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TMI Blog1998 (4) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sides including the Advocate on behalf of the third respondent, original petitions have been taken up for final disposal. 3.. The brief history of the case is narrated below so as to understand the disputes involved in the two original petitions and to appreciate the arguments advanced in this case. (i) Miss R. Anandhi, the petitioner in both the original petitions, was registered under the Tamil Nadu General Sales Tax Act, 1959 with Rc. No. 105601 in the office of the Commercial Tax Officer, Amaindakarai Assessment Circle, Madras 108. She applied for interest-free sales tax (IFST) deferral facility under G.O. Ms. No. 500 dated May 14, 1990 and obtained the eligibility certificate for IFST from the District Industries Centre, Chengalpattu Branch at Guindy, Madras on February 15, 1991. According to G.O. Ms. No. 500 Industries (MIG II) Department dated May 14, 1990 the General Manager, District Industries Centre will be the competent authority to issue eligibility certificate in respect of smallscale industries. The respective sales tax assessing authority will assess the sales tax liability of the unit for each year. The sales tax authority concerned, based on the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain conditions. Conditions (v) and (vi) which are relevant to the issues are reproduced below: "(v) that the dealers should not sell or otherwise dispose of or effect any change in the ownership of its fixed assets or encumber the same in any manner other than the charges created or to be created in favour of Assistant Commissioner (CT), Zone VIII, Madras 6 to accrue the deferral sales tax amount without the written prior permission of the Assistant Commissioner (CT), Zone VIII, Madras 6 within 30 days. (vi) that the dealers should report the Assistant Commissioner (CT), Zone VIII, Madras 6 if they stop production for a period of more than 6 (six) months during the period of availing the concession under the scheme or shift their unit to any other area or undergo any change as mentioned in the above condition at least 30 days prior to the events mentioned therein." In the deed of agreement, clauses (4) and (7) which are relevant to the issues are extracted below: "(4) The party of the second part shall not alienate/dispose/encumber the said fixed assets, nor shall it remove the fixed assets from the units' premises until the deferred tax is fully repaid. (7) The party of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the sanction and transfer of bank facilities that he has been given facility under the Interest Free Sales Tax Deferral Scheme sanctioned in G.O. Ms. No. 500 Industries (MIG II) Department dated May 14, 1990 vide Industries Department letter dated February 15, 1991 and according to the conditions therein she has to apply for permission to such handing over and take over of the unit. Therefore, she requested for necessary permission. On March 5, 1993 the petitioner reminded the fourth respondent to grant permission for the sale of the unit on condition that the buyer enters into a similar agreement for repayment as per orders of the Director of Industries and the Assistant Commissioner (CT), Zone VIII, Madras 6 with the concerned Assistant Commissioner (CT). She again reminded the fourth respondent on March 12, 1993. On June 28, 1993 she sent a letter to the Commissioner of Commercial Taxes, Chepauk, Chennai 5 requesting that the Assistant Commissioner (CT), Zone VIII, Madras who has been delegated with powers to pass orders for transfer of the unit to a buyer may be directed to pass necessary orders so as to avoid delay. The Special Commissioner and Commissioner of Commercial Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Commercial Taxes, Ezhilagam, Madras 5 has informed to the proprietrix, that after getting permission from Industries and Commercial Taxes Department for such sale, the purchaser of the unit should enter into an agreement with Assistant Commissioner (CT) to the effect that the purchaser will repay the deferred tax and till such repayment all the assets of the company are charged to the commercial tax department. In view of the above position, permission is accorded for transfer of the unit as a going concern along with assets and liabilities, which included liability of IFST deferral to Thiru Sumanth Sharma, 9-A, Whites Road, Madras 14, subject to the condition necessary amendment should be incorporated in the PMT/SSI registration certificate for the change of constitution and the amended SSI Certificate to be produced. The fact of execution of revised agreement executed by the buyer with the sales tax official has to be intimated to this office. The buyer may be advised to send a copy of revised agreement, to this office for our records." (v) On September 21, 1993, the petitioner addressed the Commissioner of Commercial Taxes, Chepauk, Madras 5 to instruct the Assistant C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new promoter to the extent of Rs. 5,53,060. 8.. The new promoter should pay the purchase consideration from out of his own funds. On July 21, 1997 Mr. Sumanth Sharma, the third respondent, wrote to the Indian Bank stating that the sanction letter dated July 18, 1994 from the Indian Bank varies greatly from the original proposal and it does not amount to a sanction as envisaged in the discussion and hence it is not acceptable to him. On November 5, 1994 the Advocate for Mr. Sumanth Sharma, the third respondent, issued a notice to the Special Commissioner and Commissioner of Commercial Taxes as well as the General Manager, Department of District Industries Centre, at Guindy informing among other things that further action for granting any permission for transfer of Interest Free Sales Tax Deferral Scheme of M/s. Surya Chemical Products from Miss. R. Anandhi to and in favour of Mr. Sumanth Sharma may be dropped. The transfer of SSI unit Surya Chemical Products from Miss. R. Anandhi to the name of Mr. Sumanth Sharma communicated in proceedings No. 6925/843/93 dated August 19, 1993 and the change of constitution of Surya Chemical Products sent in letter No. D.Dis. 14/1462/GA7/90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship, the petitioner alone has to pay the arrears. 