Deputy Commercial Tax Officer and The District Revenue Officer, Thanjavur vs Azha Kumari

Ramanujam, J.—This writ appeal is directed against the decision of Mohan, J., quashing the revenue recovery proceedings initiated by the

appellants for recovery of the tax due, in enforcement of the charge created over the properties of one M.A. Swamy, which properties he had sold

to the respondent. The said M.A. Swamy was the proprietor of Juno Fancy Circulation and he was in arrears of sales tax under the Tamil Nadu

General Sales Tax Act and the Central Sales Tax Act, to the tune of Rs. 7,223.77 for the assessment year 1966-67 and Rs. 3,634-01 for the

assessment year 1967-63. The said Swamy, without discharging his liability towards sates tax, sold 21 acres 79 cents of nanja and punja lands in

Koothanur village in Nannilam taluk to the respondent herein by a registered sale deed, dated 28th June, 1968. For non-payment of the sales tax

by M.A. Swamy, proceedings were initiated under the Revenue Recovery Act, for sale of his properties and for realisation of the sales tax dues.

Those proceedings were resisted by the respondent on the ground that she being not a defaulter, the properties purchased by her from M.A.

Swamy as early as 28th June, 1968 cannot be proceeded against. Since the appellants proceeded to bring the lands purchased by the respondent

for sale under the Revenue Recovery Act for realising the sales tax arrears, she came forward with a writ petition before this Court seeking a writ

of certiorari to quash the revenue recovery proceedings. The said petition was opposed by the appellants contending that though the respondent

was not in fact a defaulter, under S. 24(1) of the Tamil Nadu General Sales Tax Act, 1959, once an assessment is made and the notice of

assessment served on the asses see, and the amount of tax remains unpaid, a statutory charge under S. 24(1) of the Act attaches itself to the

properties owned by the defaulter and as such, notwithstanding the sale said to have been executed by the defaulter to the respondent, the

statutory charge can be enforced for realising the sales tax arrears. Mohan, J. was not, however, inclined to accept the contention of the revenue

and held that since the respondent is not a defaulter the properties purchased by her from the defaulter cannot be proceeded against and that S.

24(2) of the Tamil Nadu General Sales Tax Act cannot be invoked as against the respondent who is not a defaulter. In support of the said view,

the learned Judge relied on the decision of this Court in P. Kannamba and Others Vs. The Board of Revenue (C.T.) and Another, The

proceedings under the Revenue Recovery Act initiated against the properties purchased by the respondent have thus been quashed. It is against

the said order of Mohan, J. this writ appeal has been filed.

The learned Government Pleader brings to our notice the provision of S. 24(1) of the Act, which specifically creates a charge on the properties

of the defaulter, and states that the view taken by the learned Judge that the provision of S. 24(2) cannot be invoked as against a transferee from a

defaulter since the transferee is not a defaulter himself, cannot be legally sustained. The learned Government Pleader has relied in support of his

submission, on a decision of Mohan, J. rendered subsequently in relation to the same question. That is a decision of the same learned Judge

rendered in 1978 in Second Appeal No. 278 of 1977 reported in Balakrishna Goenka v. State of Tamil Nadu and another 1981-2-S.T.C. 43. In

that case, the facts were exactly similar to those in the present case. There also the assessee had transferred some of the properties to another and

the sales tax arrears due by the transferor before the transfer was made were sought to be recovered from the properties sold away by the

defaulter. When the validity of those proceedings were challenged by the transferees, the learned Judge had upheld the revenue recovery

proceedings initiated by the revenue. Before the learned Judge, in that case, it was contended that the transferee was a bona fide purchaser for

value without notice of the sales tax liability and therefore, he could not be proceeded against. While rejecting that contention, the learned Judge

observed that as per S. 24(1) of the Tamil Nadu General Sales Tax Act, the tax shall be paid within 21 days from the date of service of the notice

of assessment, that, if default was made in paying the tax according to the notice of assessment, the whole of the amount outstanding on the date of

the default shall become immediately due and payable and shall be a charge on the properties of the person or persons liable to pay the tax under

the Act, that such arrears are to be recovered as if they were arrears of land revenue, and that once a valid demand had been made on the

defaulter and that tax had remained unpaid for a period of 21 days, after the notice of assessment had been served, the properties of the defaulter

were made subject to a charge and that no question of bona fide thereafter would arise. We are of the view that the subsequent decision of the

learned Judge lays down the correct legal position and that the decision rendered in this case cannot be legally sustained. In this case, as already

stated, the learned Judge has proceeded on the basis of S. 24(2) of the Act without reference to the charge created under S. 24(1). According to

the learned Judge, S. 24(2) merely enables the Revenue to recover the arrears of tax under the Revenue Recovery Act and that provision will not

enable the Revenue to proceed to recover the tax due from a person who is not a defaulter. The attention of the learned Judge had not been drawn

to S. 24(1) which specifically creates a charge for the arrears of sales tax on the properties of the defaulter. If the tax assessed remained unpaid for

a period of 21 days after the notice of demand had been served, that charge can be enforced by invoking the provisions of the Revenue Recovery

Act under S. 24(2) of the Tamil Nadu General Sales Tax Act. Since the learned Judge has not considered the scope of S. 24(1) but proceeded

only on the basis of S. 24(2) we are not inclined to agree with the view expressed by the learned Judge that arrears of sales tax cannot be

recovered from the properties sold by the assessee after a charge has fastened it self on the properties of the defaulter, on his default in paying the

arrears of sales tax within the time stipulated by S. 24(1). The decision of Ramakrishnan, J., in Kannamba v. Board of Revenue referred to by the

learned Judge is not quite relevant, for, in that case, the only question decided was as to whether a transferee from the assessee would come within

the expression ''defaulter'' and the learned Judge held in that case that even if the arrears related to a period anterior to the transfer, the transferee

could never become a defaulter in respect of the amount of sales tax due by the transferor. It is unnecessary to go into that question, for, as a result

of S. 24(1), a charge was created over the properties for the sales tax amount due by the transferor even before the transfer was actually effected

and the said charge can be enforced against the properties transferred, which are in the hands of the transferee. Thus, even if the transferee is not

taken to be a defaulter, the properties in his hands can be proceeded against under the provisions of the Revenue Recovery Act, in view of the

statutory provision in S. 24(1) read with S. 24(2). In this view of the matter, the appeal is allowed and the order of the learned Judge quashing the

revenue recovery proceedings is set aside. There will be no order as to costs.