created against the properties that they had purchased. This argument was, however, rejected. The court held that while constructive notice was sufficient to satisfy the notice in the proviso to section 100 of the Transfer of Property Act, whether the transferee had constructive notice of the charge had to be determined on the facts and circumstances of the case. In other words, the Supreme Court held that there could be no fixed presumption as to the transferee having constructive notice of the charge against the property. 10. The principle laid down in Ahmedabad Municipal Corporation's case [1971] 1 SCC 757 case has been applied in a sales tax case arising under the Karnataka Sales Tax Act, 1957 in State of Karnataka v. Shreyas Papers P. Ltd. [2006] 144 STC 331 (SC); [2006] 1 SCC 615. There, following the decision in Ahmedabad Municipal Corporation's case[1971] 1 SCC 757, the Supreme Court held as follows: "22. In the present case, firstly, no provision of law has been cited before us that exempts the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2006] 1 SCC 615, the Supreme Court also referred to the decision of a division Bench of this court in Deputy Commercial Tax Officer v. R. K. Steels [1998] 108 STC 161, (1).Paras 18 and 19 in 144 STC. where this very question arose under section 24 of the TNGST Act. In that case, the assessee-firm was in arrears of tax from the assessment years 1976-77 to 1979-80. The assessee-firm was closed on October 19, 1979. Thereafter, the land belonging to the firm was sold by one of the partners of the firm on December 30, 1981. The purchaser had no notice of the charge over the property by virtue of sales tax dues. The purchaser challenged the Form 7 notice issued under the Tamil Nadu Revenue Recovery Rules on the ground that he is a bona fide purchaser without notice of charge under the TNGST Act. The division Bench held that no provision is made in the TNGST Act contrary to section 100 of the Transfer of Property Act and therefore, a bona fide purchaser for consideration without notice is protected. 12. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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