The Madras High Court while directing Authority to enforce charge over subject property for recovery of arrears of tax held that the property can not be sold during the pendency of the GST proceedings.
The respondent authority had furnished particulars of the attachment made in the subject property.
Thiru.T.C.Wilson (late), proprietor of M/s.New Nelson Watch Company, was in arrears of sales tax for the assessment year 1996-97 under TNGST Act, 1959, to the tune of Rs.1,75,830. The order levying tax and penalty was communicated to the assessee.
In this background, the assessee had sold the subject property to the petitioner and the petitioner had subsequently settled the property in favour of her son. The encumbrance of the charge over the subject property was recorded in the registers of the Registration Department.
The petitioner submitted that he is a bona fide purchaser, who had purchased the property prior to the encumbrance being created and therefore is entitled to protection from the charge created over the subject property.
According to the petitioner, there was no encumbrance registered in the Sub-Registrar Office on the date when the petitioner had purchased the subject property.
On the other hand, the respondent authority contended that the encumbrance made by the assessee in favour of the petitioner as well as the subsequent encumbrance to her son, was with an intention to defraud the revenue and in view of Section 24-A of The Tamil Nadu General Sales Tax Act, 1959, the sale itself is void.
The single judge bench of Justice M.S. Ramesh noted that as per the provision, any transfer of title or creation of a charge by the dealer with an intention to defraud the revenue, is deemed to be void.
The exceptions to such a provision is only when the charge or transfer is made for adequate consideration and without notice of the pendency of the tax proceedings or when the previous permission of the assessing authority is obtained. The intention of the dealer to defraud the revenue, is the qualifying clause, in order to render the transfer of title or charge void.
The court said that respondent authorities are at liberty to enforce the charge over the subject property for recovery of the arrears of tax due from the assessee, namely Thiru.T.C.Wilson (late), proprietor of M/s. New Nelson Watch Company, in a manner known to law.
However, the court also suggested that if the petitioner is of the view that they are willing to settle the entire arrears together with penalty to the department, liberty is hereby granted to the petitioner to approach the first respondent herein, together with the entire sales tax arrears and penalty and applicable interest, along with a representation.
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