2021 (6) TMI 1041 - HC - VAT and Sales Tax

Validity of attachment notice - recovery of arrears of sales tax - Deputy Tahsildar - proper authority to have issued the impugned notices or not - ownership of the properties - registration of the firm with the Registrar Firms has taken place post purchase of the property - Puducherry Revenue Recovery Act, 1970 - HELD THAT - The provisions of Section 25 onwards deal with the service of demand prior to effecting recovery of arrears from sale/disposal of immovable property. Section 25 deals with service of demand prior to attachment of land and mode of service thereof. Section 26 stipulates the procedure when a defaulter neglects to pay despite service of demand, Section 27, with the mode of attachment of immovable property, Section 28 with the management of the property which is under attachment, Section 29 with notice to be given on the assumption of management and so on and so forth, the succeeding provisions not being relevant for the purpose of this writ petition - All powers from Section 25 onwards, which are to be exercised by a Collector or other officer empowered by the Collector would, by application of Section 42 of the PVAT Act, be carried out by the designated officers of the Commercial Taxes Department. Mr.Kumaran would attempt to state that the procedure under the PVAT Act is two pronged and Section 37(3), which refers to recovery of arrears as though it were an arrear of land revenue would permit officials of the PRR Department also to take action for recovery. This submission is misconceived in light of the specific mandate under Section 42, which states that for the purpose of recovery of any amount due under this Act, it is only the specified officers of the Commercial Taxes Department who have the requisite powers. As a consequence, the issuance of the present impugned notices by the Deputy Tahsildar is contrary to the provisions of the Act. Petition allowed - decided in favor of petitioner.

Summary

Issues:
- Challenge to notice of attachment under Puducherry Revenue Recovery Act, 1970
- Legal issues regarding recovery of arrears of sales tax under the PVAT Act
- Ownership of properties in question post registration of the firm

Analysis:

The judgment by the Madras High Court, delivered by Honourable Dr. Justice Anita Sumanth, involved two writ petitions challenging a notice of attachment issued by the Deputy Tahsildar under the Puducherry Revenue Recovery Act, 1970. The petitions raised legal issues concerning the recovery of arrears of sales tax under the PVAT Act and the ownership of properties in question post registration of the firm.

Recovery of Arrears under PVAT Act:
The legal issues raised by the petitioners questioned the procedure for attachment of property for arrears of sales tax under the PVAT Act and the authority of the Deputy Tahsildar to issue the notices. The court analyzed the relevant provisions of the PVAT Act, specifically Sections 37, 38, 40, and 42, which deal with the demand and recovery of tax, penalty, and provisional attachment of property. The court clarified that the recovery procedure should be as per the Puducherry Revenue Recovery Act, enforced by designated officers of the Commercial Taxes Department. The court concluded that the Deputy Tahsildar's issuance of the impugned notices was contrary to the provisions of the Act.

Ownership of Properties Post Registration:
Regarding the ownership of the properties in question post registration of the firm, the court referred to Section 69 of the Indian Partnership Act, 1932. Citing relevant case law, including the Supreme Court's interpretation in M/s. Haldiram Bhujiawala case and the decision in Shanmugha Mudaliar Vs. P.V.Rathina Mudaliar, the court explained that non-registration of the firm does not impact its right to acquire property. The court dismissed the respondent's reliance on a Kerala High Court decision, emphasizing that the property vests in the firm despite non-registration at the time of acquisition.

In conclusion, the High Court allowed the writ petitions, lifting the impugned attachment. The court granted liberty to the revenue authorities to take necessary action for tax collection from the individual in accordance with the law. The judgment provided a detailed analysis of the legal issues raised, clarifying the procedures for recovery under the PVAT Act and confirming the ownership of the properties in favor of the petitioner firm.