TMI Blog2016 (1) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... legal impediment to treat such transfer void, it may not be possible for the revenue authorities to proceed against the properties in the hands of the appellants. Even according to the appellants, they purchased the properties as per sale deed dated 27/04/2007, 28/04/2007 and 17/05/2007. At the time when the properties were purchased, no proceedings were initiated against the properties. Proceedings were taken only when Ext.P10 had been issued on 11/08/2008. As far as the appellants are concerned, we do not think that the revenue authorities are entitled to invoke Section 44 of the Act - Therefore, in the absence of any statutory provision which creates a charge on the property or declares the transfer as void and not binding on the Government, and since there was no attachment on the properties prior to the date on which the appellants had purchased the property, the said property cannot be proceeded by invoking the provisions of the Act. The property of the appellants were proceeded only on account of a mistake of fact, we do not think that it amounts to wilful contempt. Accordingly we do not find it necessary to proceed with the contempt case - the title of petitioners h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 and P9 proceedings. Ext.P10 is an order passed by the Tahsildar on 11/08/2008 inter alia observing that Sri.E.V.Thomas transferred a portion of his property at Muvattupuzha to his wife Chinnamma Thomas. His liabilities towards sales tax had come to an amount of ₹ 28,21,105/- for the assessment period 1987-88 to 1990-91. It is alleged that the sale was deliberately made by Sri.E.V.Thomas to avoid payment of sales tax arrears due to the Government. After selling the property, the family moved to Puducode village in Palakkad District, where he purchased land and property in the name of his wife Chinnamma Thomas and his son Saji Thomas. Notices were issued to Chinnamma Thomas and Saji Thomas for recovering the dues. Chinnamma Thomas contended that the property at Muvattupuzha Taluk was conveyed in her name as compensation for utilising her dowry money and it was from the sale of that property, she had purchased the landed properties in Puducode village. Sri.Saji Thomas contended that the money to purchase the land in his name was provided by his maternal uncle. It is further observed that in 2003, Smt.Chinnamma Thomas and Jobin Thomas S/o.E.V.Thomas, sold out certain item of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s impugned have not been passed under the Benami Transactions (Prohibition) Act, 1988, directed the appellants to prefer a revision before the Government under Section 83 of the Act. 7. A statement has been filed by the Government Pleader as directed by this Court in which it is stated that when revenue recovery proceedings were under challenge before this Court by filing O.P.No.33609/2002, direction had been issued by the learned Single Judge of this Court to the Director General of Police to conduct an enquiry on the transfer of property effected by the defaulter and purchase of properties by his relatives in the Districts at Ernakulam, Thrissur and Palakkad. The Deputy Superintendent of Police submitted a report on 29/03/2007. Based on such report, this Court issued a further direction to conduct a detailed hearing regarding the transfer of immovable properties effected by the defaulter and purchase of properties by using the money of the defaulter by his relatives to evade of collection of tax arrears. It is, pursuant to the said directions, that the Tahsildar conducted a detailed hearing by issuing notice to the necessary parties and it was declared that certain sale deeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent transfers by them that the property came into the possession of the 1st petitioner. It is contended that the petitioner had come to know of the liability of the defaulter only on receiving notice. They alleged that in so far as the defaulter is having substantial properties in various other villages, the Government officials are bound to take action against the properties available with the defaulter. It is also contended that they are bona fide purchasers who had no knowledge about the liability of the defaulter at the time of purchase of the property. Counter affidavit is filed by respondents 3 and 8 inter alia stating that the defaulter sold 94 cents of property in Sy.Nos.626/5-1, 626/1 and 624/2-2 of Enanalloor village to Sri.Joseph, S/o.Chacko and Smt.Thressiakutty W/o.Joseph, as per sale deed dated 18/10/1990 of Kalloorkkad SRO. This property was purchased by the petitioners in 2003. Further the defaulter and his wife sold 1.85 acres of property as per sale deed dated 18/10/1990 (document No.991/90) which was subsequently purchased by the 1 st petitioner as per document No.1280/05. Similarly other items of properties were also purchased by the 1st petitioner from the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orkkad SRO dated 08/03/1984. He has also raised similar contentions as that of the other writ petitioners and sought for a declaration that his property cannot be proceeded against for the sales tax arrears of the defaulter Sri.E.V.Thomas and the proceedings initiated by the Tahsildar in terms of Ext.P5 against his properties has to be quashed. Counter affidavit has been filed by the 3rd respondent supporting the stand taken by the revenue authorities in this regard. Similar contentions as in the other writ petitions have been raised. 