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2019 (4) TMI 1716 - HC - VAT and Sales TaxRemission of sales tax arrears with interest thereon of the former owner of the immovable property currently owned by the Petitioner - enforceable charge of the property - Section 100 of the Transfer of Property Act, 1882 - HELD THAT - From a perusal of Section 100 of the TPA, it is clear that, unless expressly provided otherwise by any law for the time being in force, unlike a mortgage, a charge can be enforced against the property in the hands of a transferee only if the transferee had notice of the prior charge and was not a bona fide purchaser. In the instant case, the learned counsel for the Respondent admitted that the Sub- Registrar concerned was not informed about the existence of the charge in favour of the Respondent. It is also clear from the encumbrance certificate, which was obtained by the Petitioner in December 1998, that no charge was reflected in respect of the said property up to December 1998. The allegation that the Petitioner and the erstwhile owner colluded in effecting the sale is not based on actionable evidence and such an inference cannot be countenanced purely on the basis that the parties concerned reside in the same area or even because the original title deeds were missing as per the public notice. Therefore, it cannot be said that the Petitioner had prior notice, either actual or constructive, of the existing charge. Whether Section 24-A of the TNGST Act contains a stipulation that the charge can be enforced even against a transferee without notice? - HELD THAT - From the language of Section 24(2), it is clear that a statutory charge is created in favour of the sales tax department upon failure to pay sales tax within 21 days of the date of receipt of a notice of assessment. Therefore, from the counter affidavit, it appears that a statutory charge was created over the property on or about 31.06.1996. More importantly, when the language of Section 24-A is examined, there is nothing therein that suggests that the statutory charge would be enforceable against a transferee without notice. There is no evidence that there was collusion between the Petitioner and the erstwhile owner. Equally, from the documents on record, the Petitioner appears to be a bona fide purchaser without notice, either actual or constructive, of the prior charge in favour of the Respondent. Petition allowed.
Issues:
Enforceability of sales tax arrears against a property transferee under TNGST Act - Validity of notice issued under Section 24 - Application of Section 24-A regarding charge creation and enforcement against a transferee without notice - Interpretation of Section 100 of Transfer of Property Act - Bona fide purchaser defense - Precedents on charge enforcement against property transferees - Collusion allegations between parties. Detailed Analysis: Enforceability of Sales Tax Arrears: The Writ Petition challenges a Notice under Section 24 of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act), demanding sales tax arrears from the Petitioner, the current owner of a property previously owned by a dealer who defaulted on tax payments. The Notice threatened property sale under the Tamil Nadu Revenue Recovery Act if arrears were not remitted within seven days. Validity of Notice under Section 24: The Respondent claimed an enforceable charge over the property due to the dealer's tax liabilities. The Petitioner, a subsequent purchaser, argued against liability for the previous owner's dues, asserting bona fide purchase status without notice of the charge. The Respondent contended that the sale by the previous owner was void under Section 24-A of the TNGST Act due to alleged intention to defraud the revenue. Application of Section 24-A and Charge Enforcement: Section 24-A of the TNGST Act addresses charges created to defraud revenue, stipulating voidability unless made for adequate consideration and without notice. The Respondent argued for charge enforcement against the property, alleging collusion between the previous owner and the Petitioner. However, the Petitioner's lack of notice of the charge and bona fide purchase defense were crucial in determining enforceability. Interpretation of Section 100 of Transfer of Property Act: Section 100 of the Transfer of Property Act, 1882 was examined to understand charge enforcement against property transferees. Notably, a charge can be enforced against a transferee only if there was no notice of the charge at the time of transfer and the transferee was not a bona fide purchaser. The absence of notice to the Sub-Registrar and the Petitioner's lack of knowledge of the charge were pivotal in this case. Precedents and Legal Principles: The judgment referenced precedents and legal principles on charge enforcement against property transferees. It highlighted that a charge differs from a mortgage, requiring notice for enforcement against a transferee. The absence of collusion evidence and the Petitioner's bona fide purchase status without notice were crucial in determining the validity of the charge against the property. Conclusion: The Court allowed the Writ Petition, quashing the Impugned Notice as the Petitioner was deemed a bona fide purchaser without notice of the charge. The absence of collusion and the lack of evidence supporting charge enforcement against the Petitioner were key factors in the judgment. The Respondent was not barred from pursuing legal action against the dealer, and each party was directed to bear their respective costs, concluding the matter.
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