2019 (5) TMI 122 - HC - VAT and Sales Tax

Auction - recovery of alleged sales tax dues - bonafide purchaser or not - Section 24-A of TNGST Act - HELD THAT - The terms and conditions of sale coupled with the Second Sale Deed, which is in favour of the Petitioner herein, make it abundantly clear that the purchaser is liable in respect of commercial tax dues. The Second Sale Deed further clarifies that the seller is not providing title warranties to the purchaser and this may be compared and contrasted with the First Sale Deed which contains a title warranty from SIDCO to the Fourth Respondent and does not impose liability for commercial tax dues on the Fourth Respondent. When the documents on record are examined in the context of section 24-A of the TNGST Act, there is little doubt that the Petitioner herein was aware of the sales tax dues of the Fourth Respondent and was duly notified that he would be liable in respect thereof. Thus, he would not be entitled to any protection as a bona fide purchaser. In the instant case, by way of specific clauses in the Second Sale Deed, the implied warranties on title under Section 55 of the Transfer of Property Act, 1882 were varied by a contract to the contrary, namely, the specific clauses in the Second Sale Deed. Consequently, the Writ Petition is liable to be dismissed. Petition is dismissed but the parties are left to bear their respective costs.

Summary

Issues:
Writ of Mandamus to prevent coercive action for alleged sales tax dues.

Analysis:
1. The case involved a Writ Petition seeking a Mandamus to prevent the First Respondent from taking coercive action regarding a property due to alleged sales tax dues of the Fourth Respondent as per a notice dated 27.09.2006.
2. The facts revealed that Shed No.134 was allotted to the Fourth Respondent by SIDCO, and a Sale Deed was executed conveying the property. Subsequently, a mortgage was created over the property due to loan facilities availed by the Fourth Respondent.
3. The Petitioner participated in an auction for the property, won as the successful bidder, and later purchased the property via a Sale Deed. The terms and conditions of the sale specified the purchaser's liability for property tax, commercial tax, and other dues.
4. A notice was issued by the Commercial Tax Officer to the Fourth Respondent for sales tax dues, prompting the filing of the Writ Petition by the Petitioner.
5. During the hearing, arguments were made regarding the protection of a bona fide purchaser under Section 24-A of the TNGST Act and the implications of the terms and conditions of sale.
6. The judgment emphasized that the Petitioner was aware of the sales tax dues and the liability as a purchaser, thus not qualifying as a bona fide purchaser entitled to protection under the Act.
7. It was clarified that the SFC Act did not guarantee an encumbrance-free property, and the specific clauses in the Sale Deed varied the implied warranties on title under the Transfer of Property Act.
8. Consequently, the Writ Petition was dismissed, and each party was directed to bear their respective costs.