1998 (4) TMI 514 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Approval of transfer of assets and liabilities including IFST deferral.
2. Cancellation of demand notice and recovery of IFST arrears.
3. Liability of transferee for IFST arrears.

Issue-wise Detailed Analysis:

1. Approval of Transfer of Assets and Liabilities Including IFST Deferral:
The petitioner sought approval for the transfer of assets and liabilities, including the Interest-Free Sales Tax (IFST) deferral, to a new unit owned by the third respondent. The petitioner had obtained an eligibility certificate for IFST deferral, which included specific conditions prohibiting the sale, disposal, or change in ownership of fixed assets without prior written permission from the government. Despite entering into a sale agreement with the third respondent and informing the Assistant Commissioner (CT), the necessary permissions from the Industries and Commercial Taxes Departments were not obtained. Consequently, the Assistant Commissioner (CT) could not exercise his powers to approve the transfer. The Tribunal concluded that without the required government permissions, the request for approval of the transfer could not be granted, especially since the eligibility certificate had been canceled and the cancellation had become final.

2. Cancellation of Demand Notice and Recovery of IFST Arrears:
The petitioner challenged the demand notice issued by the Commercial Tax Officer, which required payment of IFST arrears. The petitioner argued that the cancellation of the eligibility certificate without notice was illegal. However, the Tribunal noted that the eligibility certificate was canceled by the General Manager, District Industries Centre, due to violations of its conditions, and no appeal was filed against this cancellation. As a result, the cancellation became final. The Tribunal held that the demand notice was valid as the cancellation of the eligibility certificate meant that the deferral order no longer survived, and the petitioner was liable to pay the entire sales tax amount due as arrears.

3. Liability of Transferee for IFST Arrears:
The petitioner contended that the department should proceed against the assets in the hands of the third respondent for the collection of IFST arrears under Section 27 of the TNGST Act, which allows recovery from the transferee limited to the value of the assets obtained by transfer. The Tribunal clarified that Section 27 provides the option to recover arrears from either the transferor or the transferee, with the transferee's liability limited to the value of the assets transferred. However, the Tribunal emphasized that irrespective of the transferee's liability, the transferor remains liable for the arrears. The Tribunal found no merit in the contention that the department should exclusively proceed against the third respondent, as the petitioner was the one who accumulated the arrears and the properties remained charged in favor of the department.

Conclusion:
The Tribunal dismissed both petitions, upholding the validity of the demand notice and denying the request for approval of the transfer of assets and liabilities including IFST deferral. The Tribunal ordered that the decision be observed and executed by all concerned parties.