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2021 (4) TMI 264 - HC - VAT and Sales TaxSeeking free possession and enjoyment of the property - transactions made by a Power of Attorney holder, prior to coming into the force of the provision - Section 19C of the Kerala General Sales Tax Act - Sales Tax dues - priority of charge on the land of the 7th respondent - attachment and sale of the property through Court proceedings - appropriation of 7th respondent's property towards Sales Tax dues of the 6th respondent - take over of the land by the State without assessment of dues under Section 34 of the Revenue Recovery Act - delay or laches on the part of the petitioner or not - principles of res-judicata. Maintainability of the writ petition in the context of res judicata - HELD THAT - The petitioner had approached this Court earlier filing O.P. No.10661 of 2002. The said writ petition was filed by the petitioner seeking to direct the respondents to accept land tax from the petitioner, change Thandaper in favour of the petitioner and issue possession certificate to the petitioner. A learned Single Judge of this Court, as per Ext.P12 judgment, held that as the issue involves disputed questions of fact, the petitioner has to establish his rights in a properly constituted civil suit. The petitioner filed W.A. No.2728 of 2007 and a Division Bench of this Court modified the order passed by the learned Single Judge and permitted the petitioner to establish his rights in appropriate forum following appropriate proceedings - This Court, by Ext.P14 judgment in, directed the State to consider the said revision petition. The Government thereupon passed Ext.P21 order dated 10.09.2009. It is the said Ext.P21 order which is under challenge in this writ petition. As a Division Bench of this Court modified Ext.P12 judgment of the learned Single Judge and permitted the petitioner to avail remedies available to him, Ext.P12 judgment of the learned Single Judge cannot be treated as one deciding the issue involved finally, so as to constitute res judicata. Delay and laches - auction certificate in respect of the property in question - HELD THAT - The petitioner purchased the said property as per Ext.P9 sale deed dated 18.09.2001. The petitioner thereafter approached the authorities to remit land tax and to effect transfer of registry. The petitioner approached this Court for that purpose filing O.P. No.10661/2002 which was dismissed as per Ext.P12, on 19.05.2005. The petitioner promptly challenged the said judgment of the learned Single Judge and obtained liberty to prosecute his statutory remedies, as per Ext.P13 judgment dated 21.11.2007 of a Division Bench of this Court. Ext.P21 order dated 10.09.2009 impugned in this writ petition was passed in continuation of the said Ext.P13 judgment. The writ petition was filed on 18.01.2010. In the circumstances, it cannot be said that the petitioner is guilty of delay or laches in filing this writ petition. Whether Section 19C of the Kerala General Sales Tax Act, 1963 would have retroactivity so as to take in transactions entered into by the 7th respondent as a Power of Attorney holder of the 6th respondent, much prior to the coming into force of Section 19C? - HELD THAT - The 6th respondent cancelled the Power of Attorney given to the 7 th respondent on 02.07.1989 as per Ext.P4. Respondents 1 to 4 would not admit the cancellation of the Power of Attorney by the 6th respondent as per Ext.P4. However, the 6th respondent, who issued the Power of Attorney, has sworn to an affidavit before this Court that he cancelled the Power of Attorney given to the 7th respondent on 02.07.1989. Ext.P6 would show that the 7 th respondent was given a separate Dealer licence on 10.07.1989. In the circumstances, this Court finds no reason to disbelieve the statements made by respondents 6 and 7 that the 6th respondent had cancelled the Power of Attorney issued to the 7th respondent as per Ext.P4, on 02.07.1989. When the 7 th respondent ceased to be a Power of Attorney holder of the 6th respondent with effect from 02.07.1989, whether Section 19C of the KGST Act which was brought into the statute book only with effect from 29.08.1989 can be invoked against the 7 th respondent for recovery of sales tax dues of the 6th respondent? - HELD THAT - Section 19C provides for Protective Assessment and enables Assessing Authorities to recover tax dues from agents, employees, managers, power of attorney holders, guarantees or persons who in any other capacity carrying on the business, in the name of a registered dealer - Section 19C was inserted in the Kerala General Sales Tax Act, 1963 as per Act 3 of 1990 and has been given retrospective effect from 29.08.1989. The object of Section 19C is to prevent evasion of tax by dealers indulging in dealing in Benami names i.e., transacting in the names of their nominees, henchmen or others, from whom no amount could be recovered. Section 19C is intended to strike at such