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IN THE HIGH COURT OF JUDICATURE AT MADRAS
SENTHILKUMAR RAMAMOORTHY, J.
R.Dakshinamoorthy - Appellant
Versus
The Deputy Commercial Tax Officer, Tirupur (Bazaar Street), Tirupur - Respondent
W.P.No.36469 of 2006 and M.P.No.2 of 2006
Decided on : 26-03-2019
Tamil Nadu General Sales Tax Act, 1959 - Section 24 - TNGST Act - Section 24 - Quash the Notice - Revenue Recovery Act - Sale Deed - Thereafter, it appears that dealer entered into negotiations for sale of said Property and Petitioner evinced interest in purchasing said Property - Accordingly Petitioner issued a notice in a Tamil daily calling upon public to raise claims/objections if any, to proposed purchase of said property within one week from date of publication of notice public were also put on notice that original title deeds were missing and that Petitioner would not be responsible for any claims made in respect of said Property after purchase thereof in the event of non-receipt of objections. Subsequently by Sale Deed which was registered in office of Sub- Registrar – Held, From aforesaid discussion and the precedents adverted to above, the principles of law that can be gleaned in respect of the enforcement of charges, including statutory charges, are as under - A mortgage is a transfer of interest in property and therefore, attaches itself to and moves with the property. Accordingly, it would be enforceable in hands of a transferee without notice including the ultimate transferee in case of multiple transfers - By contrast, there is no transfer of interest in a charge and, therefore as per Section 100 of TPA notwithstanding the fact that a charge holder has the same rights as a simple mortgagee, a charge is enforceable against the property in the hands of a transferee only if the transfer was not bona fide and transferee had either actual or constructive notice of prior charge - If relevant statute provides that charge can be enforced against property in hands of a transferee without notice it can be enforced notwithstanding the fact that transferee is a bona fide purchaser for value without notice of prior charge - Section 24 A of TNGST Act does not stipulate that charge can be enforced against property in the hands of a transferee without notice of the prior charge - Based on aforesaid discussion binding decisions of Hobble Supreme Court and the Division Bench of this Court in principles of law set out above Impugned Notice cannot be sustained. As stated earlier, there is no evidence that there was collusion between Petitioner and erstwhile owner – Equally from documents on record Petitioner appears to be a bona fide purchaser without notice, either actual or constructive, of the prior charge in favors of Respondent - From the language of Section 24(2), it is clear that a statutory charge is created in favor of sales tax department upon failure to pay sales tax within 21 days of date of receipt of a notice of assessment - Therefore, from counter affidavit it appears that a statutory charge was created over property - More importantly, when language of Section 24-A is examined there is nothing therein that suggests that statutory charge would be enforceable against a transferee without notice - Petition is allowed
ORDER :
This Writ Petition is filed for a Writ of Certiorari to quash the Notice dated 23.6.2006 of the Respondent. The said notice was issued under Section 24 of the Tamil Nadu General Sales Tax Act, 1959 (the TNGST Act), calling upon the Petitioner to remit the sales tax arrears with interest thereon of the former owner of the immovable property currently owned by the Petitioner within seven days from the date of receipt of the notice failing which steps would be taken to bring the property to sale under the Tamil Nadu Revenue Recovery Act.
2. The relevant facts of this case are simple. From the Impugned Notice dated 23.6.2006, it appears that M. Bhagyavathi was the Sole Proprietrix of Abirami Chemicals, which was registered as a dealer under the TNGST Act. It also appears that the said dealer had not paid sales tax dues in respect of the assessment years 1993-94 and 1994-95 and that the said dues aggregated to a sum of Rs.7,48,698/- with interest thereon as of the date of notice from the respondent to the petitioner.
3. As per the above mentioned notice, a security bond was provided on 06.04.1992 at the time of issuance of the registration certificate and the immovable property of the dealer at Chellapuram, Thirupur, admeasuring 975 sq. ft. with a built-up area of 420 sq. ft. was offered as security (the said Property). It is stated in the counter affidavit of the Respondent that the Assessment Order dated 29.03.1996 in TNGST No.272355/93-94 was served on the assessee/ dealer on 16.04.1996 and that in Assessment Order dated 31.05.1996 in TNGST No. 272355/94-95 was served on the said assessee/dealer on 10.06.1996. Consequently, as per Section 24(2) of the TNGST Act, the statutory charge would operate 21 days after receipt of the aforesaid notices.
4. Thereafter, it appears that the dealer entered into negotiations for the sale of the said Property and the Petitioner evinced interest in purchasing the said Property. Accordingly, the Petitioner issued a notice in a Tamil daily on 12.10.1998 calling upon the public to raise claims/objections, if any, to the proposed purchase of the said property within one week from the date of publication of the notice. The public were also put on notice that the original title deeds were missing and that the Petitioner would not be responsible for any claims made in respect of the said Property after purchase thereof in the event of non-receipt of objections. Subsequently, by Sale Deed dated 09.11.1998, which was registered in the office of the Sub- Registrar, Thirupur, as Document No.2774/1998, the petitioner acquired the said property from M.Bhagyavathi for a total sale consideration of Rs.3 lakhs. The Petitioner appears to have obtained an encumbrance certificate dated 02.12.1998 for the period November 1996 to December 1998 and the encumbrance certificate shows “nil” encumbrance during the aforesaid period. The Impugned Notice, as is evident from the notice, was sent to the Petitioner about eight years later.
5. The learned counsel for the Petitioner adverted to the facts set out above and contended that the Respondent cannot claim sales tax dues of the erstwhile owner from the Petitioner. He further contended that the charge against the property cannot be enforced against the Petitioner because the Petitioner is a bona fide purchaser for value without notice of the prior charge.
6. In response, the learned counsel for the Respondent submitted that the sale of the said Property by the erstwhile owner is void in terms of Section 24-A of the TNGST Act. In this connection, he invited the attention of the court to section 24 A, which reads, inter alia, as under:
“Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates, a charge on, or parts 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 person, with the intention to defraud the revenue, such charge o
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