2021 (7) TMI 1206 - HC - VAT and Sales Tax

Validity of the notice issued by the first respondent in proceedings - recovery of arrears of sales tax due - It is contended that there was a failure on the part of the first respondent in initiating action to recover the sales tax arrears, within a reasonable period of time - HELD THAT - This Court is of the considered opinion that the petitioner purchased the subject property on 31.06.2006. The sales tax defaulter has to pay the arrears of sales tax within a period of 30 days, as contemplated under the provisions of the Act. If the arrears of sales tax is not paid by the defaulter and if no appeal was filed against the order passed by the Original Authority, then the Authority Competent is empowered to initiate action against the defaulter to recover the arrears of sales tax by following the procedures contemplated under the TNGST Act. In the present case, no such action was taken. Contrarily, the arrears of sales tax for the years 2000-2001 and 2001-2002, is sought to be recovered by issuing notice to the third party purchaser of the property in the year 2012. Thus, there is a blatant lapse on the part of the Competent Authorities of the Commercial Tax Department in pursuing the matter for recovery of arrears of sales tax - In the present case, undoubtedly, the second respondent was aware of the proceedings, which were pending before the first respondent. However, he sold the property in the year 2006 probably on the impression that no action was taken by the first respondent for more than six years regarding the sales tax arrears due for the years 2000-2001 and 2001- 2002. Ultimately, the delay caused at the instance of the first respondent- Department is the reason for loss of revenue to the State. It is in the public domain that large scale and wider allegation of corrupt activities, more specifically, in Department like Commercial Tax Department, are prevailing and, people are lamenting about the corrupt activities in collusion with the traders at large in the State. However, no measures are taken to minimise such corrupt activities of the Commercial Tax Department officials with the traders - Government officials are performing the public duties and they play a pivotal role in upholding and achieving the constitutional goals and therefore, there cannot be any compromise in the matter of dealing with such corrupt activities amongst the public servants. The Court is frequently witnessing the cases of this nature, where actions are either not initiated or initiated belatedly allowing the illegality to lapse and allowing the traders to escape from the clutches of law. In these circumstances, painfully the State revenue suffers huge loss. Revenue loss to the State is the loss to the public at large. The monetary losses are neither compensated nor recovered and therefore, the State is deprived in implementing the public welfare policies in favour of common women and men - adequate care is to be taken, so as to ensure that the taxes, as applicable, are collected promptly and the officials, who all are not prudent in execution of law, are dealt with mercilessly. Petition allowed.

Summary

Issues:
Validity of notice issued for sales tax arrears recovery after a significant delay.

Analysis:
The petitioner challenges the notice issued by the first respondent in 2012 seeking recovery of sales tax arrears from the second respondent. The petitioner, a bona fide purchaser of the property in 2006, argues that the notice issued after a delay of six years from the purchase is unjust. The petitioner asserts that the interest of a bona fide purchaser should be protected, especially when no action was taken promptly by the authorities to recover the arrears.

The court observes that the sales tax defaulter must pay arrears within 30 days as per the law. However, in this case, no action was taken against the defaulter for years, and instead, the notice was issued to the innocent purchaser. The court notes a blatant lapse on the part of the Commercial Tax Department in pursuing the recovery of sales tax arrears promptly.

The judgment delves into the relevant sections of the Tamil Nadu General Sales Tax Act, emphasizing the need to protect state revenue. It highlights the provision that transfers made to defraud revenue are void, except in cases of adequate consideration without notice of pending proceedings. The court finds that the delay in action by the authorities led to a loss of revenue for the state.

The judgment also addresses the prevalence of corrupt activities within the Commercial Tax Department, stressing the importance of taking stringent actions against erring officials to safeguard public interest and state revenue. The court emphasizes the duty of government officials to act in the public's interest and uphold constitutional principles, warning against tolerance towards corruption.

In conclusion, the court quashes the impugned order, directing authorities to identify cases of inaction or delayed action regarding tax collection and take appropriate measures against responsible officials. It also instructs coordination with anti-corruption agencies to curb corrupt practices and emphasizes the need for vigilance in protecting state revenue and public welfare.

The judgment underscores the court's role in ensuring constitutional principles are upheld for citizen welfare and calls for proactive measures to address lapses in tax collection, corruption, and negligence within government departments.