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TMI Blog2015 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... properties, which are no longer belonging to the dealer. The Petitioners are not the defaulters nor they are successor in interest. In these circumstances, the attempt to foist the liability of the defaulting dealer on the Petitioners and proceed against their properties is in issue before us. The legality and validity of the attachment order dated 24th December, 2013 is the question before us. That cannot be answered by relying on a general stipulation or clause in a contract or sale deed. It is a pure legal question and that is how even the Sales Tax Authorities approach it. As a result of the above discussion, this Writ Petition succeeds. Rule is made absolute in terms of prarer clauses (a) and (b) of the Writ Petition. The attachment order impugned in this Writ Petition is quashed and aside. - Decided in favour of appellant. - Writ Petition No. 2608 of 2014 - - - Dated:- 12-2-2015 - DHARMADHIKARI S. C. AND SAMBRE N. W. JJ. P. C. Joshi with Piyush N. Shah for the petitioners. Advait M. Sethna, Special Counsel with Ms. Anjali Helekar, Additional Government Pleader and Raju Thakkar for respondent Nos. 1 and 2. Venkatesh Dhond, Senior Advocate with Ms. Tasneem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y section 13 thereof. Thereafter, the immovable properties and which have been more particularly described in a public notice were put up for sale. That immovable properties are a piece and parcel of land situated at village Ajivali, Khopoli, District Raigad. More particularly described in Form No. 4 of the order of attachment dated 24th December, 2013 as survey Nos. 52, 53, 54, 55, 58, 58/1B, 58/1C, 62/2 situated at Mauje Ajivali village, Pen-Khopoli Road, Taluka-Khalapur, District-Raigad (hereinafter referred to as the immovable properties). The Petitioners have pointed out as to how an offer was made by them and there were negotiations held, pursuant to which, the Petitioners' offer was accepted. The Petitioners offer being accepted, the sale was concluded in their favour and for an agreed consideration. There were two sale certificates separately issued for movable (plant and machinery etc.) and immovable properties acknowledging receipt and handing over delivery and possession of the same. The Petitioners state that in the sale certificates, it was mentioned that the sale is on as is where is and as is what is basis and with all known and unknown encumbrances (except t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners are in default and in the sum of ₹ 4,18,30,890/- being the dues or taxes payable under the BST Act as well as the Central Sales Tax Act, 1956 ( CST Act for short). The Petitioners complained that there was a communication addressed on 6th September, 2013 Annexure 'K' and which was replied extensively by the Petitioners pointing out that they cannot be held liable for any dues of the erstwhile owner. Its business not being taken over by the Petitioners, they cannot be termed as successors in interest. Similarly, the dues of the Sales Tax Department are not the dues against the property and in these circumstances, there was no power to attach the properties. 12. The Petitioners' grievance is that despite this legal position, summons was issued for the appearance of the Petitioners in the office of 2nd Respondent. On 12th November, 2013, in pursuance to this summons, the Petitioner attended his office, but the Respondent Nos. 3 and 4 were absent, therefore, another hearing in the office of the 2nd Respondent was scheduled on 7th December, 2013. On that date, the parties concluded their oral submissions and time was given to handover written submissions by 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 27th June, 2013. That records as to how the Petitioners have become owners of the properties and prior to the initiation of the recovery proceedings under the BST Act. If that is the understanding of the law of the Sales Tax Authorities and emerging from their communication, then, there was no warrant in re-attaching the immovable properties. Mr. Joshi would submit that even if the sale certificate and the contents thereof are perused, the same would not in any manner denote that the Petitioners have any existing liability or have taken over any prior liability of Respondent No. 4. The sale certificate with the clauses and which have been relied upon would denote that the secured assets are being sold with all known and unknown encumbrances. However, the encumbrances have never been spelt out. The dues of the Sales Tax Authorities were not known to the Petitioners. It was not that with the knowledge thereof that the immovable properties have been acquired. Hence, no reliance could have been placed on these certificates or the contents thereof. Once in law there is no provision which would enable the authorities to levy the attachment, then, it is bad in law and must be set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4), 38(5), 38B and 38C of the BST Act. If the recovery proceedings are to enable the recovery of Sales Tax dues as arrears of land revenue, then, all the powers of the revenue officers vest in the Sales Tax officers. They can proceed to attach the immovable properties. In these circumstances, there is no merit in the Writ Petition. Mr. Sethna relied upon the fact that once the Sales Tax dues are in arrears and they were always payable, then, there is a charge on the properties of the dealer or any other person, within the meaning of section 38C of the BST Act. That would enable the Petitioners to go after the properties of the Respondent No. 4 and recover the Sales Tax dues. This dues attaches to the properties and therefore, so long as the Petitioners establish and prove that they had no knowledge of the charge which is statutory in character, they cannot challenge the attachment. Once the correspondence with the 3rd Respondent and carried on by the Petitioners themselves is brought on record, that indicates as to how the Petitioners had knowledge of the dues of the Sales Tax authorities. In such circumstances, the Writ Petition be dismissed. 