TMI Blog2018 (3) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 6267 of 2006 - - - Dated:- 9-3-2018 - S. Manikumar And V. Bhavani Subbaroyan, JJ. For the Petitioner : Mr.V.Ramesh Mr.M.Hariharan For the Respondent : Mr.S.R.Sundar, Mr.S.Sethuraman, for Mr.G.Senthil Kumar ORDER ( Order of the Court was made by S. Manikumar, J ) Auction purchaser/writ petitioner has challenged Form No.5 in Rc.23/2006/A3 dated 16.01.2006 of the Commercial Tax Officer, Alandur Assessment Circle, first respondent herein, towards recovery of arrears of ₹ 6,94,09,527/-, for the years 1995-96 and 1996-97, and sought for a Writ of Certiorari to quash the same. 2. Facts leading to the writ petition are that the petitioner had purchased immovable property bearing Door No.2/4, Mount Poonamallee Road, Chennai - 58 situated in 102, Ramapuram village, Saidapet Taluk, Chengelpet District, comprised in part of Survey No.151/2 in Patta No.184 measuring 50 cents, by way of sale in public auction held on 17.04.2003, conducted by the Recovery Officer II, Debt's Recovery Tribunal I, Chennai, fourth respondent herein, for a sale consideration of ₹ 1,20,10,000/- in execution of Certificate No.150/2002, dated 27.08.2002 issued in O.A.No.103 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y transferred in the hands of the petitioner. 8. Vide notice dated 05.01.2006, first respondent herein, instructed the petitioner to file reply to the show cause as to why Revenue Recovery proceedings should not be taken against the petitioner for the recovery of arrears of sales tax due by M/s.Moolchand Exports Limited, the defaulter under the Revenue Recovery Act. 9. It is the further case of the petitioner that, the first respondent herein, without waiting for any reply, initiated proceedings under Revenue Recovery Act and issued notice in Form 4 as per Section 25 of the Revenue Recovery Act and directed the petitioners to pay a sum of ₹ 3,85,99,770/-, within 7 days from the date of receipt of the said notice. Form 4, dated 05.01.2006 was served on the petitioner on 09.01.2006. Petitioner submitted a reply dated 17.01.2006, stating that the properties were purchased through Court auction and that they were not aware of the statutory liabilities of the defaulter company, and that without even waiting for the completion of 7 days, as given in Form 4 notice dated 05.01.2006, the Commercial Tax Officer, Alandur Assessment Circle, first respondent herein, has issued an at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Rukmani Vs. Deputy Commercial Tax Officer I, Pattukottai I, Assessment Circle, Pattukottai, reported in [2013] 62 VST 369 (Mad), wherein one of us (S.Manikumar.J.,) held that right of the bonafide purchaser for the value has to be protected. 14. In response to the above submission of petitioner, Mr.M.Hariharan, learned Additional Government Pleader (Taxes), submitted that when the subject property was brought for auction by the Recovery Officer, fourth respondent herein, the fact of the sale arrears due and payable by M/s.Moolchand Exports Limited, the defaulter was brought to the notice of the Debts Recovery Tribunal-I, Chennai, and a weak submission has been made. 15. Learned Additional Government Pleader further submitted that as per Section 24(1) of the TNGST Act, for the arrears of tax, a charge is automatically created on the property and therefore recovery proceedings can be initiated against the property, which admittedly, is in the hands of the writ petitioner. 16. Heard the learned counsel for the parties and perused all the materials available on record. 17. Section 24 of the Tamil Nadu General Sales Tax Act, 1959, reads thus:- 24. Payment and recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where a dealer or person has preferred an appeal or revision against any order of assessment or revision of assessment under this Act, the interest payable under this sub-section, in respect of the amount in dispute in the appeal or revision, shall be postponed till the disposal of the appeal or revision, as the case may be, and shall be calculated on the amount that becomes due in accordance with the final order passed on the appeal or revision as if such amount had been specified in the order of assessment or revision of assessment, as the case may be. (3-A) Where a dealer submits the prescribed return within ten days after the expiry of the prescribed period, he shall also pay, in addition to the amount of tax due as per his return, interest at two per cent of the tax payable for every month or part thereof. (4) Where the tax paid under this Act is found to be in excess on final assessment or revision of assessment, or as a result of an order passed in appeal, revision or review, the excess amount shall be refunded to the dealer after adjustment of arrears of tax, if any, due from him. Where the excess amount is not refunded to the dealer within a period of nine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd., and 10 others, is supported by the auction notice issued by the Recovery Officer-II, Debt's Recovery Tribunal - I, Chennai, fourth respondent herein, bringing the subject property, for auction and the same is extracted hereunder:- AUCTION SALE DEBTS RECOVERY TRIBUNAL I 6TH FLOOR, SPENCER TOWERS, 770-A, ANNA SALAI, CHENNAI 600 002. Fax.No.044-2854 8163 DRC.No.150/2002-R.O.