2021 (4) TMI 421 - HC - VAT and Sales Tax

Recovery of sales tax dues - liability of third person (spouse) who has giving the property as security - Raising of encumbrance created by way of Intimation - contract of guarantee - whether the security given can be subjected to revenue recovery under the provisions of the Revenue Recovery Act? - HELD THAT - the security bond was not executed in her capacity as wife of the Proprietor and she executed the same in her capacity as an 'individual person' and she has given an undertaking that in the event of non-payment of statutory dues, the immovable property given by way of security can be attached. Where the security bond is executed as an individual person and further as per Section 21(2-B) of the TNGST Act, where it appears necessary to the authority granting a certificate of registration under this Section, so to do for the proper realisation of the tax payable under this Act, it may, at any time, while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer to whom the certificate has been granted, to furnish within such time as may be specified in the order and in the prescribed manner such security or, if the dealer has already furnished any security in pursuance of an order under this sub-section or sub-section (1-A) such additional security, as may be specified in the order for the aforesaid purpose. The statutory dues are recoverable and no one should be allowed to escape from the payment of statutory dues, this Court is of an opinion that the provisions are to be interpreted pragmatically and constructively, so as to ensure that the purpose and object of the Statute are meted out and the public interest is protected. Thus certain Rules or guidelines formulated for the purpose of implementing the provisions of the Act and time limits or certain procedures, guidelines contemplated are to be construed as directory and cannot be held as mandatory. This Court is of the considered opinion that the petitioner is not entitled for the relief, as such, sought for in the present writ petition - Petition dismissed.

Summary

Issues:
Challenge to order under Tamil Nadu Revenue Recovery Act, 1864 & TNGST Act, 1959; Validity of security bond executed by petitioner; Interpretation of statutory provisions regarding security bond registration; Right of respondent-Department to recover dues from security bond; Liability of petitioner as legal representative; Requirement of additional security under TNGST Act; Interpretation of procedural guidelines in recovery of statutory dues.

Analysis:
The petitioner sought to quash an order passed by the respondent under the Tamil Nadu Revenue Recovery Act and TNGST Act related to a security bond executed by her late husband for business registration. The petitioner argued that the security bond was contractual and not subject to revenue recovery as it was not a registered mortgage under the Transfer of Property Act. The petitioner's counsel contended that the respondent had no authority to auction the entire property due to the limited purpose of the security bond.

The respondent's counsel argued that the security bond clearly allowed for recovery of entire dues if unpaid, emphasizing the statutory nature of the registration under the TNGST Act. It was highlighted that the security bond did not require compulsory registration under the Registration Act, as per Section 17(2)(v). The respondent asserted the right to deal with the property in case of non-payment by the business proprietor, as per the terms of the security bond.

The Court considered the statutory registration under the TNGST Act as sufficient and rejected the petitioner's argument that a mortgage registration was necessary. It was noted that the petitioner, as the wife of the deceased proprietor, had executed the security bond as an individual person, allowing for attachment of the property in case of non-payment of dues. The Court emphasized that the security bond was executed for proper realization of tax dues under the Act, as per Section 21(2-B) of the TNGST Act.

The Court interpreted the provisions pragmatically to ensure recovery of statutory dues, emphasizing the importance of not allowing individuals to escape payment. It was held that certain guidelines and procedures were meant for consistency in implementation and should be construed in line with the spirit of the Act. Consequently, the Court dismissed the writ petition, affirming the respondent's right to initiate actions for dues recovery. The judgment highlighted the constructive interpretation of statutory provisions prevailing over individual claims for relief.