Rukmani Vs Deputy Commercial Tax Officer I

@JUDGMENTTAG-ORDER

S. Manikumar, J.@mdashChallenge in this writ petition is to a distraint order dated February 13, 2006 passed by the Deputy Commercial Tax Officer I, Pattukkottai I, Assessment Circle, Pattukottai, Thanjavur District, the respondent herein. Facts of the case, in a nutshell, as stated in the supporting affidavit, are that in the year 2004, the petitioner purchased 72 square feet and 10 cents of 0.04.0 hectares in S.F. No. 15/6 and 468 square feet and 10 cents of 0.04.0 hectares in Survey No. 15/7, for a valuable consideration of a sum of Rs. 4,00,000, from one Mr. S. Prabhakaran, (Minor), S/o. N.K. Sivasamy, by way of a registered sale deed in the office of the Sub-Registrar, Peravoorani. Previously, the aforesaid properties have been purchased by the said Mr. S. Prabhakaran, from one Mr. R. Thirupathy, by way of a registered sale deed, duly registered in the office of the Sub-Registrar, Peravoorani, as document No. 242 of 1998.

2. According to the petitioner, both the previous vendors have been enjoying the property without any interruption from any quarters. After the purchase of the aforesaid property in the year 2004, from the said Mr. S. Prabhakaran, the petitioner has been in possession and enjoyment of the property. She had let out some portion of the said property for commercial purpose. While so, the Deputy Commercial Tax Officer I, Pattukkottai I, Assessment Circle, Pattukottai, Thanjavur District, the respondent herein, issued a notice on December 1, 2005, directing the petitioner to pay a sum of Rs. 82,593, being arrears of tax payable by the said Mr. R. Thirupathy, S/o. Ramasamy Chettiar, a dealer, who had been running business, in the name and style of "Ramu Steel Furniture" at Pudukkottai.

3. In the aforesaid notice, the respondent has further stated that the properties of the said Mr. R. Thirupathy have been purchased by the petitioner, without obtaining no-due certificate from the respondent herein, and therefore, she must take full responsibility for the arrears of tax, payable by the said Mr. R. Thirupathy, S/o. Ramasamy Chettiar, otherwise, appropriate action would be taken, under the provisions of the Revenue Recovery Act. Similar notice dated February 2, 2006 was also issued. In response to the aforesaid notices, the petitioner, through her reply dated February 6, 2006, explained to the respondent that she is a bona fide purchaser of the property from the said Mr. S. Prabhakaran in the year 2004 and that she was not aware of any of the proceedings or arrears of tax payable by the dealer, the said Mr. R. Thirupathy, S/o. Ramasamy Chettiar. She further submitted that he had purchased the said property, after due verification of encumbrance details in the office of the Sub-Registrar, Peravoorani and on the basis of bona fide purchaser of the property, she requested the respondent to drop further action. It is the grievance of the petitioner that without adverting to the aforesaid explanation offered by the petitioner, the respondent has proceeded to pass orders u/s 8 of the Revenue Recovery Act.

4. Assailing the correctness of the order dated February 13, 2006 and by inviting attention of this court to proviso to section 24A of the Tamil Nadu General Sales Tax Act, 1959, (for brevity, "the Act"), Mr. K. Soundararajan, learned counsel for the petitioner, submitted that no doubt that during the pendency of any proceedings under the Act or after the completion thereof, any dealer against whom, there is a charge, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, with an intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise, but a sale or transfer shall not be void, if it is made for adequate consideration and without notice of the pendency of such proceeding under the Act or, as the case may be, without notice of such tax or other sum payable by the dealer.

5. The learned counsel for the petitioner further submitted that the property, which is now sought to be attached, is for the arrears of tax, payable for the assessment years 1994-1995 and 1995-96, respectively, by the said Mr. R. Thirupathy, S/o. Ramasamy Chettiar, who had been running a business in the name and style of "Ramu Steel Furniture" at Pudukkottai. According to the learned counsel, the property had passed on to Mr. S. Prabhakaran in the year 1998, and after six years, the petitioner has purchased the property in the year 2004 from Mr. S. Prabhakaran and that she was totally unaware of the pendency of any of the proceedings under the Sales Tax Act and that she was a bona fide purchaser of the aforesaid property. In such circumstances, the transfer of the property effected in her name cannot be set at naught, and therefore, the respondent has committed an error in passing a distraint order, u/s 8 of the Revenue Recovery Act, when a bona fide purchaser is protected under the proviso to section 24A of the Act.

