2024 (4) TMI 720 - HC - VAT and Sales Tax

Seeking to remove the encumbrance of the attachment in the petitioner's property - specific case of the petitioner is that the petitioner is a bona fide purchaser of the property from the fifth respondent and is therefore entitled to immunity under proviso to Section 43 of TNVAT Act, 2006 - HELD THAT - In the facts and circumstances of the case, it is evident that the petitioner and the fifth respondent are known to each other and are in the same business. The petitioner ought to have obtained the certificate or for prior permission from the Commercial Tax Department before purchasing the property as to whether the property was fully free from any encumbrance. Instead, the petitioner has blindly purchased the property perhaps colluding with the fifth respondent to defraud the revenue. Therefore, the challenge to the impugned communications dated 05.02.2021, 01.09.2020 and 22.02.2022 issued by the third respondent cannot be quashed. The petitioner will have to establish his bona fide before the trial Court by filing a suit establishing that the purchase of the property from the fifth respondent was bona fide . The writ petition is dismissed.

Summary

Issues involved:
The issues involved in the judgment are the validity of the attachment of an immovable property under Section 43 of TNVAT Act, 2006, and the petitioner's claim as a bona fide purchaser.

Validity of Attachment:
The petitioner sought to quash the impugned orders of the third respondent, which attached the property purchased by the petitioner on 30.03.2017. The petitioner claimed to be a bona fide purchaser and argued for the removal of the encumbrance on the property. The Additional Government Pleader defended the attachment, citing the revision of assessments for the years 2013-2014 and 2014-2015, and the subsequent demand notices served on the fifth respondent. The respondent believed the property belonged to the defaulter, Thirumathi.D.Mythili, and highlighted that the petitioner should have been aware of the pending proceedings before purchasing the property.

Bona Fide Purchaser Claim:
The petitioner contended that they were a bona fide purchaser of the property from the fifth respondent, supported by an encumbrance certificate obtained during the registration of the sale deed. The petitioner argued that there were no encumbrances against the property at the time of purchase. However, the respondent alleged collusion between the petitioner and the fifth respondent to defraud the revenue, citing Section 43 of TNVAT Act, 2006, which deems transfers made to defraud revenue as void.

Court's Decision:
The Court dismissed the writ petition, advising the petitioner to establish their bona fide status in a trial court by filing a suit. The Court emphasized the need for the petitioner to involve officials from the Commercial Tax Department in the suit. The trial court was directed to independently assess the facts and decide the case on its merits and in accordance with the law. The judgment concluded with no costs awarded and closed the connected Miscellaneous Petitions.