The Gujarat High Court has held that as the property had already been purchased by the petitioners, no charge could be entered on the property for alleged dues of the erstwhile owners.
The ruling was made by a division bench constituting of Justice Harsha Devani and Justice Sangeeta K. Vishen, in the case of Chokshi Texlen Pvt. Ltd v. State of Gujarat.
The petitioner was a private limited company and is engaged in the manufacture and sale of textile articles. The petitioner purchased the subject property by way of a registered sale deed and also obtained a title clearance certificate, which revealed that there was no encumbrance on the subject property. Thereafter, the petitioners came to know that by an order dated 9.9.2011, the respondent authorities had created a charge and attached the subject property for alleged dues of the erstwhile owner of the property. Prior to the purchase of the property by the petitioners, no charge had been registered by the respondents in respect of the subject property and, the attachment came to be made subsequent to the purchase of the subject property.
The petitioner argued before the Court that since the property had already been purchased by the petitioners, no charge could be entered on the property for alleged dues of the erstwhile owners. The petitioner further pointed that the dues of the erstwhile owners have arisen after the subject property was purchased by the petitioners and hence, it is not permissible for the respondents to attach the subject property and create any charge over it.
Meanwhile, the Revenue argued that the erstwhile owner sold its property with a view to defraud the Government revenue. Hence, the transaction between erstwhile owner and the petitioners is void as the transaction is with a view to defraud the Government exchequer, under Section 47 of the GVAT Act.
The court however while analysis the case noted that “the petitioners are not liable to pay any tax, interest or penalty to the Government and therefore, would not fall within the ambit of the expression “any other person” as contemplated in section 48 of the GVAT Act”.
The Gujarat High Court observing that the subject property was transferred in favour of the petitioner, prior to the order of attachment and creation of a charge thereon concluded that as on the date when the subject property came to be attached and a charge came to be created thereon, it did not belong to the erstwhile owner. The court hence concluded that the “provisions of section 48 of the GVAT Act, therefore, would clearly not be attracted in the facts of the present case”
The court also pointed out that, “if it is the case of the department that the transfer in favour of the petitioner is void on the ground that Varun Filaments Private Limited has transferred the same to the petitioner with the intention of defrauding the Government revenue, then the respondents are required to approach the civil court for a declaration that the transfer is void”.
The court from the analysis hence concluded that the only recourse available to the VAT authority under section 47 of the Act is to approach the civil court to annul the transfer on the ground that it was made with an intention to defraud the Government.
Subscribe Taxscan Premium to view the Judgment