17. Reliance is placed by Mr. Seth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding Excise dues, Sales Tax are payable by the Petitioners, then, the Petitioners cannot escape the liability. They had a knowledge of the charge. The correspondence in that regard is relied upon. 19. Strangely, we find that Mr. Dhond was more vehement in opposing the Writ Petition than even the Sales Tax Department. The arguments and which ought to have emanated from the Sales Tax Department, were placed for our consideration by Mr. Dhond. He would submit that the statute being clear and its mandate being not to allow the parties like the Petitioners to escape the recovery that the Petitioners must be called upon to deposit the sum, in respect of which the attachment was levied and not be allowed to go scott free. In these circumstances, he also prayed for dismissal of the Writ Petition. 20. With the assistance of all the Counsel, we have perused the Writ Petition and all the Annexures thereto. We have perused the affidavit in reply filed by Respondent Nos. 1 and 2 with all its Annexures and a rejoinder affidavit placed on file by the Petitioners. Initially Mr. Sethna sought time to place a sur-rejoinder, but once we found that there is no dispute about the facts a sur-rejoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (6) of section 13 is relied upon to contend that any transfer of secured assets after taking possession or taking over of Management under sub-section (4), by the secured creditor or by the Manager on behalf of the secured creditors, shall vest in the transferee all rights in, or in relation to the secured asset transferred as if the transfer had been made by the owner of such secured asset. The possession of the immovable and movable properties of the Respondent No. 4, which are secured assets has been taken over by Respondent No. 3 pursuant to the assigning of the debt in its favour and the powers which it exercised are in terms of this SARFESI Act. That is how the possession notice at Annexure 'B' and the public notice for sale would have to be read. It is only upon such takeover and the right to transfer by way of inter alia sale that the sale of the properties was announced. True it is, as has been placed before us by Respondent Nos. 1 and 2, that the sale in favour of the Petitioners was preceded by certain negotiations. 23. Respondent Nos. 1 and 2 rely upon the assessment orders passed against Respondent No. 4 under the BST Act and CST Act for assessment period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which carries on such business, and also any society, club or other association of persons which buys goods from or sells goods to its members. The term business has therefore been defined in a inclusive manner. It includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and any transaction in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; and any transaction in connection with, or incidental or ancillary to, the commencement or closure of such trade, commerce, manufacture, adventure or concern. That is why the Explanation says that any transaction of sale or purchase of capital assets pertaining to such trade, commerce, manufacture, adventure or concern shall be deemed to be business and expression 'capital assets' shall have the same meaning as assigned to it in the Income Tax Act, 1961. Therefore, even a transaction of sale or purchase of capital assets pertaining to the trade, commerce, manufacture, adventure or concern shall be deemed to be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2) Where a dealer, liable to pay tax under this Act, is a Hindu undivided family and the joint family property is partitioned amongst the various members or group of members, then each member or group of members shall be jointly and severally liable to pay the tax (including any penalty and interest) due from the dealer under this Act or under any earlier law, up to the time of the partition, whether such tax (including any penalty and interest) has been assessed before partition but has remained unpaid, or is assessed after partition. (3) Where a dealer, liable to pay tax under this Act, is a firm, and the firm is dissolved, then every person who was a partner shall be jointly and severally liable to pay to the extent to which he is liable under section 18, the tax (including any penalty and interest) due from the firm under this Act or under any earlier law up to the time of dissolution, whether such tax (including any penalty and interest) has been assessed before such dissolution but has remained unpaid, or is assessed after dissolution. (4) Where a dealer, liable to pay tax under this Act, transfers or otherwise disposes of his business in whole or in part, or effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n succeeding shall jointly and severally be liable to pay the tax (including any penalty and interest) due from the dealer under this Act or under any earlier law, up to the time of such transfer, disposal or change, whether such tax (including any penalty and interest) has been assessed before such transfer, disposal or change but has remained unpaid, or is assessed thereafter. 