-II Auction sale of Immovable Property, Mortgaged to Bank, Under Recovery of Debts, due to Banks and Financial Institutions Act, 1993. IN THE MATTER OF State Bank of India, Leather International Branch, MVJ Towers, Chennai 600 010 Vs. Moolchand Industries Ltd., Ramapuram, Chennai 89 and 11 others PLACE OF AUCTION: Debts Recovery Tribunal I, 6th Floor, Spencer Towers, Anna Salai, Chennai 600 002. DATE AND TIME OF AUCTION: On 17.04.2003 at 3.00 p.m. DESCRIPTION OF PROPERTY: 1. All that place and parcel of land together with superstructure thereon situated at Door No.2/4, MOUNT POONAMALLEE ROAD, RAMAPURAM, CHENNAI 600 089 comprised in Survey No.151/2 of No.102, RAMAPURAM VILLAGE, SAIDAPET TALUK, CHENGALPATTU MGR DISTRICT in patta No.184 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.K.Gupta, Managing Partner Having its office at No.8 11, Ekkaduthangal Road, Guindy, Chennai 600 032. Has paid a sum of ₹ 1,20,10,000/-(Rupees One Crore Twenty Lakhs Ten Thousand only) and has been declared the purcahser at a sale by public auction held on 17.04.2003 of the undermentioned immovable property in execution of Certificate No.150/2002 dated 27.08.2002 issued in O.A.No.1032/1998 by the Hon'ble Presiding Officer, Debts Recovery Tribunal, Chennai-600002 under Section 19(22) of the Recovery of Debts Due to Bank and Financial Institution Act, 1993 (Act 51 of 1993) for RECOVERY OF DEBTS DUE FROM 1. M/s.Moolchand Industries Ltd. 2. Mr.Pradeep Kothari No.151/1,Mount Poonamallee 3. Mr.Santhosh Kothari Road, Ramapuram, 4. M/s.Moolchand Export Ltd., Chennai 89. 5. Mr.Moolchand Kothari 6.Mrs.Kantha Bhattad 7.Mr.Om Prakash Kothari 8.Mr.Jayaprakash Kothari 9.Mrs.Rajkumar Bisani 10.Mrs.Saroj Kumari Rathi No.28, Ramaswamy Street 11.Mrs.Rekha Kabra T.Nagar, Chennai 17. And the said sale has been duly confirmed by the undersigned and becomes absolute. SPECIFICATION OF PROPE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion) Company Petition No.254 of 1997 SALE NOTICE Pursuant to the orders passed on 13.08.2004 by Hon'ble Mr.Justice, Kulasekaran of the Hon'ble High Court, Madras offers are invited in Sealed Tenders from the intending purchasers for the sale of landed property admeasuring 50 cents under Survey No.151/1B 151/2C of the company situated at Door No.2/4, Mount Poonamallee Road, Ramapuram, Chennai 89, excluding two buildings thereon which were sold already to another purchaser through the DRT, Chennai and the movables such as furniture and other articles on As is where is basis . The upset price for the landed property is ₹ 77,10,000/- (Rupees Seventy Seven Lakhs and Ten Thousand Only) and ₹ 50,000/- (Rupees Fifty Thousand Only) for furniture and other articles. In respect of subject landed property to title deeds are available with Official Liquidator and the property is in the custody of this Hon'ble Court upon liquidation of the subject company, pursuant to Section 456(2) of the Companies Act, 1956 and the Official Liquidator has taken possession of the said property under Section 456(1) of the said Act and a notice calling objection, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NOTICE Sub: ARREARS Office of the Commercial Tax Officer, Nandanam Assessment Circle Tvl. Moolchand Exports Limited Arrears of ₹ 3,85,99,700 for the years 1993- 94 to 1996-97 R.R.Action Notice issued. Ref: Commercial Tax Officer, Nandanam Assessment Circle Rc.2914/96/1999/A3, dated 26.12.2005. ********* You take notice that the Commercial Tax Officer, Nandanam Assessment circle has informed that Tvl. Moolchand Exports Ltd., are in arrears of sales tax to the extent of ₹ 3,38,99,770/- for the years 1993-94 to 1996-97 and the defaulters were having a Land and Building at No.151/1, Mount Poonamallee Road, Ramapuram, Chennai-89. The arrears were accrued during the year 2000. 2) It is learnt that you have purchased the said land and building situated at No.151/1, Mount Poonamallee Road, Ramapuram, Chennai 89 by way of public auction in execution certificate No.150/2002 dated 27.08.2002 issued in O.A.No.1032/1998 by the Hon'ble Presiding Officer, Debt Recovery Tribunal, Chennai. 