1998 (10) TMI 519 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Bona fide purchaser protection u/s 24-A of the Tamil Nadu General Sales Tax Act, 1959.
2. Jurisdiction of Article 226 of the Constitution of India to decide bona fide purchaser claims.
3. Joint and several liability of partners u/s 19 of the Tamil Nadu General Sales Tax Act, 1959.
4. Definition and implications of "notice" u/s 3 of the Transfer of Property Act, 1882.
5. Burden of proof u/s 101 of the Evidence Act, 1872.
6. Precedents and their applicability to the current cases.

Summary:

1. Bona fide purchaser protection u/s 24-A of the Tamil Nadu General Sales Tax Act, 1959:
The petitioners, purchasers of immovable property from assessees in arrears of sales tax, claimed protection as bona fide purchasers for value without notice, under the proviso to section 24-A of the Tamil Nadu General Sales Tax Act, 1959. They argued that they had verified the encumbrance certificate which did not reveal the tax liability of the vendor and thus, their transactions should be protected from Revenue recovery actions.

2. Jurisdiction of Article 226 of the Constitution of India to decide bona fide purchaser claims:
The Tribunal questioned whether Article 226 is the proper forum to decide if a purchaser is genuinely a bona fide purchaser without notice or if the transaction is colorable to defraud creditors, including the Revenue. It was concluded that such disputed facts require a full-fledged enquiry, which is not possible under Article 226 proceedings.

3. Joint and several liability of partners u/s 19 of the Tamil Nadu General Sales Tax Act, 1959:
Under section 19, partners of a firm are jointly and severally liable for the firm's tax dues. Therefore, properties transferred by partners during or after tax proceedings cannot escape liability if the transfer was intended to evade tax.

4. Definition and implications of "notice" u/s 3 of the Transfer of Property Act, 1882:
Section 3 defines "notice" to include actual knowledge, wilful abstention from enquiry, or gross negligence. The Tribunal emphasized that a purchaser claiming bona fide status must demonstrate that they did not wilfully abstain from making necessary enquiries or act with gross negligence.

5. Burden of proof u/s 101 of the Evidence Act, 1872:
The burden of proof lies on the purchaser to establish that they had no notice of the vendor's tax liabilities and that the purchase was bona fide. This requires evidence of the purchaser's conduct and enquiries made before the transaction.

6. Precedents and their applicability to the current cases:
The Tribunal reviewed several precedents, including the Supreme Court's decision in Ahmedabad Municipal Corporation v. Haji Abdul Gafur Haji Hussenbhai, which involved a detailed examination of evidence in a regular suit. The Tribunal concluded that the facts of the current cases, where the Revenue had issued notices and the purchasers claimed bona fide status without sufficient enquiry, did not align with the cited precedents. The Tribunal held that the purchasers must establish their bona fide status through civil suits rather than Article 226 proceedings.

Conclusion:
The Tribunal dismissed the petitions, directing the petitioners to initiate civil suits to establish their title to the properties and their bona fide purchaser status. The Tribunal emphasized that a full-fledged enquiry into the facts is necessary, which is not feasible under Article 226 proceedings.