2021 (7) TMI 29 - HC - VAT and Sales Tax

Recovery of Arrears of Commercial Tax - Liability of person who purchased the property - charge created by the Department not intimated either to the vendor of the petitioner or to the petitioner - HELD THAT - This Court is of the considered opinion that the contentions of the first respondent that the action was initiated under the Revenue Recovery Act, attaching the immovable property in the year 1999, they have failed to continue all further actions in order to auction the property attached and recover the arrears of tax to be collected. Contrarily, the authorities allowed the defaulter to sell the property in the year 1999 in favour of the second respondent. The petitioner is the subsequent purchaser, purchased the property on 13.07.2006. Till such time, no action was taken by the authorities nor further notice was issued to the petitioner, informing about the charge created. In the absence of any such action during the relevant point of time, the impugned notice issued after a lapse of 8 years from the date of purchase by the petitioner, cannot be sustained. In the present case, the subject property was sold by the defaulter / 3rd respondent to the 2nd respondent on 25.08.1999, who in turn, further sold the property to the petitioner on 13.07.2006 and the petitioner has no knowledge about any such charge created by the Department till the impugned orders are issued on 01.12.2004. The long delay in initiating action would defeat the proceedings itself. Even in the impugned notice, it is stated that the arrears of Commercial Tax due was of the year 1992-93. This being the factum, the writ petition is to be considered. Petition allowed.

Summary

Issues: Challenge to notice issued by 1st respondent regarding arrears of Commercial Tax and property sale.

Analysis:
1. The petitioner purchased a property in 2006 and intended to sell it in 2014. However, a notice was issued in 2014 by the 1st respondent stating that the property cannot be sold due to arrears of Commercial Tax by a previous defaulter, causing hindrance to the sale transaction.

2. The petitioner argued that the defaulter had sold the property to the vendor in 1999, who then sold it to the petitioner in 2006. The notice issued in 2014, after 8 years from the petitioner's purchase, was challenged on the grounds of lack of awareness about the arrears and the charge created by the Department, which were not communicated to the petitioner or the vendor.

3. The Government Advocate contended that actions were initiated under the Revenue Recovery Act in 1999, including attaching the property and serving notices to the defaulter. However, it was observed that the authorities failed to continue actions to auction the property for tax recovery, allowing subsequent transactions to take place without informing the purchasers about the charge on the property.

4. The Court held that the delay in taking action by the authorities, coupled with the lack of communication to subsequent purchasers about the charge on the property, rendered the notice issued in 2014 invalid. It was emphasized that authorities must diligently proceed with actions to recover arrears, and long delays could defeat the proceedings, especially when subsequent innocent purchasers are involved.

5. Consequently, the impugned order issued by the 1st respondent in 2004 was quashed, and the writ petition was allowed, highlighting the importance of timely and diligent actions by authorities in revenue recovery matters to protect the rights of innocent purchasers.