6. Placing reliance on the judgments of the Division Bench in Deputy Commercial Tax Officer, Thudiyalu Assessment Circle, Coimbatore and another Vs. R.K. Steels, ) and D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar, learned counsel for the petitioner submitted that when the writ petitioner had no actual or constructive notice of the charge, prior to the transfer of the property, she should be treated as a bona fide purchaser and under such circumstances, it is not open to the Commercial Tax Officer to fasten any liability on the petitioner to pay tax.

7. Distinguishing an unreported judgment of the honorable First Bench of this court made in W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer III), rendered on the basis of an earlier judgment in N. Padma Coffee Works v. Commercial Tax Officer, Rockfort Assmt. Circle, Tricky reported in [1999] 114 STC 494 (TNTST), learned counsel for the petitioner submitted that when an issue, as to whether a bona fide purchaser of the property has to file any suit for declaration to establish his/her bona fides and whether he/she had any constructive notice of the charge prior to the purchase of the property, came up for consideration in D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar, , the honorable First Bench, relying on a case, arising out of the Karnataka Sales Tax Act, 1957 in State of Karnataka and Another Vs. Shreyas Papers Pvt. Ltd. and Others, , has approved the decision rendered in Deputy Commercial Tax Officer, Thudiyalu Assessment Circle, Coimbatore and another Vs. R.K. Steels, and therefore, applying the dictum in D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar, to the facts of this case, he submitted that the petitioner, who had purchased the property, from the subsequent purchaser in the year 2004, after the first sale of the property, is a bona fide purchaser and in the light of the abovesaid judgment, that there is no need to institute any suit before the civil court to establish her bona fides. Learned counsel for the petitioner further submitted that if the subsequent purchaser had no actual or constructive notice of the charge, prior to the transfer, of the property, there is no need to institute any suit and establish her right. In this context, he referred to the relevant passages from D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar,

8. Inviting attention of this court to the averments made in the counter-affidavit filed by the Deputy Commercial Tax Officer, Pattukottai I Assessment Circle, Pattukottai, the first respondent herein, learned counsel for the petitioner submitted that though the said authority has contended that a dealer, on coming to know of the fact that the Revenue Recovery Act could be proceeded with for the arrears of tax, if such a dealer, with an intention to defraud the revenue, had sold the properties to the said Mr. S. Prabhakaran, the said authority has not made any averments denying the bona fide purchase made by the petitioner in the year 2004, after six long years, after the first sale. According to the learned counsel, insofar as the purchase made by the petitioner is concerned, it is a bona fide. In the light of the above decisions coupled with the statutory protection granted under the proviso to section 24A of the Act, learned counsel for the petitioner submitted that the impugned distraint order issued u/s 8 of the Revenue Recovery Act has to be set aside.

9. On the basis of the counter-affidavit filed by the Deputy Commercial Tax Officer I, Pattukottai I Assessment Circle, Pattukottai, the first respondent herein, Mr. S. Kumar, learned Additional Government Pleader, submitted that the dealer Mr. R. Thirupathy, S/o. Ramasamy Chettiar, did business in the name and style of "Ramu Steel Furniture" at T.S. No. 3083, East Main Street, Pudukkottai. He was in arrears of sales tax to the tune of Rs. 82,593 for the assessment years 1994-95 and 1995-96, respectively. Therefore, to realise the arrears, demand notices were also duly served on the petitioner. To recover the aforesaid arrears of sales tax, action was initiated under the Revenue Recovery Act, by attaching the immovable properties, by issuing a notice in form IV, on February 13, 2006 and that the said notice was duly served on the petitioner on February 27, 2006.

