2020 (5) TMI 637 - HC - VAT and Sales Tax

Auction Sale of Attached property - Recovery of tax - petitioner had purchased the properties which were already attached by the Department for the legitimate Government dues - HELD THAT - This Court is of the view that the petitioner ought to have taken necessary care and caution while purchasing the properties from the third respondent. No documents/ papers have been filed by the petitioner to show that he had approached and contacted the office regarding the requirement of any details as regards existence of any charge on the properties. Thus, it is clear that the petitioner had never approached the Department, to find out as to whether any dues are payable by the third respondent / existence of any charge on the properties, before purchase of the properties. In the present case, the petitioner herein purchased the properties from the third respondent only subsequent to the attachment effected by the Department. Further, the petitioner had failed to ascertain the details of arrears payable by his vendor before execution of the sale deed - It is also seen from both the sale deeds executed between the petitioner's vendor and the petitioner, that the vendor has given an undertaking that there is no encumbrance on the properties in question and if any encumbrance arises at a later stage, he would made good the loss on his own. Reliance can be placed in the case of MRS. MEENAKSHI. J. GANESH KUMAR VERSUS DEPUTY COMMERCIAL TAX OFFICER, SRIVILLIPUTHUR AND ANOTHER 2010 (12) TMI 1094 - MADRAS HIGH COURT . The said judgment has been passed under similar circumstances. In that case, the petitioner therein contended that he was the bona fide purchaser, since he purchased the property only after getting encumbrance certificate from the Sub-Registrar, Srivilliputhur and that when the Department had not attached the property prior to purchase of the same by the petitioner therein, it was not open to the Department to issue the notice impugned therein. Petition dismissed.

Issues involved:
1. Validity of impugned notice issued by the second respondent.
2. Impact on petitioner's right to property guaranteed under Article 300A of the Constitution of India.
3. Jurisdiction of the second respondent to issue the impugned notice without notice to the petitioner.
4. Principles of natural justice and compliance with the Tamil Nadu General Sales Tax Act.
5. Alleged lack of jurisdiction on the part of the second respondent.
6. Effect of the petitioner's purchase of properties from the third respondent subsequent to attachment by the Department.
7. The significance of the vendor's undertaking regarding encumbrances on the properties in question.

Analysis:

1. The petitioner contested an impugned notice issued by the second respondent regarding sales tax arrears owed by the third respondent, whose properties the petitioner had purchased. The petitioner argued that the notice jeopardized his property rights under Article 300A of the Constitution, as he was unaware of any existing liabilities on the properties.

2. The petitioner's counsel emphasized that the second respondent lacked jurisdiction to issue the notice without prior communication to the petitioner, violating principles of natural justice and the Tamil Nadu General Sales Tax Act. Reference was made to a previous judgment highlighting the importance of notice before enforcing charges on properties.

3. The counter affidavit by respondents 1 and 2 detailed the history of the tax arrears owed by the third respondent and the subsequent actions taken by the Department, including attaching and auctioning properties. It was argued that the petitioner should have conducted due diligence before purchasing the properties to ascertain any encumbrances.

4. The Court noted that the petitioner had not approached the Department to verify any charges on the properties before purchase. Citing a relevant judgment, the Court emphasized the importance of buyers ensuring the absence of encumbrances before acquiring properties.

5. The Court highlighted the vendor's undertaking in the sale deeds, absolving the properties of encumbrances. It was concluded that the issue of charges on the properties could not be resolved through a writ petition, and the petitioner was advised to seek recourse in a Civil Court based on the vendor's undertakings.

6. The judgment differentiated the present case from a previous case where charges were created after property purchase, emphasizing that the petitioner bought the properties post-attachment. The Court dismissed the writ petition, directing the petitioner to pursue legal action against the third respondent for damages or to establish his rights as a bona fide purchaser.

7. Ultimately, the judgment underscored the importance of due diligence by property buyers and the necessity for legal action in cases of disputed property ownership, leaving the petitioner to seek remedies through the appropriate legal channels.

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