12. W.P.C.No.23327 of 2008 has been filed by Joy Thomas, Maju John, Mathai Mathew and Chacko Mathai. They contended that they own separate items of property in kalloorkkad village. 1st petitioner owns 2 cents, 2nd petitioner owns 2.89 cents, 3 rd petitioner and his wife own 6 cents of property. 1st petitioner acquired the property from one Francis who acquired the property from the defaulter as per sale deed No.501/1983. 2nd petitioner acquired the property from his father Sri.E.V.John who acquired the property from the defaulter as per sale deed No.975/1982. The 3rd petitioner and his wife Thresyama acquired the property from the defaulter and hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 1963. That was a case in which M/s.Tata Oil Mils Company Limited imported inedible tallow. After import, they delivered the same to a buyer at Patna. The buyer M/s.Maruti Wire Industries did not file any return on the turnover relating to the said transaction. Sales Tax Officer finalised the assessment on 10/10/1984 and a demand notice was issued on 04/03/1985 which included penal interest of ₹ 1,85,882.58/-, in terms of Section 23(3) of the KGST Act for the period from 20/05/1983, the date on which return of turnover was due to be filed, upto 25/02/1985. The demand was impugned before this Court. The learned Single Judge allowed the writ petition and quashed the demand. In a writ appeal filed by the State, the Division Bench allowed the writ appeal and judgment of the learned Single Judge was set aside. After referring to Section 23(3) of the KGST Act and also the judgments in Associated Cement Company Ltd. v. Commercial Tax Officer [(1981) 48 STC 466] and J.K.Synthetics Ltd. v. Commercial Taxes Officer [(1994) 94 STC 422], the Supreme Court observed that the liability of the assessee appellant to pay sales tax could have arisen either on return of turnover be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssments were completed only subsequent to the date on which the first sale was effected by the defaulter, it cannot be stated that there was a liability on the defaulter at the relevant time. In other words, it cannot be stated that any public revenue due on land has fallen in arrears at the time when the sales were effected by the defaulter in favour of third parties. Reference is also made to the judgment of the learned Single Judge of this Court in M/s.Catholic Syrian Bank Ltd. v. P.B.Sunil Kumar and Other s [ 2010(3) KHC 93 ]. That was a case in which the question considered was whether the amount payable to the Toddy Workers' Welfare Fund Act is having any priority over the debt due to the petitioner bank in whose favour the mortgage was created prior to the date on which the amount had become due to the Toddy Workers Welfare Fund Board. The learned Single Judge also considered the question as to when the arrears of public revenue due on land falls due as Section 9 of the Toddy Workers' Welfare Fund Act stipulates the mode of recovery of money due from the employers as arrears of public revenue due on land. While considering the said issue, it was held that the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a charge is created on the property it was held at paragraphs 18 to 23 as under: 18. The next limb of Mr. Hegde's arguments was that since Section 13(2)(i) of the KST Act creates a charge on the property of the Defaulting Company, the charge would continue on the properties, even if it changes hands by transfer. 19. WHILE the expression charge is not defined by the KST Act, this concept is well known in property law and has been defined by Section 100 of the Transfer of Property Act, 1882 (hereinafter the TP Act ). Here charge is defined as: Where immoveable property of one person is by act of patties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same. It remains to be seen, therefore, if in the facts of the present case, the First Respondent had notice - actual or constructive of the charge. At the outset, in the advertisement/notice dated 17-3-1992 issued by the Corporation, mention is only made of the sale of the Defaulting Company's assets and there is no indication, whatsoever, of any sales tax arrears. Further, the bid offer made on behalf of the First Respondent on 5-6-1992 specifically excludes any statutory liabilities, including sales tax. This offer was accepted by the Corporation on 15-7-1992. Even at that stage, there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreement dated 12-8-1992 in which a specific clause was inserted that the First Respondent would be liable to pay all property taxes, other taxes, electricity bills, water taxes and rents from the date of the agreement (i.e.12-8- 1992). For the first time, by letter dated 8-1-1993 of the Second Appellant to the Mandal Panchayath, Aloor Taluk, the issue of sales tax dues of the Defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived by sale of such properties. 