transactions by making the real dealer liable for the tax along with the ostensible dealer. Section 19C of the KGST Act may, at the first blush, appear to be procedural in nature inasmuch as it does not create any new tax liability but only provides for recovery of tax already fell due. But, as far as persons like Power of Attorney holders and others enunciated in Section 19C are concerned, it affects their substantive property rights, since they are made liable for tax dues of a registered dealer - Section 19C therefore creates new obligation on persons like the petitioner. Even a procedural law should not be generally applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. A reading of Section 19C would show that realisation of tax dues from persons like the petitioner contemplates assessment of tax dues. Therefore, it is clear that Section 19C is not procedural in nature, but on the other hand, creates a new liability on persons controlling business on behalf of registered dealers - As the 7th respondent ceased to be a Power of Attorney holder of the 6th respondent prior to the coming into force of Section 19C, this Court is of the considered view that protective assessment proceedings under Section 19C could not have been legally invoked against the 7th respondent. The revenue recovery proceedings initiated by respondents 1 to 4 against the 7 th respondent for recovery of tax dues of the 6th respondent is illegal. All proceedings against the 7th respondent including the attachment of his property for recovery of such dues, are therefore illegal. Exts.P15 and P21 are hence set aside - petition allowed.
Issues Involved:
1. Applicability of Section 19C of the Kerala General Sales Tax Act to transactions made by a Power of Attorney holder prior to the provision's enactment. 2. Priority of Sales Tax dues as a first charge on the land of the 7th respondent. 3. Requirement of an independent tax assessment on the 7th respondent for appropriating his property towards the 6th respondent's Sales Tax dues. 4. Justification of the State's takeover of land without assessment of dues under Section 34 of the Revenue Recovery Act. 5. Maintainability of the writ petition in light of res judicata, delay, or laches. Detailed Analysis: 1. Applicability of Section 19C of the Kerala General Sales Tax Act: The court examined whether Section 19C could retroactively apply to transactions conducted by the 7th respondent as a Power of Attorney holder before the provision came into effect. The 6th respondent had appointed the 7th respondent as Power of Attorney on 02.01.1986, which was canceled on 02.07.1989, before Section 19C's effective date of 29.08.1989. The court found that Section 19C, which was inserted in 1990 with retrospective effect from 29.08.1989, could not apply to transactions conducted by the 7th respondent before that date. The court emphasized that Section 19C affects substantive rights and cannot be applied retrospectively to create new liabilities for past transactions. 2. Priority of Sales Tax Dues: The court noted that Section 19C aims to prevent tax evasion by making agents, employees, and Power of Attorney holders jointly and severally liable for tax dues. However, it concluded that since the 7th respondent ceased to be a Power of Attorney holder before Section 19C's enactment, the provision could not be invoked against him. Consequently, the State's claim of a first charge on the 7th respondent's property for the 6th respondent's tax dues was invalid. 3. Requirement of Independent Tax Assessment: The court highlighted that Section 19C contemplates an independent tax assessment of agents or Power of Attorney holders before recovering tax dues. Since no such assessment was conducted on the 7th respondent, the proceedings against him were deemed illegal. 4. Justification of State's Takeover: The court found that the State's takeover of the 7th respondent's land without proper assessment of dues under Section 34 of the Revenue Recovery Act was unjustified. The attachment and subsequent auction of the property were declared invalid. 5. Maintainability of the Writ Petition: The court addressed the issue of res judicata, noting that the petitioner's previous writ petition was dismissed with liberty to pursue statutory remedies. The petitioner filed a revision petition, which was dismissed, leading to the current writ petition. The court ruled that the writ petition was maintainable and not barred by res judicata. Additionally, there was no undue delay or laches, as the petitioner had promptly pursued available legal remedies. Conclusion: The court concluded that Section 19C could not retroactively apply to the 7th respondent's transactions, rendering the revenue recovery proceedings and property attachment illegal. The writ petition was allowed, setting aside the impugned orders and permitting the petitioner to pay land tax and apply for transfer of registry.
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