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TMI Blog2013 (3) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... y, by way of a Registered Sale Deed, duly registered in the Office of the Sub - Registrar, Peravoorani, as document No.242 of 1998. 3. According to the petitioner, both the previous vendors have been enjoying the property without any interruption from any quarters. After the purchase of the aforesaid property in the year 2004, from the said Mr. S. Prabhakaran, the petitioner has been in possession and enjoyment of the property. She had let out some portion of the said property for commercial purpose. While so, the Deputy Commercial Tax Officer I, Pattukkottai I, Assessment Circle, Pattukottai, Thanjavur District, the respondent herein, issued a notice on 01.12.2005, directing the petitioner to pay a sum of Rs. 82,593/-, being arrears of tax payable by the said Mr.R.Thirupathy, S/o.Ramasamy Chettiar, a dealer, who had been running business, in the name and style of "Ramu Steel Furniture" at Pudukkottai. 4. In the aforesaid notice, the respondent has further stated that the properties of the said Mr. R. Thirupathy have been purchased by the petitioner, without obtaining No Due Certificate from the respondent herein, and therefore, she must take full responsibility for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a business in the name and style of "Ramu Steel Furniture" at Pudukkottai. According to the learned counsel, the property had passed on to Mr. S. Prabhakaran in the year 1998, and after six years, the petitioner has purchased the property in the year 2004 from Mr. S. Prabhakaran and that she was totally unaware of the pendency of any of the proceedings under the Sales Tax Act and that she was a bona fide purchaser of the aforesaid property. In such circumstances, the transfer of the property effected in her name cannot be set at naught, and therefore, the respondent has committed an error in passing a distraint order, under Section 8 of the Revenue Recovery Act, when a bona fide purchaser is protected under the proviso to Section 24-A of the Act. 7. Placing reliance on the Judgments of the Division Bench in Deputy Commercial Tax Officer Vs. R.K.Steels reported in (1998) 108 STC 161 (Mad) and D.Senthilkumar and others Vs.Commercial Tax Officer, Erode and another reported in (2006) 148 STC 204 (Mad), learned counsel for the petitioner submitted that when the Writ Petitioner had no actual or constructive notice of the charge, prior to the transfer of the property, she should be tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold the properties to the said Mr. S. Prabhakaran, the said authority has not made any averments denying the bona fide purchase made by the petitioner in the year 2004, after six long years, after the first sale. According to the learned counsel, insofar as the purchase made by the petitioner is concerned, it is a bona fide. In the light of the above decisions coupled with the statutory protection granted under the proviso to Section 24-A of the Act, learned counsel for the petitioner submitted that the impugned distraint order issued under Section 8 of the Revenue Recovery Act has to be set aside. 10. On the basis of the counter affidavit filed by the Deputy Commercial Tax Officer I, Pattukottai I Assessment Circle, Pattukottai, the first respondent herein, Mr. S. Kumar, learned Additional Government Pleader, submitted that the dealer Mr. R. Thirupathy, S/o. Ramasamy Chettiar, did business in the name and style of "Ramu Steel Furniture" at T.S.No.3083, East Main Street, Pudukkottai. He was in arrears of sales tax to the tune of Rs. 82,593/- for the assessment years 1994 - 1995 and 1995 - 1996 respectively. Therefore, to realise the arrears, demand notices were also duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified in the notice of assessment, not being less than twenty-one days from the date of service of the notice. The tax under sub- section (2) of Section 13 shall be paid without any notice of tax under sub- section (2) of Section 13 shall be paid without any notice of demand. In default of such payment the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act. 24-A. Transfers to defraud revenue void.- Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise" Provided that, such charge or transfer shall not be void, if it is made, (i) for adequate consideration and without no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1959, [hereinafter referred to as "the Act"], when the firm is liable to pay tax under the Act, the firm, and each of the partners of the firm shall be jointly and severally liable for such tax. Under this Section, for the liability of the firm, the partners also are made liable and therefore, their properties cannot escape for the tax liability. When such a person has effected transfer of his property during the pendency of the proceedings under the Act or after the completion thereof, it cannot be stated that he did not intend to evade the tax and therefore, if the sale was to defraud the Revenue, the sale will be ab initio void. But, at the same time, the Legislature has intended to protect an honest person who had purchased the property from such a seller, if he had not colluded with the seller and he had no notice of the liability of the vendor. Under the proviso (i) to Section 24-A of the Act, not only adequate consideration, but also the want of notice, are the two ingredients to safeguard the purchaser. 6. A reading of Section 3 of the Transfer of Property Act, 1882, leads to the conclusion that, not only a wilful absention from an enquiry which a person ought to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, has been relied on by a Hon'ble Judge of this Court, while dismissing a Writ Petition (MD).No.1277 of 2005, dated 28.02.2005 [R. Balasubramaniam Vs. Additional Deputy Commercial Tax Officer III, Thoothukudi]. The appeal preferred by the subsequent purchaser in W.A.(MD).No.130 of 2005, has been dismissed on 07.02.2008. However, in D. Senthil Kumar's case, reported in (2006) 148 STC 204 (Mad), cited supra, the First Bench of this Court, presided over by the Hon'ble The Chief Justice, who was also a party to the unreported Judgment in W.A.(MD).No.130 of 2005, dated 07.02.2008, has considered a similar issue, as to whether a purchaser of a property in execution of the Recovery Certificate issued by the Debts Recovery Tribunal and who was not aware of the arrears of sales tax dues under the Act, can claim exemption from the action for recovery of the said arrears and whether a charge can be enforced against the transferee, if he had no notice thereof and whether the requirement of such notice had been waived, if there is a bona fide purchase. 16. In W.A.