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Andhra Pradesh High Court
Judges : BILAL NAZKI, S.ANANDA REDDY
Damera Ramakrishna - Appellant
Versus
Commercial Tax Officer - Respondent
Decided On : 10-05-04
Held : There is no doubt that under Sec. 16-C of the Act, the sales tax due to the government shall be the first charge on the property of the dealer notwithstanding anything to the contrary contained in any law. Section 17-A of the Act lays down that any conveyance of property in favour of any other person with the intention to defraud the revenue, such conveyance would be void. But the proviso saves the transfers, if the transfers have been made for adequate consideration and without notice of the pendency of such proceeding under this Act or, as the case may be, without notice of such tax or other sum payable by the dealer.
Learned counsel for the petitioners submits that the petitioners had obtained non-encumbrance certificate from the authorities concerned and also got the documents registered by the Sub-Registrar. If the petitioners (sic. respondents) had in fact informed the Sub-Registrar about the encumbrance of the property, then the Sub- registrar would have not registered the documents. Only a copy of the letter purported to have been sent by the department to the Sub-Registrar was produced before us. There is nothing to prove and in fact not even the acknowledgment due was placed on record. In any case, even if such letter has gone to the Sub-Registrar and the Sub-Registrar failed to take notice of that letter, a bona fide purchaser cannot be punished for that. While analysing Section 17-A of the Act, we feel that after discharging the initial burden that the property was sold to defraud the department and avoid payment of sales tax, the onus will shift to the purchasers to show that they were bona fide purchasers and that they were not parties to the fraud being played by the assessee, and they had paid adequate consideration for the purchase.
The onus in the first instance is on the Department to prove that there was a fraud and the transaction was made only to defeat the rights of the Department to recover the tax and in case the Department was able to prove it, then the onus would shift to the petitioners to show that they were not parties to the fraud played by the assessee against the Department.The question of filing a civil suit would only arise if the respondents had pleaded that the petitioners were parties to the fraud played against the Department. Even before this court, the Department has not stated that the petitioners were parties to any mischief or fraud played by the assessee with the department. If one reads in between the lines of the counter-affidavit, one comes to the only one conclusion that the Department was also of the view that the petitioners were bona fide purchasers. Therefore, they cannot be forced to go to the civil Court.
( 1 ) HEARD learned counsel for the parties. All these writ petitions raise a similar question of law, hence, we are disposing of the matters by a common order.
( 2 ) THE writ petitioners have challenged the attachment of the property by the fourth respondent by order dated 30-4-2004 in form no. 5. A consequential notice to the order of attachment was passed under Section 17-A of the Andhra Pradesh General Sales Tax act, 1957, (for short "the Act") on 6-2-2004. According to the attachment order and the notice under Section 17-A of the Act, one m/s. Mehar Tanneries Private Limited was assessee on the rolls of the Commercial Tax officer, Suryaraopet, Vijayawada, for the years 1993-94 to 1996-97 and fell in sales tax arrears to the tune of Rs. 35,98,030/ -. Several notices were issued for payment of the arrears and when arrears were not paid, the Sub-Registrar, Gannavaram, was also addressed a letter on 16-9-2003 by registered post with acknowledgment due requesting him not to register the immovable properties of the above Company. Meanwhile, M/s. Mehar Tanneries Private limited, Vijayawada, sold its immovable properties comprising of land to an extent of ac. 10. 23 gts and building situated in it and registered it to different persons on 15-12-2003 and 29-12-2003. The property was sold for a consideration of rs. 18,75,000/- vide six registered documents. The Department maintained in the notice that M/s. Mehar Tanneries Private limited, with an intention to evade tax legitimately due to the Department and to defraud the Government revenue, willfully sold and registered its immovable properties to different persons in spite of receipt of several notices for payment of sales tax arrears. Therefore, the Department maintained that the transfer of property by m/s. Mehar Tanneries Private Limited to the petitioners was void under Section 17-A of the Act as it had charge over the property under Section 16-C of the Act.
( 3 ) ON the other hand, the case of the petitioners is that they had paid due consideration for the transactions and purchased the property through registered sale deeds. There was no method or no way out for the petitioners to know whether the seller was in arrears of sales tax or not, since, they purchased the property, which was registered by the Sub-Registrar, after obtaining non-encumbrance certificate of the property from the Revenue authorities and there was no other way for them to receive any knowledge with regard to the arrears of their seller on account of sales tax.
( 4 ) BEFORE appreciating these arguments, it will be profitable to have a look on the different provisions of the Act. Section 16-C of the Act lays down that:"16-C. Liability under this Act to be the first charge: Notwithstanding anything to the contrary contained in any law for the time being in force [ any amount of Tax, Government loan extended to the dealer due to treating deferred tax as deemed to have been paid, penalty, interest] and any other sum if any, payable by a dealer or any other person under this Act, shall be the first charge on the property of dealer, or such person. "section 17-A of the reads as under:"17-A. Transfers to defraud revenue void: Where during the pendency of any proceeding under this Act, or after the completion thereof any dealer creates, a charge on, or part, with the possession by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever of any of his assets in favour of any other person, with the intention to defraud the 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 as a result of the completion of the said proceedings or otherwise. "
( 5 ) THERE is no doubt that under Sec. 16-C of the Act, the sales tax due to the government shall be the first charge on the property of the dealer notwithstanding anything to the contrary contained in any law. Section 17-A of the Act lays down that any conveyan
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