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TMI Blog2009 (4) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of the balance of the amount that was outstanding in the names of respondents Nos. 5, 6 and 7 by having recourse to the property which the petitioner purchased in the auction sale and has also taken further coercive action such as attachment of bank accounts of the petitioner which is the latest coercive action on the part of the third respondent as per garnishee notice dated March 4, 2009 (copy at annexure B) served on the bankers of the petitioner in exercise of the powers under section 14 of the Karnataka Sales Tax Act, 1957 (for short, "the KST Act") and indicating therein that a sum of Rs. 9,93,811 has to be made over to the third respondent from the amount at the credit of the petitioner in the accounts maintained by the petitioner in its banks, namely, State Bank of Mysore, Challakere, Canara Bank, Challakere, ING Vysya Bank, Challakere. The present round of writ litigation by the petitioner is not only for quashing of notice dated February 3, 2009 (copy at annexure A) indicating that unless the petitioner pays the outstanding tax arrears that was due by the erstwhile owners of the property purchased by the petitioner with interest up to date, the respondent-Commercial T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for respondents Nos. 5, 6 and 7. The submission of Sri Satenahalli, learned counsel for the petitioner, is that the notices at annexures A and B are clearly an abuse of the statutory provisions; that the petitioner is not an assessee who was liable to pay any tax arrears; that the petitioner purchased the property in public auction sale conducted by respondents Nos. 1 and 2 admittedly for realization of the amount due to them and owed by respondents Nos. 5 to 7; that it was the duty of respondents Nos. 5 to 7 to have cleared any sales tax dues if at all were due from respondents Nos. 5 to 7 and which even if had constituted a charge on the property of respondents Nos. 5 to 7 up to the date of auction sale; that the property having been sold in a public auction by the Karnataka State Financial Corporation in exercise of its statutory powers under section 29 of the SFC Act, the property vests free from encumbrances in favour of the auction purchaser; that the petitioner is a bona fide auction purchaser for valuable consideration having paid a sum of about Rs. 23 lakhs for the property; that such person cannot be saddled with an earlier liability of erstwhile owners of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercising the powers under section 14 of the KST Act; that both notices are per se misuse and abuse of the statutory powers, illegal and are liable to be quashed. In support of the submission that the petitioner is a bona fide purchaser for valuable consideration and particularly having purchased the property which had been secured in favour of the Karnataka State Financial Corporation by the borrower from the bank and for realization of the amount due to the bank in a public auction sale in exercise of its statutory power under section 29 of the SFC Act and therefore is well insulated from any recovery proceedings by respondents Nos. 3 and 4 for realizing any tax arrears that perhaps was due by the erstwhile owners of the property. In support of such submission, Sri Satenahalli, learned counsel for the petitioner, has placed reliance on the following decisions of the Supreme Court, namely: (a) Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. reported in [2000] 120 STC 610 (SC); AIR 2000 SC 3654. (b) Union of India v. SICOM Ltd. reported in [2009] AIR SCW 635. (c) State of Karnataka v. Shreyas Papers P. Ltd. reported in [2006] 144 STC 331 (SC); [2006] AIR SCW 169. Placing re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility and holding that the petitioner having knowledge of sales tax liability of respondents Nos. 5, 6 and 7 and such being the condition of sale also was bound to make good the amount, respondents Nos. 3 and 4 are entitled to recover the amount from the petitioner as that was one of the conditions of sale and the petitioner had notice of the same and having allowed the revision petition on such terms, it is not open to the petitioner to now dispute the liability and therefore the petition has no merits. The learned Government Pleader also submits that in view of the statutory provisions of section 15 read with section 13 of the KST Act, the petitioner becomes an assessee in default and all coercive measures as are available to the Commercial Taxes Department as against an assessee in default can also be pursued against the petitioner and therefore the impugned notices as at annexures A and B are valid in law and the writ petitions are to be dismissed. Sri Rudragouda, learned counsel for respondents Nos. 1 and 2 submits that the property in question having been sold subject to sales tax liability being taken over or to be met by the purchaser and that having been made known to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the execution of the sale deed, if it was found to be not to the convenience of the petitioner and therefore to this extent though the law declared in terms of the judgments referred to and relied upon by Sri Satenahalli, learned counsel for the petitioner would support the case of the petitioner as this court has given a finding that the petitioner is liable in respect of the amount of sales tax dues, etc., that may not be a question which can be reagitated before this court even by relying upon the decisions of the Supreme Court referred to above. But Sri Satenahalli, learned counsel for the petitioner, is justified in contending that bona fide auction purchaser like the petitioner who has purchased the property sold by the first respondent-Karnataka State Financial Corporation is not a person who is taking over a running concern or who is taking over the business of an assessee in default which alone can attract the provisions of section 15 of the KST Act; that, the petitioner having merely purchased the property does not step into the shoes of the assessee in default and even on the findings by this court earlier if at all the property can be charged with the liability no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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