2019 (8) TMI 1290 - HC - VAT and Sales Tax

Attachment of property - scope of term or otherwise within the definition of dealer - carrying business through Vendor - directly or indirectly - whether the writ petitioner's vendor is a 'dealer' within the meaning of Section 2(n) of PVAT Act? HELD THAT - As 'registered dealer' has been separately defined under Section 2(zc), it is clear that 'or otherwise' should be read with wide amplitude and should be understood as words used as extension include all possible ways of carrying on business activities. However, on an extreme demurrer, now that this Court has clearly come to the conclusion that the generic words 'or otherwise' will only qualify 'directly', even if ejusdem generis principle is applied, it would at best read directly or indirectly. Even if 'directly or otherwise' is read as 'directly or indirectly', it would only mean 'any person' who carries on any or some of the kinds of business activities enumerated in Section 2(n) directly or indirectly. In the instant case, it is the case of writ petitioner's vendor's mother carrying on three of the business activities, namely buying, selling and distributing petroleum products indirectly through her son. This Court having come to the conclusion that writ petitioner is carrying on business as a dealer not directly, but otherwise, even on an extreme demurrer, even if the expression 'or otherwise' is to be given a restricted meaning, it will still cover writ petitioner's vendor. The writ petitioner's vendor qualifies as a 'dealer' within the meaning of Section 2(n) and that writ petitioner's vendor's property i.e., said property will clearly be covered under Section 37(1) of PVAT Act. With regard to proviso to Section 37(2) which deals with bonafide transfer, there is copious and undisputed material before this Court to show that writ petitioner was carrying on day-today affairs of the business and in any event, learned senior counsel for writ petitioner made it clear that writ petitioner does not want to tread into that arena. Therefore this Court deems it appropriate to not to delve into the same any further. In the instant case, this Court expresses no opinion as to whether writ petitioner is a bonafide third party purchaser or not in the light of trajectory of the hearing. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Provisional attachment of immovable property.
2. Definition and scope of the term "dealer" under the PVAT Act.
3. Interpretation of the term "or otherwise" in the context of business activities.
4. First charge on property under Section 37 of the PVAT Act.
5. Rights of a bona fide third-party purchaser.

Detailed Analysis:

1. Provisional Attachment of Immovable Property:
The writ petitioner challenged the provisional attachment order dated 30.10.2018, which attached the property purchased by the petitioner to secure tax arrears and penalties amounting to ? 11.72 Crores under the Pondicherry General Sales Tax Act (PGST Act) and the Pondicherry Value Added Tax Act (PVAT Act). The property was attached as it belonged to the vendor's mother, Tmt. D. Indira, who was the proprietrix of Sri Manakula Vinayagar Petro Agency.

2. Definition and Scope of the Term "Dealer" under the PVAT Act:
The primary contention from the petitioner was that the vendor, D. Sundar, was not a "dealer" within the meaning of the PVAT Act. The PVAT Act defines "dealer" under Section 2(n) as any person who carries on the business of buying, selling, supplying, or distributing goods, directly or otherwise. The petitioner argued that the vendor's mother, Tmt. D. Indira, was the dealer, not the vendor.

3. Interpretation of the Term "or otherwise" in the Context of Business Activities:
The court examined whether the term "or otherwise" in Section 2(n) of the PVAT Act qualifies the business activities or the manner in which the business is carried on. The court relied on the Supreme Court's judgment in Smt. Lila Vati Bai vs. State of Bombay, which interpreted "or otherwise" as words of extension, covering all possible ways of carrying on business activities. The court concluded that "or otherwise" extends the manner of carrying on business, meaning the vendor could be considered a dealer if he was managing the business indirectly.

4. First Charge on Property under Section 37 of the PVAT Act:
Section 37(1) of the PVAT Act states that tax assessed becomes a first charge on the property of the dealer if not paid within 21 days from the notice of assessment. The court found that the vendor's property was subject to this first charge, as the vendor was deemed to be carrying on the business indirectly, thus qualifying as a dealer.

5. Rights of a Bona Fide Third-Party Purchaser:
The petitioner claimed to be a bona fide third-party purchaser. However, the court noted that the petitioner chose not to pursue this argument and confined the challenge to whether the vendor was a dealer. The court indicated that the petitioner could proceed against the vendor for selling a property that was subject to a first charge under Section 37(1) of the PVAT Act.

Conclusion:
The court dismissed the writ petition, holding that the vendor qualified as a dealer under the PVAT Act, and the property was rightly attached for tax liabilities. The court also recommended that the government consider making rules for communicating such charges to the jurisdictional Registrar's office to protect the interests of the Revenue and innocent third-party purchasers.