28. The entire affidavit in reply does not indicate that there is any transfer or disposal of the business of the dealer, namely Respondent No. 4 in whole or in part or there is any change in the ownership of Respondent No. 4. There is merit in the contention of Mr. Joshi that the Petitioners cannot be termed as successors in interest and therefore liable to pay tax jointly and severally. Rather there is something indicated in favour of the Petitioners, inasmuch as when the Petitioners brought to the notice of the authorities that they have acquired title in respect of the immovable properties consequent upon the sale by Respondent No. 3 in their favour, promptly, the authorities noticed their error and mistake. They noticed that the recovery proceedings have not been initiated prior to the sale being no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(4) of the BST Act, which is section 15 of the Karnataka Sales Tax Act, 1957 and dealing with the rival contentions, the Hon'ble Supreme Court, on a perusal of the enactment, held thus:- 11. A careful reading of section 15(1) of the KST Act shows that the consequences contemplated therein, namely, foisting of the liabilities of the defaulting transferor onto the transferee, would come into effect only if the ownership of the business is transferred. Although, Mr. Hegde strenuously urged that business could not be separated from the assets of the business, we are unable to accept this contention. Business is an activity, directed with a certain purpose, more often towards producing income or profit. Ownership of assets is merely an incident rather than a characteristic of business. Hence, the mere transfer of one or more species of assets does not necessarily bring about the transfer of the ownership of the business for ownership of a business is much wider than mere ownership of discrete or individual assets. In fact, ownership of business is wider than the sum of the ownership of a business constituent assets. Above all, transfer of ownership of business requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lment not duly paid, shall be recoverable as arrears of land revenue. Sections 38B and 38C read as under:- 38B.-Special powers of Sales Tax authorities for recovery of tax as arrears of land revenue.:- (1) For the purpose of effecting recovery of the amount of tax, penalty interest and amount forfeited, due and recoverable from any dealer or other person by or under the provisions of this Act, as arrears of land revenue:- (i) the Commissioner of Sales Tax shall have and exercise all the powers and perform all the duties of the Commissioner under the Maharashtra Land Revenue Code, 1966, (Mah. XLI of 1966); (ii) the Additional Commissioner of Sales Tax shall have and exercise all the powers and perform all the duties of the Additional Commissioner under the said Code; (iii) the Deputy Commissioner of Sales Tax shall have and exercise all the powers and perform all the duties of the Collector under the said Code; (iv) the Senior Assistant Commissioner and the Assistant Commissioner of Sales Tax shall have and exercise all the powers (except the powers of arrest and confinement of a defaulter in a civil jail), and perform all the duties of the Assistant or Deputy Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the first charge on the property of the dealer or as the case may be the person is what is enacted by this provision. If the property is and was capable of being followed even in the hands of the Petitioners, we do not see any reason as to why Respondent Nos. 1 and 2 acceded to the Petitioners' request and raised the attachment initially levied. Their own statement states that realizing that the recovery measures have not been initiated prior to the sale being notified or the title in favour of the Petitioners being transferred that the attachment cannot be levied any longer. They realised that the property has changed hands and the Petitioners have become owners thereof. However, on obtaining the documents and from Respondent No. 3, particularly copies of the correspondence between the Petitioners and Respondent No. 3 that Respondent Nos. 1 and 2 decided to re-levy the attachment. That is on a complete different footing and namely that the liabilities of Respondent No. 4 have been taken over by the Petitioners and they are aware of the same. We have indicated as to how beyond the clauses of the sale certificate or deed or document in favour of the Petitioners, there is ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, the Municipal Corporation's main argument was that where the local law provided for the creation of a charge against a property for which municipal taxes were due, transferees of such properties were imputed with constructive knowledge of any charge created against the properties that they had purchased. This argument was, however, rejected. This Court held that while constructive notice was sufficient to satisfy the requirement of notice in the proviso to section 100 of the TP Act, whether the transferee had constructive notice of the charge had to be determined on the facts and circumstances of the case. In other words, this Court held that there could be no fixed presumption as to the transferee having constructive notice of the charge against the property. In fact, the principle laid down in Ahmedabad Municipal Corporation has been correctly applied in a sales tax case similar to the present case. 18. In the present case, firstly, no provision of law has been cited before us that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same. It remains to be seen, therefore, if in the facts of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was the highest and therefore could be accepted. A sale deed was executed in its favour and conveying the ownership of the land and building, plant and machinery. Once it became the owner, it was surprised to note that there was Excise duty, which had fallen due and in arrears from the erstwhile unit. The auction purchaser/owner was pressed to discharge this liability and on the footing that it is successor in interest of land and building and plant and machinery of the borrower. That demand was resisted and what is material for our purpose is that while the legal proceedings were before the Hon'ble Allahabad High Court by way of a Writ Petition, in which the auction purchaser lost, similar clause or stipulation, as is to be found in the sale certificate in the present case was relied upon. It had been clearly stated in the sale certificate that all the statutory liabilities arising out of the said properties shall be borne by the vendee and vendor shall not be held responsible. Thereafter, the Hon'ble Supreme Court noted as to how the Allahabad High Court proceeded and by relying upon its own Judgment, it dismissed the Writ Petition. The rival contentions and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty will have the same consequence. xxx 23. Furthermore, the right of a State Financial Corporation is a statutory one. The Act contains a non-obstante clause in Section 46-B of the Act which reads as under:- 46-B. Effect of Act on other laws.