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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE A. RAMAMURTHI
State of Tamil Nadu and Another - Appellant
Versus
M. Cauvery Ammal - Respondents
Second Appeal No. 21 of 1987
Decided On : 09 December 1998
SALES TAX - STATUTORY CHARGE - PROPERTY OF ASSESSEE - ALIENATION - VALIDITY - SECTION 24(2) OF THE TAMIL NADU GENERAL SALES TAX ACT, 1959 - INTERPRETATION - SALE OF PROPERTY BY ASSESSEE AFTER PROVISIONAL ASSESSMENT NOTICE AND FINAL ASSESSMENT ORDER - EFFECT - WHETHER SUBSEQUENT TRANSFERS ARE SUBJECT TO STATUTORY CHARGE - WHETHER PLAINTIFF, A BONA FIDE PURCHASER FOR VALUE WITHOUT NOTICE, IS ENTITLED TO RELIEF - ANALYSIS AND CONCLUSION.
Fact of the Case:
The plaintiff, a bona fide purchaser for value without notice, purchased a property from Dhanalakshmi Ammal, who had acquired it from Govindasamy Chettiar, who in turn had purchased it from Malayan Chettiar. Malayan Chettiar was an assessee under the Tamil Nadu General Sales Tax Act, 1959, and owed sales tax arrears from 1957 to 1963. The second defendant, the sales tax authority, attached the property to recover the arrears. The plaintiff filed a suit to set aside the attachment and for permanent injunction from bringing the property to sale.
Finding of the Court:
The court held that the statutory charge created under section 24(2) of the Tamil Nadu General Sales Tax Act, 1959, has priority over all other claims against the property of the assessee, and any alienation of the property made on and after the assessment of the sales tax would not be valid unless and until the sales tax amount due and payable is cleared. The court further held that the plaintiff, as a subsequent transferee, is not entitled to claim any relief, as the alienation made by the assessee is not valid under law.
Issues: 1. Whether the plaintiff is entitled to the relief of permanent injunction? 2. Whether the attachment made by the defendants is liable to be set aside? 3. Whether the defendants have got any statutory charge over the properties in respect of the sales tax arrears of Malayan Chettiar? 4. To what relief?
Ratio Decidendi: 1. Section 24(2) of the Tamil Nadu General Sales Tax Act, 1959, creates a statutory charge on the property of the assessee for any tax assessed or payable or any other amount due under the Act. 2. Any alienation of the property made on and after the assessment of the sales tax would not be valid unless and until the sales tax amount due and payable is cleared. 3. The plaintiff, as a subsequent transferee, is not entitled to claim any relief, as the alienation made by the assessee is not valid under law.
Final Decision: The second appeal is allowed. The judgment and the decree of the lower appellate court are set aside and the suit is dismissed. However, there will be no order as to costs.
A. RAMAMURTHI, J.
The unsuccessful defendants are the appellants.
2. The case in brief is as follows :
The plaintiff filed a suit to set aside the attachment of the suit properties made by the second defendant and for permanent injunction from bringing the same for sale to realise the sales tax arrears and also penalty due by one Malayan Chettiar. She purchased the properties for a valid consideration from one Dhanalakshmi Ammal under a registered sale deed dated March 1, 1973. She is in possession and enjoyment of the properties in her own right and paying the municipal tax. The second defendant filed a written statement that the said Malayan Chettiar was an assessee under the Tamil Nadu General Sales Tax Act, assessed to sales tax from the year 1957-58 and he was under arrears of sales tax from 1957 to 1963. On account of the tax arrears, there was statutory charge over the properties. The plaintiff issued a notice under section 80 of the Code of Civil Procedure, to the defendants, objecting to the attachment. The plaintiff is not liable to pay any sales tax and the attachment is also illegal. Hence, the suit.
3. The defendants resisted the suit, stating that the suit properties were attached to the sales tax arrears due from Malayan Chettiar. He was an assessee, having been assessed for sales tax from 1957-58. The tax for the year 1957 to 1963 still remains unpaid. The property has been transferred subsequently to the accrual of the sales tax and, as such, there is a statutory charge on the properties. All the subsequent transfers are only subject to the charge. The subsequent transfer, viz., in favour of Govindasamy Chettiar, Dhanalakshmi Animal and the plaintiff will not confer any absolute title. They are entitled to recover the arrears by proceedings under the Revenue Recovery Act.
4. The trial court framed six issues and on behalf of the plaintiff, exhibits Al to A40 were marked and P.W.I was examined. On the side of the defendants exhibits Bl and B2 were marked and D.W.I was examined. The trial court dismissed the suit and aggrieved against this, the plaintiff filed A.S. 18/85 on the file of sub-court, Salem and the appeal was allowed and the judgment and decree of the trial court were set aside and the suit was decreed. Aggrieved against this, the defendants have come forward with the present appeal.
5. The defendants/appellants raised the following substantial question of law :
"When the assessee had alienated the property subsequent to the provisional assessment notice, would not such a sale be covered by section 24 of the Tamil Nadu General Sales Tax Act, 1959 ?"
6. The points that arise for consideration are : (1) whether the plaintiff is entitled to the relief of permanent injunction ? (2) whether the attachment made by the defendants is liable to be set aside ? (3) whether the defendants have got any statutory charge over the properties in respect of the sales tax arrears of Malayan Chettiar ? and (4) To what relief ?
7. It is admitted that the suit property originally belonged to one Malayan Chettiar. The said Malayan Chettiar and his wife Dhanalakshmi Ammal purchased the properties under a registered document dated April 15, 1959. They sold the property to one Govindasamy Chettiar under a registered document dated August 31, 1962. The said Govindasamy Chettiar sold the same to one Dhanalakshmi Ammal under a registered document dated March 11, 1968. Thereafter, the plaintiff purchased it from the said Dhanalakshmi Ammal on March 1, 1973. The learned counsel for the plaintiff stated that from the date of purchase the plaintiff is in possession and enjoyment of the property and in the municipal registry the assessment was also changed in her name and she has been paying the tax. This being so, the second defendant had attached the property for realisation of sales tax arrears due from one Malayan Chettiar and on the date of attachment the said Malayan Chettiar has no right on the title and under the circumst
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