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THE HONOURABLE DR. JUSTICE ANITA SUMANTH W.P.No.12686 of 2019 and W.M.P.No.12915 & 12916 of 2019. Tax case full order. Section 24A is also inapplicable in the present case, since the sale transaction was in the year 2010 and a mere demand without any action taken by the Commercial Taxes Department to secure the properties in question would not justify the present impugned action taken belatedly after nine years. In view of the detailed discussion as above, the impugned communication dated 02.04.2019 is quashed and this writ petition, allowed

by ·

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 22.06.2022

CORAM

THE HONOURABLE DR. JUSTICE ANITA SUMANTH

W.P.No.12686 of 2019

and

W.M.P.No.12915 & 12916 of 2019

 

Maha Impex

Represented by its Proprietorix

P.Saraswathi

Flat No.C-3, Ganga Block,

Selvam Estates, 6th Cross Street,

New Colony, Chrompet,

Chennai-600 044.                                                                                     … Petitioner

Vs.

 

1.Principal Secretary/Commissioner of Commercial Taxes,

Ezhilagam, Chepauk,

Chennai-600005.

 

2.Assistant Commissioner,

Ranipet SIPCOT Assessment Circle,

Railway Station Road, Ranipet.

 

3.Assistant Commissioner,

Vallurvakottam Assessent Circle,

Chennai-600006.

 

4.The Sub Registrar,

Walaja, Vellore District.                                                  … Respondents

 

Prayer: Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of Certiorari, calling for the records relating to the proceedings dated 02.04.2019 in Na.Ka.No.A3/244/2015 of the 2nd respondent and quash the same.

For Petitioner :           Mr.Sri Sankar S. for

M/s.R.Saravanakumar

For Respondents :       Mr.V.Prasanth Kiran [R1 to R3]

Government Advocate

 

O R D E R

 

The petitioner has challenged communication dated 02.04.2019 issued by the Assistant Commissioner, Ranipet SIPCOT Assessment Circle (R2) instructing the Sub-Registrar, Walaja, Vellore District (R4) to register a charge in respect of the property admeasuring 2 acres and 52 cents, comprised in Old Survey Nos.472/1 & 472/9 and (New Survey Nos.472/1D1 and 472/9A) situated at Mukundarayapuram Village, Ranipet, Walaja Taluk, Vellore District and the property measuring an extent of 39520 sq. ft., comprised in Survey No.62, Korai Village, bearing Plot Nos. 117 & 118, SIDCO Industrial Estate, SIPCOT, Ranipet, Vellore District (properties/properties in question).

  1. The sequence of relevant dates and events to decide the writ petition are set out as follows:

(i) The properties in question were owned by one, Anusha International Limited, hereinafter referred to as ‘assessee’ and assessed to tax under the provisions of the Tamil Nadu General Sales Tax Act, 1956 (in short ‘Act’).

(ii) The properties had been mortgaged with IDBI as well as Kotak Mahindra Banks for availment of certain financial facilities.

(iii) On account of defaults in repayment by the assessee, the properties have been brought to auction by the banks and the petitioner is the successful bidder in the public auction.

(iv) The banks had, on 22.07.2010, accepted the offer of the petitioner and sold the properties for a consideration of Rs.1,10,00,000/-.

(v) The terms and conditions at annexure-2 of the letter of acceptance dated 22.07.2010 make no reference to commercial tax arrears but only state that there were pending provident fund (PF) and employees’ state insurance (ESI) dues that shall be cleared by the petitioner prior to issuance of sale certificate.

(vi) The petitioner, by letter dated 09.08.2010, had conveyed that the PF and ESI dues were in the process of being settled and, admittedly, the same have been settled thereafter.

(vii) A sale certificate has thus come to be issued by IDBI Bank confirming the sale on 15.02.2011. The sale certificate unambiguously acknowledges receipt of full sale consideration for the sale of properties in question, being Rs.1,10,00,000/-. The petitioner has, admittedly, been in undisturbed possession and occupation of the property thereafter.

(viii) The petitioner had exhibited due diligence even at the time of sale, verifying that there was no encumbrance upon the properties, at the time of purchase thereof.

(ix) Encumbrance certificate dated 05.09.2011 issued by the Sub-Registrar, Walaja is placed on record, revealing that, at the time of purchase of the properties by the petitioner, no charge had subsisted in regard to the same, either at the instance of the Commercial Taxes Department or any other authority for that matter. Patta has been issued by the Revenue Authority on 18.10.2012.

(x) While this is so, the petitioner required additional funds for the purposes of its business and thus approached State Bank of India (SBI) for raising the funds.

(xi) SBI has sought verification of the title documents for which purpose R4 had been approached. It was at this juncture that the Commercial Taxes Department appears to have got wind of the fact that the defaulting assessee had owned the properties in question

(xii) Till such time, as fairly stated by the respondent counsel and as obvious from the sequence of events, the existence of the properties in question was not within the knowledge of the Commercial Taxes Department at all.

(xiii) While the process was ongoing before R4 for obtaining the parent title/documents, the impugned communication came to be shot off by R2, which is the trigger for the present writ petition.

