2005 (12) TMI 538 - HC - VAT and Sales Tax

Summary

Issues:
Constitutional validity of section 26A of the Kerala General Sales Tax Act, 1963; Validity of exhibit P6 order informing about the sale being hit by section 26A; Transfer of property to defeat sales tax arrears recovery; Obligation of revenue authorities to inform transferee about amount due; Interpretation of section 26A regarding void transfers during proceedings.

Constitutional Validity of Section 26A:
The appellant challenged the constitutional validity of section 26A of the Kerala General Sales Tax Act, 1963, and sought to quash exhibit P6 order. The court noted that section 26A makes transfers during proceedings void against any tax or sum payable by the assessee. The court upheld the constitutional validity of section 26A based on a previous judgment. The section does not require notice to the transferee about the amount due, placing the responsibility on the transferee to discharge the liability to save the property.

Transfer of Property to Defeat Recovery:
The case involved an assessee who transferred property to the petitioner to avoid sales tax arrears recovery. Revenue recovery proceedings were initiated against the assessee for arrears amounting to Rs. 44,46,093. The property transfer was deemed void under section 26A as it was made to defeat the sales tax claim after recovery steps were initiated. The court found no obligation on the revenue department to issue notice under section 44 once the property is transferred to evade the claim under the Act.

Obligation to Inform Transferee of Amount Due:
The petitioner argued that they were not served with details of the amount due from the assessee before the property transfer. However, the court held that section 26A does not require the revenue authorities to inform the transferee about the amount due. The responsibility lies with the transferee to settle the liability or ensure payment by the transferor to save the property from recovery proceedings.

Validity of Exhibit P6 Order:
The petitioner challenged exhibit P6 order, claiming it was passed without considering their contentions. The court found that the order was valid as the transfer was made to avoid the sales tax claim after recovery proceedings were initiated. The court upheld the proceedings initiated by the revenue authorities for recovery of the amount and dismissed the appeal for lacking merits.

Interpretation of Section 26A:
Section 26A of the Act deems transfers during proceedings void against tax or sums payable by the assessee. The court clarified that the provision does not necessitate notice to the transferor or transferee but makes the transaction void. The revenue authorities can proceed against the property for recovery since the transfer is considered void under section 26A. The court found no infirmity in the proceedings initiated by the respondents for recovery of the amount.