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TMI Blog2024 (9) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... ), VIJAYAWADA AND OTHERS [ 2004 (10) TMI 556 - ANDHRA PRADESH HIGH COURT] . In this case, a Private Limited Company had fallen in sales tax arrears to the tune of Rs. 35,98,030/-. The said assessee, while steps were being taken to recover the tax dues, had sold away immovable property belonging it and orders under Section 17-A were passed - In the present case, the facts are different. The petitioner is no other than the son-in-law of the 5th respondent and the assertion of the petitioner that he was unaware of the tax dues of the 6th respondent, which was essentially a family concern of the 5th respondent, cannot be taken on face value. In the present case, though the company is admitted to be in liquidation, no steps have been taken against the 5th respondent by issuance of a notice calling upon him to pay the tax dues of the 6th respondent Private Limited Company nor was the 5th respondent given an opportunity of hearing to demonstrate that there was no liability to pay such taxes. In the absence of such an opportunity being given to the 5th respondent, tax liability cannot be fastened upon the 5th respondent. This Court is of the view that the proceedings of the 1st respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to arrears of A.P. Sales Tax, under the APGST Act, to the tune of Rs. 63,19,981/-, for the period 1992-93 to 1998-99. Admittedly, by the time of the passing of the impugned order, the 6th respondent was under liquidation. Under section 16B of the Andhra Pradesh General Sales Tax Act, 1957, every director of a private limited company, which goes into liquidation, is liable to pay the tax dues, provided that he can deny such liability if he can show that non-payment of such dues, by the private limited company was not on account of the director s gross negligence, misfeasance or breach of duty. The 1st respondent took the view that the 5th respondent to evade such payment had alienated his property in favour of the petitioner, who is none other than his son-in-law and, by another transaction, to his daughter. 5. Aggrieved by the said proceedings, the petitioner has approached this Court. It may also be noted that the petitioner, in the affidavit filed in support of the writ petition, also states that the 6th respondent was under the liquidation and that the State Finance Corporation had auctioned the property of the 6th respondent company, under Section 29 of the SFC Act. 6. Sri Kart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department only when the department is able to show that the transfer was made to defraud the revenue and thereafter the burden shifts to the petitioner to show it is a bonafide transaction. The 1st respondent, in the impugned proceedings, has not placed any material to show that there is a basis to say that the transfer was to defraud the revenue. 7. The learned Government Pleader for Commercial Taxes, on the other hand, would contend that the petitioner is no other than the son-in-law of the 5th respondent and was fully aware of the difficulties of the 6th respondent in paying its taxes and other dues. He would submit that the payment of sale consideration of Rs.3.51 lakhs included payment of about Rs. 2 lakhs for clearing the mortgage on the property. This would mean that the sale consideration was essentially used to clear the charge over the property so that the property can be transferred to the petitioner. He would submit that in such circumstances, there is neither adequate consideration nor was the purchase a bona fide purchase without notice of the pending dues. He would further submit that the impugned proceedings itself record that various notices had been issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c returns filed by the dealer. The said power to declare an alienation of property as void, need not be only after the tax liability has been fixed. Any other view would render this provision otiose. 11. This provision came to be considered by a Division Bench of the erstwhile High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in the case of Damera Ramakrishna and Ors vs. Commercial Tax Officer (Fac), Vijayawada and Ors (2005) 1 ALT 293 (DB): 2005) 142 STC Page 515 . In this case, a Private Limited Company had fallen in sales tax arrears to the tune of Rs. 35,98,030/-. The said assessee, while steps were being taken to recover the tax dues, had sold away immovable property belonging it and orders under Section 17-A were passed. Upon challenge, a Division Bench of the erstwhile High Court took the view that the initial burden to show that the property was sold to defraud revenue and avoid payment of tax falls on the sales tax authorities. Upon such onus being discharged, the burden would fall on the purchaser to show that they were bona fide purchasers who have paid adequate consideration for the purchase. On the facts in that case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrate that there was no liability to pay such taxes. In the absence of such an opportunity being given to the 5th respondent, tax liability cannot be fastened upon the 5th respondent. 16. The 6th respondent became liable to pay sales tax between 1992 to 1998. The alienation of property took place in the year 2000 and the proceedings declaring the alienation, as void, took place in the year 2007. Thereafter, no steps have been taken for fixing tax liability on the 6th respondent. In the absence of fixation of such liability, passing an order under Section 17-A of the APGST Act is not a reasonable exercise of power. It may also be noted that no steps have been taken to recover taxes from the 5th respondent till date and the question remains as to whether such recovery is permissible today. 17. In the circumstances, this Court is of the view that the proceedings of the 1st respondent dated 14.09.2007 would have to be set aside, subject to the condition that such proceedings can again be issued, provided steps are taken to fix liability of payment of tax dues of the 6th respondent on the 5th respondent and thereafter steps are taken for recovery of such tax dues. 18. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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