3) The defaulters sold the property without discharge his sales tax liability. As a result of section 24(1) of the TNGST Act 1959, a charge was created over the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Circle, No.62, Pudupet Street, Alandur, Chennai 600 016. Dated : 16.01.2006 Form No.5 SECTION 27 - NOTICE OF ATTACHMENT Notice of attachment to Tvl.Moolchand Exports Limited, 151/1, Mount Poonamallee Road, Ramapuram, Chennai - 600 089 (Present occupier Thiru Dr.S.Gupta, Managing Partner, Tvl.Gupta and Company, No.8 11, Ekkattuthangal Road, Guidy, Chennai - 600 032. Take notice that as you have not paid or shown sufficient cause for the non payment of ₹ 3,85,99,770/- (Rupees Three Crores Eighty Five Lakhs Ninety nine thousand sevan hundred and seventy only) TNGST/1990-94 to 1996-97 Although the said sum has been duly demanded in writing from you, the landed property belonging to you is hereby placed under attachment, and that unless the arrear due by you with interest and other charges be paid within SEVEN days the 23rd day of January, 2006, the landed property will be brought to sale in due course of lay. You will further take notice that from the date of this attachment notice until the date of sale of your land hereby attached. You are, and will be held liable for all kists thereon accruing and the said kists will be demanded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 01.09.2016. 4. The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending. 5. The aforesaid would, thus, question (a) in favour of the finacial institution, which is a secured creditor having the benefit of the mortgaged property. 6. In so far as question (b) is concerned, the same is stated to relate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of Section 31B, as it includes secured debts due and payable to them by sale of assets over which security interest is created . 7. We, thus, answer the aforesaid reference accordingly. 31. Thus, after reference, instant writ petition filed in the year 2006, is placed before us. In B.Suresh Chand Vs. State of Tamil Nadu, rep. by the Secretary, Revenue Department, Fort St. George, Madras-9 and another, reported in 2006 (4) CTC 805, a Full Bench of this Court, after considering a catena of judgment, at para 20 held as follows:- 20. Therefore we hold that in view of the Honourable Supreme Court's j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a non obstante clause in Section 46-B of the Act which reads as under: 46-B. Effect of Act on other laws.--The provisions of this Act and of any rule or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern. The non obstante clause shall not only prevail over the contract but also other laws.(See Priyar Pareekanni Rubbers Ltd. v. State of Kerala). In the light of the above discussions, the issue as to whether the right of the secured creditor over the subject property mortgaged will prevail over crown debt is no longer res integra. 32. On the aspect of protection of a bonafide purchaser, without notice, in Rukmani vs. Deputy Commercial Tax Officer I, Pattukottai I, Assessment Circle, Pattukottai, reported in (2013) 62 VST 369 (Mad), one of us (Mr.Jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act or, as the case may be, without notice of such tax or other sum payable by the dealer: or (ii) with the previous permission of the assessing authority.' ... 4. Under section 19 of the Tamil Nadu General Sales Tax Act, 1959, (hereinafter referred to as, 'the Act'), when the firm is liable to pay tax under the Act, the firm, and each of the partners of the firm shall be jointly and severally liable for such tax. Under this section, for the liability of the firm, the partners also are made liable and therefore their properties cannot escape for the tax liability. When such a person has effected transfer of his property during the pendency of the proceedings under the Act or after the completion thereof, it cannot be stated that he did not intend to evade the tax and therefore if the sale was to defraud the Revenue, the sale will be ab initio void. But, at the same time, the Legislature has intended to protect an honest person who had purchased the property from such a seller, if he had not colluded with the seller and he had no notice of the liability of the vendor. Under the proviso (i) to section 24A of the Act, not only adequate consideration, but also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enquiries with prudence, or utter negligence and the real intention in their mind. Every