2021 (8) TMI 482 - HC - VAT and Sales Tax

Validity of recovery notice - charge and priority over the other claims against the property of a registered dealer - Section 24(2) of the TNGST Act 1959 not invoked - HELD THAT - Explanation I to Rule 24(15-A) of the said Rules would be relevant for the purpose of this case. It states that where the security is furnished in the form of immovable property the person furnishing it may in any town to which Sub-Section (f) of Section 58 of the Transfer of Property Act 1882 is applicable mortgage such property to the Government by deposit of title deeds that in other cases the security should be by means of registered mortgage of the immovable property and that the security bond should be in Form XIX-B and should be filed in duplicate the original of which should bear appropriate adhesive non judicial stamps or court fee stamps - The statutory form as stipulated in Form XIX-B states that the applicant who is the husband of the appellant herein filed an application for registration before the respondent under the TNGST Act 1959 and the Registering Authority directed the appellant s husband to furnish security as required under Section 21 of the TNGST Act 1959. Admittedly there is no necessity for registration of a security bond as the appellant is irrevocably bound herself to the dues payable by the firm at the time when the registration was applied by the husband of the appellant. Therefore it will be too late in the day for the appellant to state that the property cannot be proceeded against that it is her individual property and that the provisions of the TNGST Act 1959 do not specifically provide for recovery of arrears of sales tax from a person who is not a dealer/defaulter. The terms and conditions of the bond read along with Explanation I to Rule 24(15-A) are lucid and will clearly state that the respondent had enough jurisdiction to proceed in terms of the security bond for recovery of tax arrears payable by the said firm. Appeal dismissed.

Summary

Issues:
Challenge to recovery notice under TNGST Act, 1959 and Revenue Recovery Act, 1864 based on security bond - Jurisdiction of respondent to proceed against appellant's property as a surety.

Analysis:
The appeal before the court challenged an order dismissing a writ petition against a recovery notice issued under the Tamil Nadu Revenue Recovery Act, 1864 and the TNGST Act, 1959. The appellant, as the wife of a registered dealer, contested the jurisdiction of the respondent to proceed against her individual property based on a security bond executed in 1992. The main legal issue revolved around whether the respondent had the authority to recover tax or penalty from the appellant, who was not a defaulter but a surety under the security bond.

The appellant argued that she was described as a surety in the security bond and, therefore, could not be held liable for the dues of the registered dealer. However, the court examined the statutory requirements under the Tamil Nadu General Sales Tax Rules, specifically Rule 24(15-A), which mandated various forms of security for registration, including immovable property. The court highlighted that the appellant voluntarily offered her property as security, creating a charge over it for any dues payable by the registered dealer.

The court emphasized that the terms of the security bond, as per Form XIX-B, clearly outlined the obligations of the surety, stating that the appellant irrevocably bound herself to the firm's dues at the time of registration. The court concluded that the jurisdiction of the respondent to proceed against the appellant's property for tax arrears was valid based on the terms of the security bond and the relevant legal provisions. Therefore, the court found no grounds to interfere with the order of the learned Single Judge and dismissed the writ appeal, along with the connected CMP, without costs.

In summary, the judgment upheld the respondent's jurisdiction to recover tax arrears from the appellant's property based on the security bond executed voluntarily by the appellant as a surety for the registered dealer, dismissing the appeal against the order of the Single Judge.