Madras High Court
S.Venkatajalapathy vs The Commercial Tax Officer on 24 September, 2021
W.A.No.2458 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 24.09.2021
CORAM :
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP
W.A.No.2458 of 2021
and
C.M.P.No.15781 of 2021
S.Venkatajalapathy ... Appellant
Vs.
1.The Commercial Tax Officer,
Tondiarpet Assessment Circle,
Chennai – 600 081.
2.K.P.Kesavan ... Respondents
Prayer :Writ Appeal filed under Clause 15 of the Letter Patent, against the
order dated 02.03.2021 made in W.P.No.23574 of 2015.
For Appellant : Mr.P.Ramesh Kumar
For R1 : Mr.M.Venkateswaran
Government Counsel
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W.A.No.2458 of 2021
JUDGMENT
(Judgment was delivered by T.S. SIVAGNANAM, J.)
This Writ Appeal filed by the writ petitioner is directed against the
order, dated 02.03.2021, in W.P.No.23574 of 2015.
2.Heard Mr.P.Ramesh Kumar, learned counsel for the appellant and
Mr.M.Venkateswaran, learned Government Counsel, accepting notice on
behalf of the 1st respondent.
3.The said writ petition was filed by the appellant challenging the
proceedings issued by the 1st respondent, dated 13.07.2015, which is a notice
issued to the appellant for recovery of Sales Tax arrears payable by a
Proprietary concern in the name and style of “M/s.Kairali Steels Traders”.
The reason for issuing such a notice to the appellant was on the ground that
the appellant has purchased a property, which was offered as security to the
extent of Rs.50,000/-, when the said Proprietary concern secured registration
under the provisions of the Tamil Nadu General Sales Tax Act, 1959
(“TNGST Act” for brevity).
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W.A.No.2458 of 2021
4.The appellant contended that he is the bona fide purchaser of the
property for a sale consideration of Rs.13,50,000/- and the sale deed dated
06.01.2014 was executed and registered by Mr.K.P.Kesavan, the father of the
Proprietor of M/s.Kairali Steels Traders, who was the assessee in default. The
appellant claimed protection under the provisions of Section 24-A of the
TNGST Act on the ground that he is the bona fide purchaser and he cannot be
compelled to pay the arrears of Sales Tax payable by M/s.Kairali Steels
Traders.
5.At this juncture, it is worthwhile to take note of the decision of this
Court in the case of the Noor M.Saied v. Commercial Tax Officer, Chennai
[2018 (9) G.S.T.L. 63], wherein, it was held that a bona fide purchaser,
without notice of the charge under Section 24(2) of the TNGST Act, action
cannot be taken against the property for recovery for Sales Tax arrears. The
operative portion of the judgment reads as follows :
“2.In the case of Deputy Commercial Tax Officer,
Thudiyalur Assessment Circle, Coimbatore and another v. R.K.
Streets reported in (1998) 101 STC 161, the Court considered
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W.A.No.2458 of 2021
somewhat a similar case and held that the respondent therein is
a bona fide purchaser without notice of charge under Section
24(2) of the Tamil Nadu General Sales Tax Act, 1959 and
therefore, the property cannot be proceeded against for the
recovery of sales tax arrears. In the case on hand, there is no
charge on the property and there is no doubt about the bona
fide of the purchase made by the petitioner, because it is TIIC
who brought the property for sale. In Raghuvar (India) Limited
v. Deputy Commissioner (Appeals) I, Commercial Taxes,
Jaipur reported in (2006) 144 STC 331, the Court considered
the case of similar purchaser who had purchased the property
without notice of Sales Tax arrears and it was held that the
property, at the hands of the purchaser, was free of charge and
it was not open to the Sales Ta x Department to enforce the
liability of the defaulter against the purchaser. In D. Senthii
Kumar and others v. Commercial Tax Officer, Erode and
another reported in MANU/TN/2377/2006 : (2006) 148 STC
204 (Mad. ), the Hon'ble Division Bench has held that the
appellants therein, as transferee for the properties for valuable
consideration w ithout the notice of the charge are entitled for
direction as mentioned above. The petitioner's case is on a
better footing as there was no charge on the property. In
Rukmani v. The Deputy Commercial Tax Officer (MANU/
TN/2674/ 2012 : CDJ 2012 MHC 5515), a similar view was
taken and it wa~ held that there is no material placed before
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W.A.No.2458 of 2021
them to prove that steps have been taken under the provisions
of the Revenue Recovery Act against the delinquent or the
subsequent first purchaser; and therefore the petitioner therein
cannot be penalized. The above decisions are fully in support of
the petitioner. Thus, for all the above reasons, this Court is of
the firm view that the impugned notice is unsustainable in law.
Accordingly, the writ petition is allowed and impugned notice
dated 23-1-2006 is set aside. However, this will not prejudice
the right of the Department to proceed against M/ s. Karpaga
Electronics (P) Ltd . No costs. Consequently, the connected
miscellaneous petition is closed.”
6.The same decision has been rendered by this Court in the case of
Rukmani v. Deputy Commercial Tax Officer-I [(2013) 62 VST 369 (Mad)].
In fact, the judgment of the Hon'ble Division Bench of this Court in the case of
D.Senthil Kumar and others v. Commercial Tax Officer, Erode reported in
(2006) 3 L.W.627 would also support the case of the appellant that the
property cannot be proceeded against, as the appellant is a bona fide
purchaser.
7.The learned Single Bench accepted the case of the appellant and held
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W.A.No.2458 of 2021
that there is no reason to sustain the recovery notice dated 13.07.2015 and
accordingly, set aside the same, however, directed the appellant to pay a sum
of Rs.50,000/- to the Department. This direction is on the ground that the said
property was offered by the 2nd respondent as a security seeking to obtain
registration under the provisions of the TNGST Act. The learned Writ Court
having held that the appellant is a bona fide purchaser and entitled to the
defence under Section 24-A, the direction could not have been issued to the
appellant to pay a sum of Rs.50,000/-. This is more so, because, the appellant
can never be treated as the assessee in default. Therefore, to that extent, the
order passed by the learned Writ Court warrants interference.
8.This Writ Appeal is partly allowed and the order and direction issued
by the learned Single Bench insofar it directs the appellant to pay a sum of
Rs.50,000/- to the 1st respondent, is set aside. No costs. Consequently,
connected Miscellaneous Petition is closed.
(T.S.S., J.) (S.S.K., J.)
mkn 24.09.2021
Internet : Yes
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W.A.No.2458 of 2021
Index : Yes / No
Speaking order / Nonspeaking order
To
The Commercial Tax Officer,
Tondiarpet Assessment Circle,
Chennai – 600 081.
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W.A.No.2458 of 2021
T.S. SIVAGNANAM, J.
and
SATHI KUMAR SUKUMARA KURUP, J.
mkn
W.A.No.2458 of 2021
24.09.2021
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