10. The learned Additional Government Pleader further submitted that earlier, being aggrieved by the assessment order in respect of the year 1994-95, the dealer, Mr. R. Thirupathy, has filed an appeal before the Appellate Assistant Commissioner in A.P. No. 486 of 1995. By order dated October 25, 1996, the aforesaid order of assessment was modified by granting a relief, on a turnover of Rs. 1,38,420. The said order has become final on February 28, 1997 and it was served on the dealer on April 9, 1997. Likewise, the assessment for the year 1995-96 was also finalised on March 25, 1998 and that the order was also served on the dealer on March 26, 1998. Knowing fully well that action would be initiated under the Revenue Recovery Act, to recover the arrears with an intention to defraud the revenue, the said Mr. R. Thirupathy has sold the properties to Mr. S. Prabhakaran (Minor), S/o. N.K. Sivasamy, Kazhanivasal Village, Peravoorani Taluk, on May 13, 1998. Subsequently, the purchaser-Mr. S. Prabhakaran has also sold the properties to the writ petitioner on March 31, 2004. Placing reliance on the unreported judgment of the honourable First Bench made in W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer), learned Additional Government Pleader submitted that since the property has been sold after the accrual of the arrears and that a charge has been created u/s 24 of the Act, the respondent is empowered to recover the arrears of tax by attaching the properties. According to him, there is no jurisdictional error warranting interference, at the hands of this court.

11. Heard the learned counsel for the parties and perused the materials available on record.

12. Before adverting to the rival submissions, this court deems it fit to extract sections 24 and 24A of the Act, which read as follows:

24. Payment and recovery of tax.--(1) Save as otherwise provided for in sub-section (2) of section 13, the tax assessed or has become payable under this Act from a dealer or person and any other amount due from him under this Act shall be paid in such manner and in such instalments, if any and within such time as may be specified in the notice of assessment, not being less than twenty-one days from the date of service of the notice. The tax under sub-section (2) of section 13 shall be paid without any notice of demand. In default of such payments the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act.

24A. Transfers to defraud revenue void.--Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise:

Provided that, such charge or transfer shall not be void, if it is made,--

(i) for adequate consideration and without notice of the pendency of such proceeding under this Act or, as the case may be, without notice of such tax or other sum payable by the dealer; or

(ii) with the previous permission of the assessing authority.

13. The issue to be considered is when a bona fide purchaser of a property would be protected from the proceedings under the Revenue Recovery Act, u/s 24A of the Act. In N. Padma Coffee Works'' case [1999] 114 STC 494 (TNTST), the Tamil Nadu Special Taxation Tribunal, Chennai, considered a claim made by a subsequent purchaser, for protection u/s 24A of the Act. After considering section 24A of the Act, section 3 of the Transfer of Property Act, 1882, section 101 of the Indian Evidence Act, 1872, the earlier decisions of this court, as well as the decision of the honourable Supreme Court inAhmedabad Municipal Corporation of the The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai, , Chogmal Bhandari and Others Vs. Deputy Commercial Tax Officer, II Division, Kurnool, and Deputy Commercial Tax Officer, Thudiyalu Assessment Circle, Coimbatore and another Vs. R.K. Steels, the Tamil Nadu Special Taxation Tribunal, Chennai, at paragraph Nos. 2, 4 and 6 held as follows (pages 96-98 in 114 STC):

2. It is no doubt true that an honest and a bona fide purchaser who had no knowledge about the encumbrance of the tax liability of the original owner is protected under the proviso (i) of section 24A of the Act which reads as follows:

24A. Transfers to defraud revenue void.--Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates, a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise:

Provided that, such charge or transfer shall not be void, if it is made,--

(i) for adequate consideration and without notice of the pendency of such proceeding under this Act or, as the case may be, without notice of such tax or other sum payable by the dealer; or

(ii) with the previous permission of the assessing authority.

. . .

4. u/s 19 of the Tamil Nadu General Sales Tax Act, 1959, (hereinafter referred to as, ''the Act''), when the firm is liable to pay tax under the Act, the firm, and each of the partners of the firm shall be jointly and severally liable for such tax. Under this section, for the liability of the firm, the partners also are made liable and therefore their properties cannot escape for the tax liability. When such a person has effected transfer of his property during the pendency of the proceedings under the Act or after the completion thereof, it cannot be stated that he did not intend to evade the tax and therefore if the sale was to defraud the Revenue, the sale will be ab initio void. But, at the same time, the Legislature has intended to protect an honest person who had purchased the property from such a seller, if he had not colluded with the seller and he had no notice of the liability of the vendor. Under the proviso (i) to section 24A of the Act, not only adequate consideration, but also the want of notice, are the two ingredients to safeguard the purchaser.