4.. The learned Advocate Thiru A. Devanathan on behalf of the petitioner in regard to the prayer in O.P. No. 595 of 1996 vehemently argued that the fourth respondent ought to have passed orders on the petition dated February 1, 1993 approving the transfer of assets and liability including IFST deferral from the petitioner to the respondent 3 as the unit was factually and legally transferred. On December 9, 1992, the physical transfer of the unit was completed by delivery of possession and control. This fact was recognised by the General Manager, District Industries Centre by his letter dated August 19, 1993 and even the cancellation as late as on May 29, 1995 confirmed the position. The eligibility certificate was cancelled because the factory was found locked and not operated by the respondent 3 in spite of taking over of the unit as a going concern and giving undertaking to run the unit to the petitioner and the General Manager, District Industries Centre. The respondent 4 has not chosen to dispose of the application dated February 1, 1993. The Special Commissioner and Commissioner of Commercial Taxes instead of giving instruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 17A of the TNGST Act contemplates the deferral of sales tax payment by any new industrial unit, etc. The power that could be exercised by the territorial Assistant Commissioner is one of passing order of deferral payment of sales tax in pursuance of the eligibility certificate issued by the General Manager, District Industries Centre. In such circumstances, when the General Manager, while issuing the eligibility certificate to the petitioner on February 15, 1991 has clearly indicated that for any change of the name and/ or constitution prior written permission of Government at least 30 days prior to the contemplated event has to be obtained, there is no point in addressing the territorial Assistant Commissioner (CT) on February 1, 1993 for such a change without obtaining prior Government permission. In fact, when the petitioner complained against the respondent 4 to the Commissioner of Commercial Taxes, she has been categorically told by the Commissioner of Commercial Taxes in his letter dated July 28, 1993 that as per the eligibility certificate issued by the Industries Department and as per agreement entered with the Assistant Commissioner, prior permission from Industries an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount relating to IFST deferral. This is in accordance with the agreement entered into with the department. Therefore, the action taken by the assessing authority is in order. 8.. We have considered the point carefully. As already stated, valid reasons have been given by the General Manager, District Industries Centre, Guindy, while cancelling the eligibility certificate issued to avail IFST deferral to the petitioner. No action was pursued by the petitioner on the cancellation of the eligibility certificate ordered on May 29, 1995. Thus, the matter was allowed to become final. Consequent on the cancellation of eligibility certificate the order issued for payment of sales tax by availing IFST deferral no longer survives. In such circumstances, the action taken by the assessing authority to collect the entire sales tax amount due as arrears is in order. Thus the prayer of the petitioner is negatived. 9.. The next point urged is that the respondent 1 should proceed against the assets in the hands of the respondent 3 for collection of IFST arrears under section 27 of the Act and that the action proposed against the petitioner in pursuance of the demand notice dated April 4, 1996 is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner stands cancelled. Section 27 of the TNGST Act reads as follows: "Where the ownership of the business of a dealer liable to pay tax or other amount is transferred, any tax or other amount payable under this Act in respect of such business and remaining unpaid at the time of the transfer and any tax or other amount due up to the date of transfer though unassessed, may, without prejudice to any action that may be taken for its recovery from the transferor, be recovered from the transferee as if he were the dealer liable to pay such tax or other amount: Provided that the recovery from the transferee of the arrears of taxes due for the period prior to the date of the transfer shall be limited to the value of the assets he obtained by transfer." According to this section, tax recovery in respect of any business done and remaining unpaid at the time of transfer of ownership of business to another person could be recovered from the transferee as if he were the dealer liable to pay such tax or other amount. However, the liability of transferee is limited to the value of the assets obtained by him by transfer. Further, this mode of recovery from the transferee for arrears from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of registration." Sub-section (1) of section 26 of the Bombay Sales Tax Act, 1953 is similar to section 33(1) of the Madhya Pradesh General Sales Tax Act, 1958. (iv) Similarly in the case of Commercial Taxes Officer, Circle-B, Alwar v. Eicher Good Earth Ltd. [1997] 104 STC 321 (RTT), sub-section (1) of section 9 of the Rajasthan Sales Tax Act, 1954 reads as follows: 9.. Liability on transfer of business or on discontinuance or dissolution of business of a firm, etc.-(1) When the ownership of the business of a dealer liable to pay the tax is entirely transferred, any tax, payable in respect of such business and remaining unpaid at the time of the transfer, shall be payable by the transferee, as if he were the dealer liable to pay such tax ; and the transferee, shall also be liable to pay tax on the sale or purchase of goods effected by him with effect from the date of such transfer and shall within thirty days of the transfer, apply for registration unless he already holds a certificate of registration." (v) Apparently section 27 of the TNGST Act is different from the various liability provisions of transferee in other States as narrated supra. Irrespective of the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he third respondent has taken place or not. The fact remains that the IFST with reference to the deed of agreement executed by the petitioner on February 1, 1993 in pursuance of deferral eligibility certificate under IFST Deferral Scheme with the Assistant Commissioner (CT), Zone VIII, the respondent 4, still remains and the properties are charged in favour of the department. If there is any transfer of ownership which is a moot point, the department is vested with power to proceed against the transferee to the extent of value of assets transferred to him in respect of tax which remains unpaid at the time of transfer of ownership. However, section 27 does not prohibit the initiation of action to recover the arrears from the petitioner in any event, as she is the person who did business and accumulated arrears. The action to recover the arrears includes action to proceed against the property which is charged in favour of the department, whether the ownership is claimed by the petitioner or by the third respondent in the capacity of transferee as alleged by the petitioner. However, there is nothing illegal in the action taken by the first respondent to proceed against the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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