Proceedings against Purchaser of Defaulting Dealers’ Property is Invalid as the Dept had No Charge over the Property at the time of Purchase: Madras HC [Read Order]

In Noor M.Saied v. The Commercial Tax Officer, the Madras High Court quashed the proceedings initiated by the Commercial tax department against the purchaser of a defaulting dealer’s property holding that the department had no Sales Tax arrears and no charge over such property at the time when the said purchase was effected.

In the instant case, the petitioner purchased a property from Tamilnadu Industrial Investment Corporation Ltd., (TIIC), who brought the property for sale, which property was initially allotted to M/s.Karpaga Electronics (P) Ltd., and who had defaulted in repayment to TIIC. After the sale was effected, the sales tax department sent a notice to the TIIC stating that M/s.Karpaga Electronics (P) Ltd. is in arrears of Sales Tax. After realizing the fact that the property was sold to the petitioner, the department proceeded against the petitioner.

Aggrieved by the order, the petitioner approached the High Court through a writ petition.

While allowing the petition, Justice T S Sivagnanam accepted the contentions of the assessee that the petitioner has purchased the property for valuable consideration and in the absence of charge over the property by the Sales Tax Department, the petitioner cannot be made liable to pay alleged arrears of Sales Tax for the defaulting dealer and for such reason, the petitioner cannot be denied registration under the provisions of the Act when the petitioner files an application for registration.”

To Read the full text of the Order CLICK HERE