. . .

6. A reading of section 3 of the Transfer of Property Act, 1882, leads to the conclusion that, not only a willful abstention from an enquiry which a person ought to have made, but the gross negligence to make enquiry also would amount to notice of a fact to him. When the prudence of a person requires to make enquiry, but due to his own negligence he failed to make enquiry, he falls in the category of a person, with notice. A purchaser of the property when claims the transaction to be bona fide without notice, the yardstick to be applied for the ''notice'' is given in section 3 of the Transfer of Property Act, 1882 and only by the application of this provision, a purchaser who seeks protection u/s 24A of the Tamil Nadu General Sales Tax Act, is to be identified, whether he is a purchaser for value without notice. The necessity of the purchase, the intention of the transfer, the relationship between the vendee and vendor are all vital factors to find out the reasonableness of the person in purchasing the property. Sometimes unexplained secrecy or the haste in the transactions may also throw some light as to the bona fide or mala fide. To decide whether a transaction was genuine or bona fide or mala fide, all facts relating to the conduct of the parties to the transaction have to be weighed as a whole. Such enquiry on disputed facts is not possible in the proceedings under article 226 of the Constitution of India, because the enquiry under these proceedings will be on admitted facts or on the question of law. The controversies as to the facts can be proved only by evidence. For the mere assertions in the affidavit of these petitioners that they are bona fide purchasers, the court or Tribunal cannot simply nod its head to give the relief as prayed for. The petitioners in these proceedings have not disputed the liability of their vendors to pay the sales tax, even at the time of the sales, but claim protection under the exception clause, for which the parameters of section 3 of the Transfer of Property Act, 1882, have to be applied. This can be done only in a regular suit where there is scope for the evidence to prove the conduct of the parties in making the enquiries with prudence, or utter negligence and the real intention in their mind. Every purchaser from the assessee is naturally interested to protect the property and will claim to be a bona fide purchaser. For the sake of their claim, the court cannot approve the transaction as a bona fide sale.

14. N. Padma Coffee Works'' case [1999] 114 STC 494 (TNTST), has been relied on by a honourable judge of this court, while dismissing a Writ Petition (MD). No. 1277 of 2005, dated February 28, 2005 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer III, Thoothukudi). The appeal preferred by the subsequent purchaser in W.A. (MD). No. 130 of 2005, has been dismissed on February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer). However, in D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar, , the First Bench of this court, presided over by the honourable Chief Justice, who was also a party to the unreported judgment in W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer), has considered a similar issue, as to whether a purchaser of a property in execution of the recovery certificate issued by the Debts Recovery Tribunal and who was not aware of the arrears of sales tax dues under the Act, can claim exemption from the action for recovery of the said arrears and whether a charge can be enforced against the transferee, if he had no notice thereof and whether the requirement of such notice had been waived, if there is a bona fide purchase.

15. In W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer), decided subsequently, there is no reference to the earlier decision of the honourable First Bench in D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar, . Probably, the parties to W.A. (MD). No. 130 of 2005, dated February 7, 2008 (R. Balasubramaniam v. Additional Deputy Commercial Tax Officer), would not have brought to the notice of the earlier decision to the Bench.

16. When the correctness of a notice of recovery issued to a subsequent purchaser came up for consideration before the Division Bench in D. Senthil Kumar''s case, reported in [2006] 148 STC 204 (Mad), it has been contended, inter alia, that the appellant therein was a bona fide purchaser for valuable consideration, and hence, his case was covered within the exempted category, as provided u/s 24A of the Act. The appellant has also contended that no encumbrance could be created, in view of the fact that the property had already been transferred in his favour, and hence, the question of creating any encumbrance in respect of the same does not arise. Reference has also been made to the Transfer of Property Act, 1882 and the appellant has also submitted that a charge created under the Tamil Nadu General Sales Tax Act, 1959, cannot bind a bona fide purchaser for valuable consideration without notice and in the absence of any provision requiring to dispense with such a notice, under the Tamil Nadu General Sales Tax Act, 1959, it would not be permissible for the sales tax authorities to proceed against the transferee, who had purchased the property for valuable consideration, without notice.