  1. The petitioner would submit that there is absolutely no justification for the issuance of the impugned communication seeing as the purchase of the property in 2010 by it in public auction was subject to only the settlement of PF and ESI dues, and the aforesaid conditions have been duly complied with. It has been in possession of the properties since 2011 and hence the impugned communication is not liable to be sustained.
  2. Per contra, learned Government Pleader relies upon the provisions of Section 24 and 24A of the Act dealing with the ‘payment and recovery of tax’ and ‘transfers to defraud revenue’, respectively. As and when there are any demands are raised against an assessee wherein there are defaults, proceedings for recovery are initiated. According to him, there is an automatic attachment of all assets of that concerned assessee to secure the interests of the Commercial Taxes Department.
  3. Sections 24 and 24A of the Act, to the extent to which they are relevant, are extracted below:

Section 24. Payment and recovery of tax: (1) Save as otherwise provided for in sub-section(2) of section 13, the tax assessed or has become payable under this Act from a dealer or person and any other amount due from him under this Act shall be paid in such manner and in such installments, if any and within such time as may be specified in the notice of assessment, not being less than twenty-one days from the date of service of the notice. The tax under sub-section (2) of section 13 shall be paid without any notice of demand. In default of such payments the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act.

Section 24-(2) Any tax assessed on or has become payable by, or any other amount due under this Act from a dealer or person and any fee due from him under this Act, shall, subject to the claim of the government in respect of land revenue and the claim of the Land Development Bank in regard to the property mortgaged to it under section 28(2) of the Tamil Nadu Co-operative Land Development Banks Act, 1934(Tamil Nadu Act X of 1934), have priority over all other claims against the property of the said dealer or person and the same may without prejudice to any other mode of collection be recovered:-

(a) as land revenue, or

(b) on application to any Magistrate by such Magistrate as if it were a fine imposed by him:

Section 24-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 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 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 proceeding or otherwise:

  1. In my view, reliance upon the provisions of Section 24-A are misplaced in the facts and circumstances of this case. Section 24 of the Act sets the stage for the raising of a valid demand. To invoke the protection afforded by Section 24-A, the revenue must engage in some constructive act, such as identification of the properties of a defaulting assessee, communication with the assessee concerned in that regard, issuance of a notice of attachment in statutory form, communication of the attachment to the sub-registrar concerned for creation of charge and ensuring that the encumbrance certificate reflects such charge.

7.The respondent officials, have not, in the present case, engaged  in any of the acts as aforesaid or taken any precautions to secure the interests of the revenue. Mere reference to Section 24-A is insufficient to protect the interests of the Department and enforcement of the demands can be proceeded with only if the assets have been attached in the first place.

  1. In the present matter, as in so many others, there has been absolutely no move by the Commercial Taxes Department to secure its interest by actual attachment of the property. The attachment of the property is a pre- condition, without which, the provisions of Section 24-A are of no assistance to the revenue.
  2. The provisions of the Revenue Recovery Act, 1890, which prescribe the procedure for sale of the asset, would also stand triggered only if the condition precedent, which is attachment of the property, is actually resorted to. This would mean that the officers of the Department must collate the details of assets in the name of the defaulting assessee and take steps diligently to correspond with the Sub-Registrars and create a charge thereupon, in a manner known to law.
  3. This calls for proactive initiative on the part of the officers, clearly absent in the present case. Admittedly, even the existence of the present properties came to the knowledge of the Department only in 2019, when the present communication has been issued. The impugned communication, in my considered view, clearly unsustainable, seeing as the transfer of the properties in 2010 to the petitioner has been effected in accordance with law, and has attained finality.
  4. That apart, reliance upon Section 24A of the Act is also misconceived for the reason that that provision is intended to protect bonafide purchases, where a purchase of a property has been made for adequate consideration and where the owner of the property was unaware of the pendency of sales tax proceedings in its/his case.
  5. The burden thus rests upon the revenue to establish that the consideration for the property is inadequate, that the vendor had due notice of the pendency of the sales tax proceedings and the transfer itself, was a measure to evade tax. In the present case, the parties, that is, the petitioner and the defaulting assessee are admittedly unrelated and the transaction of purchase is bonafide.
  6. Section 24A is also inapplicable in the present case, since the sale transaction was in the year 2010 and a mere demand without any action taken by the Commercial Taxes Department to secure the properties in question would not justify the present impugned action taken belatedly after nine years.
  7. In view of the detailed discussion as above, the impugned communication dated 02.04.2019 is quashed and this writ petition, allowed. Connected miscellaneous petitions are closed. No costs.

22.06.2022

Index : Yes

Speaking Order

ska

 

 

To

 

1.Principal Secretary/Commissioner of Commercial Taxes,

Ezhilagam, Chepauk,

Chennai-600005.

 

2.Assistant Commissioner,

Ranipet SIPCOT Assessment Circle,

Railway Station Road, Ranipet.

 

3.Assistant Commissioner,

Vallurvakottam Assessent Circle,

Chennai-600006.

 

4.The Sub Registrar,

Walaja, Vellore District.

 

 

 

 

 

DR.ANITA SUMANTH, J.

 

                                                                                                    ska

 

 

 

 

 

 

 

 

 

 

 

W.P.No.12686 of 2019 and

W.M.P.No.12915 & 12916 of 2019

 

 

 

 

 

 

 

 

 

 

 

 

22.06.2022

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