1971 (7) TMI 140 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether a purchaser of property can be held liable for the tax arrears of the seller under the Tamil Nadu General Sales Tax Act and the Madras Revenue Recovery Act.
2. Interpretation of the term "defaulter" under the relevant statutes.
3. Jurisdiction of the statutory authority to issue a notice of demand for tax arrears and proceed with revenue recovery actions against the purchaser.
4. Remedies available to a person aggrieved by proceedings under the Revenue Recovery Act, including the option to file a civil suit for redress.

Detailed Analysis:
1. The petitioner purchased lands from a dealer who had tax liabilities under the Tamil Nadu General Sales Tax Act. The revenue sought to recover the arrears from the petitioner under section 24 of the Sales Tax Act and the Madras Revenue Recovery Act. The petitioner claimed to be a bona fide purchaser without notice of the tax arrears and argued that he should not be held liable for the seller's debts. The court examined the statutory provisions creating a charge on the property for tax arrears and held that the petitioner could not escape liability merely by claiming not to be a "dealer" as commonly understood. The court emphasized that the statutory charge burdened the property until relieved by legal process.

2. The term "defaulter" was not defined in the Madras Revenue Recovery Act. However, the Act applied by fiction in cases where an assessee under the Sales Tax Act defaulted. The court analyzed the provisions of section 24 of the Sales Tax Act, which allowed for the recovery of tax arrears as if they were land revenue. This provision attracted section 52 of the Revenue Recovery Act, enabling the recovery of arrears in a similar manner to land revenue unless otherwise specified in special enactments. The court rejected the argument that the petitioner was not a defaulter in the popular sense, holding that the statutory charge applied to the property.

3. The statutory authority issued a notice to the petitioner under the Sales Tax Act and the Revenue Recovery Act, intending to proceed with revenue recovery actions. The court acknowledged that the petitioner was a person aggrieved by the proceedings and had the option to seek redress through a civil suit within six months of the cause of action. The court clarified that the petitioner should file a suit for relief and that the revenue should not raise a plea of limitation given the circumstances of the case and the timely filing of the writ petition challenging the notice.

4. The court granted the petitioner six months to file a suit and directed the revenue to refrain from pursuing recovery actions during this period. The court discharged the rule nisi, stating that the notice was not challengeable under Article 226 of the Indian Constitution. The petition was dismissed, and no costs were awarded. The judgment highlighted the petitioner's right to seek redress through a civil suit and the expectation that the revenue would not raise a plea of limitation given the circumstances of the case.