(MD).No.130 of 2005, dated 07.02.2008, decided subsequently, there is no reference to the earlier decision of the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned as follows:- "Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simply mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust- property for expenses properly incurred in the execution of his trust, and save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge". [emphasis supplied]. As the Section itself indicates, a charge may not be enforced against a transferee if he/she has had no notice of the same, unless by law, the requirement of such notice had been waived. The provisions of Section 100 of the Transfer of Property Act fell for consideration of the Supreme Court in Ahamedabad Municipal Corporation of the City of Ahamedabad v. Haji Abdul Gafur Haji Hussenbhai [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, whatsoever, of any sales tax arrears. Further, the bid offer made on behalf of the first respondent on June 5, 1992, specifically excludes any statutory liabilities, including sales tax. This offer was accepted by the Corporation on July 15, 1992. Even at that stage, there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreement dated August 12, 1992, in which a specific clause was inserted that the first respondent would be liable to pay all property taxes, other taxes, electricity bills, water taxes and rents from the date of the agreement (i.e., August 12, 1992). For the first time, by letter dated January 8, 1993 of the second appellant to the Mandal Panchayat, Aloor Taluk, the issue of sales tax dues of the defaulting company was brought to the surface. This is further borne out by the correspondence between the first respondent and the Corporation. Thus, it is evident that the first respondent had no actual notice of the charge prior to the transfer. As to whether the first respondent had constructive notice of the charge, no substantive argument on this issue was made, either before the High Court or at any rate before us. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haser, without notice, in a valid sale, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002, [for brevity, "SARFAESI Act"], whether the property can still be brought for public auction, for recovery of sales tax arrears, due to the Government. In the above reported A.Senthilkumar's case, at Paragraph No.10, the Hon'ble Division Bench has held as follows:- ".....The tax due would be a charge as per Section 24(1) of the Act. Section 24(1) creates charge whereas Section 24(2) gives preference/priority to the tax arrears over other claims except the claim of the Land Development Bank over property mortgaged under Section 28(2) of the Tamil Nadu Co-operative Land Development Bank Act, 1934. Therefore, it is very evident that except the claim of the Land Development Bank, the tax arrears would be given priority and it would be the "First Charge" on the property and would have priority over other claims." 21. Following the aforesaid decision in A.Senthilkumar's case, a Hon'ble Judge of this Court in W.P.No.36547 of 2007, dated 06.06.2011, has set aside the recovery notice issued Section 11(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner (CT), Koyambedu Assessment Circle, Channei and others reported in 2011 (1) CTC 828, a Hon'ble Judge set aside the impugned demand notice issued by the Regional Provident Fund Commissioner II and Recovery Officer, the second respondent therein. 25. Thus, in the light of the above Judgments, it could be seen that even though a charge is created on the properties on the finalisation of the assessment of tax or contribution to the Regional Provident Fund Commissioner, as the case may be, and a demand is raised, the same would not preclude the bona fide purchaser from seeking protection under Section 24-A of the Act. Constructive notice means, "legal inference from established facts." "Notice imputed by the law to a person not having actual notice". "Knowledge of any fact which would put a prudent man upon inquiry." "Knowledge of such facts as should induce inquiry, and as would lead to injury in the case of an ordinarily prudent man and which cannot be neglected without a voluntary closing of the eyes, and conduct inconsistent with good faith." 26. In the case on hand, the contention of the learned counsel for the petitioner is that prior to the purchase of the property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in a writ proceeding and a civil suit. In Bharat Singh and Others Vs. State of Haryana and Others, reported in 1988 (4) SCC 534, at paragraph 13, the Supreme Court held as follows: ".... In our opinion, when a point which is ostensibly a point of law is required to be substantiated by facts, the party raising the point, if he is the writ petitioner, must plead and prove such facts by evident which must appear from the writ petition and if he is the respondent, from the counter-affidavit. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition or to the counter-affidavit, as the case may be, the court will not entertain the point. In this context, it will not be out of place to point out that in this regard there is a distinction between a pleading under the Code of Civil Procedure and a writ petition or a counter-affidavit. While in a pleading, that is, a plaint or a written statement, the facts and not evidence are required to be pleaded, in a writ petition or in the counter- affidavit not only the facts but also the evidence in proof of such facts have to be pleaded and annexed to it." 27. Going through the judgments relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase, absentism or negligence, in making due enquiry with the Registration Department, prior to purchase, the conduct of the subsequent purchaser cannot be doubted by making any allegation of fraud, being played on the revenue. 29. Though the respondent has contended that the petitioner ought to have obtained a 'No Objection' from the revenue before purchasing the property, no provisions have been quoted by the respondent in the counter affidavit. Needless to say that a purchaser in normal course would only verify from the Registration Department as to whether the property to be purchased has any encumbrance. Unless the charge is duly registered in the Registration Department, it would not be possible for any prospecting buyer to know whether there is any charge over the property, for any arrears of tax or any statutory dues to be paid to the Government or statutory body. As stated supra, no materials have been produced before this Court to prove that notice demanding arrears of tax, has been served on the defaulter. No materials have been placed before this Court to prove that steps have been taken under the provisions of the Revenue Recovery Act, against the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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