17. In the reported case, per contra, learned Special Government Pleader for the Department has submitted that since a charge over the property of the defaulting firm had been created under the Tamil Nadu General Sales Tax Act, 1959, the appellant, as transferee of the said property, has held the property subject to that charge, and therefore, the Department can take appropriate action.

18. While adverting to the aforesaid rival submissions, in D. Senthil Kumar''s case reported in [2006] 148 STC 204 (Mad), the honourable Division Bench, at paragraph No. 8, held as follows (pages 208-211 in 148 STC):

8. The short question is whether the charge created on a property under the TNGST Act is enforceable against a transferee of such property. The expression ''charge'' is not defined by the TNGST Act. However, this concept is well-known in law of transfer of property and has been defined by section 100 of the Transfer of Property Act, wherein the word ''charge'' is defined as follows:

Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simply mortgage shall, so far as may be, apply to such charge.

Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.

(emphasis Here italicised supplied).

As the section itself indicates, a charge may not be enforced against a transferee if he/she has had no notice of the same, unless by law, the requirement of such notice had been waived.

The provisions of section 100 of the Transfer of Property Act fell for consideration of the Supreme Court in Ahmedabad Municipal Corporation of the The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai, . In that case, the respondent was in arrears of property tax, due under the Bombay Provincial Municipal Corporation Act, 1949. Consequently, the Municipal Corporation created a charge over the property of the defaulter. However, the property was sold in execution of a mortgage decree. When the Municipal Corporation purported to exercise their charge over the property, the purchaser in court auction filed a suit for a declaration that he was the owner of the property and that the arrears of municipal taxes due by the transferor were not recoverable from him by proceeding against the property purchased in the auction. In the appeal before the Supreme Court, the Municipal Corporation''s main argument was that where the local law provided for the creation of a charge against a property for which municipal taxes were due, transferees of such properties were imputed with constructive knowledge of any charge created against the properties that they had purchased. This argument was, however, rejected. The court held that while constructive notice was sufficient to satisfy the notice in the proviso to section 100 of the Transfer of Property Act, whether the transferee had constructive notice of the charge had to be determined on the facts and circumstances of the case. In other words, the Supreme Court held that there could be no fixed presumption as to the transferee having constructive notice of the charge against the property.

The principle laid down in The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai, has been applied in a sales tax case arising under the Karnataka Sales Tax Act, 1957 in State of Karnataka and Another Vs. Shreyas Papers Pvt. Ltd. and Others, There, following the decision in The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai, the Supreme Court held as follows (paras 18 and 19 in 144 STC):

22. In the present case, firstly, no provision of law has been cited before us that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same. It remains to be seen, therefore, if in the facts of the present case, the first respondent had notice--actual or constructive--of the charge. At the outset, in the advertisement/notice dated March 17, 1992, issued by the Corporation, mention is only made of the sale of the defaulting company''s assets and there is no indication, whatsoever, of any sales tax arrears. Further, the bid offer made on behalf of the first respondent on June 5, 1992 specifically excludes any statutory liabilities, including sales tax. This offer was accepted by the Corporation on July 15, 1992. Even at that stage, there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreement dated August 12, 1992 in which a specific clause was inserted that the first respondent would be liable to pay all property taxes, other taxes, electricity bills, water taxes and rents from the date of the agreement (i.e., August 12, 1992). For the first time, by letter dated January 8, 1993 of the second appellant to the Mandal Panchayat, Aloor Taluk, the issue of sales tax dues of the defaulting company was brought to the surface. This is further borne out by the correspondence between the first respondent and the Corporation. Thus, it is evident that the first respondent had no actual notice of the charge prior to the transfer. As to whether the first respondent had constructive notice of the charge, no substantive argument on this issue was made, either before the High Court or at any rate before us. Hence, we cannot hold that the first respondent had constructive notice of the charge.

23. In these circumstances, we are of the view that the first respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent charge on the property. This would, therefore, attract the principle laid down by this court in The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai, which is also embodied in the proviso to section 100 of the T.P. Act. Thus, the property in the hands of the first respondent was free of the charge and it is not open to the appellants to enforce the liabilities of the defaulting company in this manner against the first respondent.

