1997 (6) TMI 354 - AT - VAT and Sales Tax

Summary

Issues:
1. Validity of notice dated December 21, 1990 under section 11AAA of the Act.
2. Liability of the petitioner for outstanding dues of M/s. Jai Food Industries.
3. Interpretation of sections 9 and 11AAA of the Act in the context of the case.

Analysis:

Issue 1: Validity of notice under section 11AAA
The writ petition challenged the notice dated December 21, 1990, issued under section 11AAA of the Act, alleging that the transfer of property was to defraud the Revenue. The petitioner contended that the transfer was made with valuable consideration and without intention to defraud. The Tribunal held that the notice was illegal and without jurisdiction as the essential elements of intention to defraud and absence of valuable consideration were not present in this case.

Issue 2: Liability of the petitioner for dues
The respondents argued that the petitioner, who purchased assets of M/s. Jai Food Industries, is liable for the outstanding dues under sections 9 and 11AAA of the Act. However, the petitioner claimed to have purchased only specific assets and not the entire business. The Tribunal observed that the petitioner acted in good faith, unaware of the tax liabilities, and purchased the assets with valuable consideration. Therefore, the provisions of sections 9 and 11AAA were not applicable, and the petitioner was not liable for the dues.

Issue 3: Interpretation of sections 9 and 11AAA
The Tribunal analyzed sections 9 and 11AAA of the Act in detail. Section 9 imposes liability on the transferee when the ownership of the entire business is transferred, while section 11AAA deals with transfers made with the intention to defraud the Revenue. In this case, the Tribunal found that the petitioner did not acquire the entire business but only specific assets. Moreover, the transfer was not intended to defraud the Revenue, as it was done with valuable consideration and without notice of outstanding tax dues. Therefore, the Tribunal concluded that neither section 9 nor section 11AAA applied to the petitioner's situation.

In conclusion, the Tribunal allowed the writ petition, quashed the notice dated December 21, 1990, and restrained the respondents from recovering dues from the petitioner. The judgment emphasized the importance of valuable consideration and absence of fraudulent intent in determining liability under the relevant provisions of the Act.