purchaser from the assessee is naturally interested to protect the property and will claim to be a bona fide purchaser. For the sake of their claim, the court cannot approve the transaction as a bona fide sale. 15. N. Padma Coffee Works' case [1999] 114 STC 494 (TNTST), has been relied on by a honourable judge of this court, while dismissing a Writ Petition (MD). No. 1277 of 2005, dated February 28, 2005 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer III, Thoothukudi). The appeal preferred by the subsequent purchaser in W.A. (MD). No. 130 of 2005, has been dismissed on February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer). However, in D. SenthilKumar's case reported in [2006] 148 STC 204 (Mad), the First Bench of this court, presided over by the honourable Chief Justice, who was also a party to the unreported judgment in W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer), has considered a similar issue, as to whether a purchaser of a property in execution of the recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , has held the property subject to that charge, and therefore, the Department can take appropriate action. 19. While adverting to the aforesaid rival submissions, in D. Senthil Kumar's case reported in [2006] 148 STC 204 (Mad), the honourable Division Bench, at paragraph No. 8, held as follows (pages 208-211 in 148 STC): 8. The short question is whether the charge created on a property under the TNGST Act is enforceable against a transferee of such property. The expression 'charge' is not defined by the TNGST Act. However, this concept is well-known in law of transfer of property and has been defined by section 100 of the Transfer of Property Act, wherein the word 'charge' is defined as follows: 'Where immovable property of one person is by act of parties 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 simply 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; AIR 1971 SC 1201, the Supreme Court held as follows (paras 18 and 19 in 144 STC): '22. In the present case, firstly, no provision of law has been cited before 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 March 17, 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 June 5, 1992 specifically excludes any statutory liabilities, including sales tax. This offer was accepted by the Corporation on July 15, 1992. Even at that stage, there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 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. 20. It is a well-settled legal position that a judgment rendered by a court, taking into consideration of the later judgment of the Supreme Court, on the same issue is binding. Later judgment of the Supreme Court, on the point of law, would prevail over the former. One of the issues considered by another Division Bench of this court in A. Senthilkumar v. Assistant Commissioner (CT), Koyembedu Assessment Circle reported in [2011] 1 CTC 828, was whether the arrears of sales tax would prevail upon the claim of the secured debtors, like a bank, on the basis of the charge over the property and if the purchaser establishes that he is a bona fide purchaser, without notice, in a valid sale, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for brevity, the SARFAESI Act ), whether the property can still be brought for public auction, for recovery of sales tax arrears, due to the Government. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t inconsistent with good faith. 28. Even in N. Padma Coffee Works' case [1999] 114 STC 494 (TNTST) the Special Tribunal has clearly observed that the legislative intent in engrafting proviso to section 24A of the Act, is to protect a honest person, who had purchased the property from a seller and further observed that there should not be any collusion with the seller, but the necessary ingredients of section 24A of the Act should be there, i.e., the sale effected should be for adequate consideration and want of notice. Unless the charge is duly registered in the Registration Department, it would not be possible for any prospecting buyer to know whether there is any charge over the property, for any arrears of tax or any statutory dues to be paid to the Government or statutory body. That apart, there are no materials to indicate that the petitioner had any constructive notice of the charge. There is no pleading to the effect and rightly, no arguments have been advanced, and therefore, this court is of the view that the case on hand would squarely also fall within the ambit of the apex court in Ahmedabad Municipal Corporation's case reported in [1971] 1 SCC 757; AIR 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
