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TMI Blog2019 (11) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... of the erstwhile owners of the property, that is, Varun Filaments Private Limited under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the GVAT Act"). 4. The petitioner No.1 is a private limited company and is engaged in the manufacture and sale of textile articles. The petitioner No.2 is a Director and authorised signatory of the first petitioner company. The petitioners purchased the subject property by a registered sale deed dated 13.7.2011 from one M/s. Varun Filaments Private Limited on payment of valuable consideration. On the very next day, the petitioners made an application with the revenue department for mutation of the entry of sale of property by registered sale deed. Subsequently, on 26.9.2011, the petitioners had obtained a title clearance certificate in respect of the subject property from an advocate, who certified that there was no subsisting encumbrance on the property. Thereafter, the petitioners came to know that by an order dated 9.9.2011, the respondent authorities had created a charge and attached the subject property for alleged dues of the erstwhile owner of the property namely, M/s. Varun Filaments Private Limited for the year 2006-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication before the Grievance Cell of the Value Added Tax Department complaining about the charge and attachment of their property not being removed even though the alleged dues of the erstwhile owner were raised much after the purchase of the property of the petitioner. However, the Grievance Cell, by communication dated 22.2.2019, informed the petitioners that they can approach the Revenue Department for resolution of their grievance. Since the Value Added Tax Department did not take any steps for removal of the charge and attachment over the subject property, the petitioners have approached this court seeking the relief noted hereinabove. 7. Mr. Uchit Sheth, learned advocate for the petitioners, submitted that entering the charge and attachment on the property of the petitioners for the alleged dues under the GVAT Act of the erstwhile owner of the property is wholly without jurisdiction and illegal. It was submitted that the petitioners had purchased the subject property before the charge came to be entered on the property by the Value Added Tax Department and that no charge was registered in respect of the alleged value added tax dues of the previous seller prior to registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer issued notices for assessment under section 34 of the GVAT Act for assessment years 2006-07, 2009-10, 2011-12. It was submitted that thereafter, vide order dated 3.5.2014, Varun Filaments Private Limited was held liable to pay tax of Rs. 1,48,35,312/- for assessment year 2006-07; vide order dated 31.3.2014, it was held liable to pay tax of Rs. 28,47,276/- for assessment year 2009-10; whereas by an order dated 28.3.2016, Varun Filaments Private Limited was held liable to pay tax of Rs. 23,15,631/- for assessment year 2011-12. 8.1 It was submitted that in the light of the provisions of section 44 of the GVAT Act, the respondent authorities had created a charge over the property in question on 12.9.2011, which came to be certified on 16.6.2012. It was submitted that Varun Filaments Private Limited was well aware of its liability under the GVAT Act as it had participated in all the assessment proceedings and was fully conversant with the fact that the assessment proceedings were initiated way back in the year 2008, despite which, Varun Filaments Private Limited sold the subject property to the present petitioners on 14.7.2011. It was submitted that Varun Filaments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove backdrop. 12. As noticed earlier, in this case no charge was created prior to the subject property being transferred in favour of the petitioners. Section 48 of the GVAT Act bears the heading "Tax to be first charge on property" and which lays down that notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case may be, such person, would not come into play. Thus, the section envisages a first charge on the property of the dealer on account of tax, interest or penalty which he is liable to pay to the Government. In the present case, the petitioners are not liable to pay any tax, interest or penalty to the Government and therefore, would not fall within the ambit of the expression "any other person" as contemplated in section 48 of the GVAT Act. The subject property was transferred in favour of the petitioner, prior to the order of attachment and creation of a charge thereon. Therefore, as on the date when the subject property came to be at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the dealer. According to the respondents, since Varun Filaments Private Limited was aware that the tax has become due and payable by it and despite such position, it had parted with the possession of the subject property by way of sale in favour of the petitioner with the intention of defrauding the Government revenue, the transfer in favour of the petitioner is void as against the claim of the Department for the sum payable by Varun Filaments Private Limited. 16. In this regard, it may be germane to refer to the decision of the Supreme Court in the case of Tax Recovery Officer II v. Gangadhar Vishwanath Ranade, (1998) 6 SCC 658, wherein the court, in the context of section 281 of the Income Tax Act, 1961, which is in pari materia with section 47 of the GVAT Act, held thus:- "7. The question which is now required to be answered is whether in a proceeding under Rule 11 of the Second Schedule to the Income-tax Act, the Tax Recovery Officer can declare a transfer as void under Section 281. Section 281, as it stood at the relevant time provided a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallow the claim. Rule 11(6) : Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive." [emphasis ours] 9. The Tax Recovery Officer, therefore, has to examine who is in possession of the property and in what capacity. He can only attach property in possession of the assessee in his own right, or in possession of a tenant or a third party on behalf of/for the benefit of the assessee. He cannot declare any transfer made by the assessee in favour of a third party as void. If the Department finds that a property of the assessee is transferred by him to a third party with the intention to defraud the Revenue, it will have to file a suit under Rule 11(6) to have the transfer declared void under Section 281." "13. In the present case the Tax Recovery Officer could not have examined whether the transfer was void under Section 281 of the Income-tax Act. His adjudication of the transfer as void under Section 281 is without jurisdiction. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the facts of the present case and if it is the case of the department that the transfer in favour of the petitioner is void on the ground that Varun Filaments Private Limited has transferred the same to the petitioner with the intention of defrauding the Government revenue, then the respondents are required to approach the civil court for a declaration that the transfer is void. Moreover, this court in the case of Chetna Vijay Shah v. State of Gujarat, rendered on 25.1.2018 in Special Civil Application No.14823 of 2017, has, in the context of the provisions of section 47 of the GVAT Act, held that the only recourse available to the VAT authority under section 47 of the Act is to approach the civil court to annul the transfer on the ground that it was made with an intention to defraud the Government. It is in the light of the above factual and legal position that the impugned order of attachment dated 9.9.2011, made by the second respondent cannot be sustained. However, the right of the department to have the transfer declared as void under section 47 of the GVAT Act is not thereby taken away. If at all the respondents seek such a declaration, it is always open for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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