20. Before proceeding further, it would be useful to refer to the relevant provisions of the KGST Act. Section 22 creates an obligation on a registered dealer to collect the tax payable by him on the sale of any goods from the person to whom he sells the goods and to pay over the same to the Government in the manner prescribed. Section 23 of the KGST Act relates to payment and recovery of tax. Section 23(1) and (2) reads as under: 23. Payment and recovery of tax:- (1) The tax assessed or any other amount demanded under this Act shall be paid in such manner and in such instalments, if any, and within such time, as may be specified in the notice of demand, not being less than twenty one days from the date of service of the notice. If default is in paying according to the notice of demand, the whole of the amount outstanding on the date of the default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or other amount under this Act: Provided that the time limit of twenty one days for a notice under this Sub-section shall not apply to casual traders. (2) Any tax assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Government on account of quit rent or revenue other than public revenue due on land; all moneys due from any person to the Government which under a written agreement executed by such person are recoverable as arrears of public revenue due on land or land revenue, and all specific pecuniary penalties to which such person renders himself liable under such agreement or contract; all sums declared by any other law for the time being in force to be recoverable as arrear of public revenue due on land or land revenue; and all fees and other dues payable by any person to the Government, may be recovered under the provisions of this Act. 21. It is apparent from Section 23(1) of the KGST Act that the tax assessed or any other amount demanded under the Act shall be paid within such time as specified in the notice of demand. If default is made in payment, according to the notice of demand, the whole of the amount outstanding on the date of the demand shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or other amount under the Act. It is therefore clear that the Statute creates a charge on the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or instalment of such revenue not paid on the day on which it falls dues according to the kistbandy or any engagement or usage; Section 2(j) defines public revenue due on land which reads as under: 2(j): public revenue due on land means the land revenue charge on the land and includes all other taxes, fees and cesses on land, whether charged on land or not and all cesses or other dues payable to the Government on account of water used for purposes of irrigation. 24. The primary question to be considered is whether there was any notice of demand on the defaulter for arrears of tax under the KGST Act at the time when he effected sale of property. The materials available on record clearly indicates that he sold the properties during 1990. There had been demand for sales tax arrears as per assessment orders dated 18/09/1987, 02/04/1988, 03/04/1989, 27/09/1990 and as evident from the report submitted by the Deputy Superintendent of Police, demand notices were issued on 18/12/1987, 22/05/1989 and 27/08/1989. It is therefore apparent that the properties were sold in the year 1990, that is even after the demand had been made. Hence, these are instances where a charge h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. Arrear of land revenue is recovered by invoking the provisions of the RR Act and Section 44(1) of the Act clearly indicates that any engagement entered into by the defaulter with anyone in respect of any immovable property after the service of written demand on him shall not be binding on the Government. Further Section 44(2) indicates that any transfer of immovable property made by the defaulter after public revenue due on land has fallen in arrear, shall not be binding upon the Government, if the transfer is made with an intention to defeat or delay the recovery of such arrear. Though it is argued by the learned counsel for the petitioners that the defaulter was not served with any notice of demand prior to the sale being effected by him, there is no material to arrive at such a conclusion. All such issues are to be raised before the competent revenue authorities, who have to consider the same, in accordance with law. This Court cannot go into the factual circumstances involved in the matter to analyze as to whether there was a proper demand or not. From the materials available on record, especially Ext.P5 produced in W.P.C.No.23327/2008, steps had been taken by the Tahs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants are concerned, we do not think that the revenue authorities are entitled to invoke Section 44 of the Act. Appellants have purchased the property from certain persons who acquired the property from the wife and children of the defaulter. There cannot be any dispute regarding the fact that any property in the hands of the wife and children of the defaulter could be proceeded, if it is a fraudulent transfer, especially since the contentions urged by them had been negatived by this Court as per judgment in O.P.No.33609/2002. Therefore, we are of the view that in the absence of any statutory provision which creates a charge on the property or declares the transfer as void and not binding on the Government, and since there was no attachment on the properties prior to the date on which the appellants had purchased the property, the said property cannot be proceeded by invoking the provisions of the Act. 29. In Cont.Case No.661/2011, the contention urged is that though there was an interim stay of operation of Exts.P10 and P11 as per interim order dated 04/09/2008 in W.A.No.1835/2008 and interim order was extended until further orders, property of the appellants were subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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