-The provisions of this Act and of any rule or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern. 18. In so far dues of the Government in the form of tax or excise etc. are concerned, the Court was of the opinion that rights of the Crown to recover the dues would prevail over the right of the subject. Crown debt mean the debts due to the State or the King. Such creditors, however must be held to mean unsecured creditors. The principle of Crown debt pertains to the common law principle. When parliament or State Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the subject meet at one and the same time that the Crown is in general preferred. Where the right of the subject is complete and perfect before that of the king commences, the rule does not apply, for there is no point of time at which the two rights are at conflict, nor can there be a question which of the two ought to prevail in a case where one, that of the subject, has prevailed already. In Giles v. Grover it has been held that the Crown has no precedence over a pledge of goods. In Bank of Bihar v. State of Bihar the principle has been recognised by this Court holding that the rights of the pawnee who has parted with money in favour of the pawner on the security of the goods cannot be extinguished even by lawful seizure of goods by making money available to other creditors of the pawner without the claim of the pawnee being first fully satisfied. Rashbehary Ghose states in Law of Mortgage (TLL, 7th Edn., p. 386)- it seems a government debt in India is not entitled to precedence over a prior secured debt . 20. Coming to the liability of the successor in interest, the Court clarified the legal position enunciated in M/s. Macson by observing that such a liability can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser . As far as Central Excise Act is concerned, there was no such specific provision as noticed in SICOM as well. Proviso to Section 11 is now added by way of amendment in the Act only w.e.f. 10-9-2004. Therefore, we are eschewing our discussion regarding this proviso as that is not applicable insofar as present case is concerned. Accordingly, we thus, hold that insofar as legal position is concerned, UPFC being a secured creditor had priority over the excise dues. We further hold that since the appellant had not purchased the entire unit as a business, as per the statutory framework he was not liable for discharging the dues of the Excise Department. 22. With this, we no revert to the first issue, namely interpretation of the clause in the Sale Deed for land and building and similar clause in Agreement of Sale for machinery on the basis of which appellant is held to be liable to pay the dues. These clauses have already been incorporated in the earlier portion of our judgment. 23. We may notice that in the first instance it was mentioned not only in the public notice but there is a specific clause inserted in the Sale Deed/Agreement as well, to the effect that the properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above decisions of the Hon'ble Supreme Court are binding on us. We cannot depart from the same on the specious plea that section 38C of the BST Act enacts a statutory charge. Thus, the unit of Respondent No. 4 is not taken over as a going concern by the Petitioner No. 1 before us. It is not aware of the statutory charge either. Thirdly, it has not taken over the business of the Respondent No. 4 and hence is not a successor-in-interest either. Unless, all this is established and proved there is no way the attachment on the properties of the Petitioners can be levied. Rather, it was rightly vacated either. 40. In the light of this clear position, we are not in a position to accept Mr. Dhond's argument that allowing the Writ Petition would mean that the Petitioners can wriggle out of the obligation voluntarily incurred by them. The argument runs thus:- The Petitioners have, in terms of a contract of sale, negotiated for sale of the immovable properties. That sale is concluded in terms of a sale certificate. The clauses and recitals in the agreement and sale certificate denote that the Petitioners have voluntarily and willingly accepted the liability to pay taxes. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel on this point, we are unable to accede to the request of Mr. Sethna and particularly after having found that the attachment was wholly illegal and invalid. If that was not permissible in law, then, we cannot continue it. The request in that behalf is refused. However, in order to enable Respondent Nos. 1 and 2 to take recourse to other remedies available in law and equally to challenge this Judgment in higher Court, we direct that without prejudice to the rights and contentions of parties, for a period of 8 weeks from today, the Petitioners shall not sell or transfer the immovable properties, which are subject matter of the possession notice and the sale certificate in their favour, in any manner whatsoever, nor part with possession thereof. We clarify that grant of such an order shall not be construed as any relief in favour of the Respondent Nos. 1 and 2 nor any Court or authority would be bound by this order so as to continue this prohibition beyond the period of 8 weeks. However, it would be open for Respondent Nos. 1 and 2 to pray before the higher Court that this order having been passed, it may be continued. That request and prayer in that behalf so also all contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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