In State of Karnataka and Another Vs. Shreyas Papers Pvt. Ltd. and Others, , the Supreme Court also referred to the decision of a Division Bench of this court in Deputy Commercial Tax Officer, Thudiyalu Assessment Circle, Coimbatore and another Vs. R.K. Steels, where this very question arose u/s 24 of the TNGST Act. In that case, the assessee-firm was in arrears of tax from the assessment years 1976-77 to 1979-80. The assessee-firm was closed on October 19, 1979. Thereafter, the land belonging to the firm was sold by one of the partners of the firm on December 30, 1981. The purchaser had no notice of the charge over the property by virtue of sales tax dues. The purchaser challenged the form 7 notice issued under the Tamil Nadu Revenue Recovery Rules on the ground that he is a bona fide purchaser without notice of charge under the TNGST Act. The Division Bench held that no provision is made in the TNGST Act contrary to section 100 of the Transfer of Property Act and therefore, a bona fide purchaser for consideration without notice is protected.

19. It is a well-settled, legal position that a judgment rendered by a court, taking into consideration of the later judgment of the Supreme Court, on the same issue is binding. Later judgment of the Supreme Court, on the point of law, would prevail over the former. One of the issues considered by another Division Bench of this court in A. Senthil Kumar and Another Vs. Assistant Commissioner (CT) and Others, was whether the arrears of sales tax would prevail upon the claim of the secured debtors, like a bank, on the basis of the charge over the property and if the purchaser establishes that he is a bona fide purchaser, without notice, in a valid sale, under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for brevity, "the SARFAESI Act"), whether the property can still be brought for public auction, for recovery of sales tax arrears, due to the Government. In the above reported A. Senthil Kumar and Another Vs. Assistant Commissioner (CT) and Others, , the honourable Division Bench has held as follows:

. . . The tax due would be a charge as per section 24(1) of the Act. Section 24(1) creates charge whereas section 24(2) gives preference/priority to the tax arrears over other claims except the claim of the Land Development Bank over property mortgaged u/s 28(2) of the Tamil Nadu Co-operative Land Development Bank Act, 1934. Therefore, it is very evident that except the claim of the Land Development Bank, the tax arrears would be given priority and it would be the ''first charge'' on the property and would have priority over other claims.

20. Following the aforesaid decision in A. Senthil Kumar and Another Vs. Assistant Commissioner (CT) and Others, , a honourable judge of this court in W.P. No. 36547 of 2007, dated June 6, 2011 (Ravindranath (K) v. Authorised Officer and Chief Manager, Indian Bank), has set aside the recovery notice issued section 11(2) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, in respect of arrears of contribution, wherein a charge was created in respect of the property. For the purpose of better appreciation, this court deems it fit to extract the facts made in the supporting affidavit in W.P. No. 36457 of 2007.

21. Facts, in a nutshell, as stated in the affidavit filed in support of the abovesaid writ petition, are that plot Nos. 41 and 81 situated in SIDCO Industrial Estate, Ranipet, originally belonged to one M/s. Industries and Chemical Ltd. The respondent-bank therein took action against the said M/s. Industries and Chemical Ltd., under the SARFAESI Act, in respect of failure and repayment of certain amounts, by issuing a notice u/s 13(2) of the SARFAESI Act, and ultimately, after taking possession, u/s 13(4) of the SARFAESI Act, the bank sold the plots, in a public auction, in which the petitioner therein, was the bidder of plot No. 49 and his wife was the successful bidder of plot No. 81 and that the sales were also confirmed by the authorized officer of the Indian Bank, who issued the sale certificate on June 11, 2007, after receiving the entire sale consideration and that the sale certificates were also registered in the office of the Sub-Registrar, Walajapet and that the petitioner and his wife were in possession of plot Nos. 49 and 81, respectively. While so, the Regional Provident Fund Commissioner II and Recovery Officer, the second respondent therein, issued a nonce on October 4, 2007 to them, demanding arrears, payable by the previous owner, viz., M/s. Industries and Chemical Ltd., the employer.

22. After the sale certificates were issued on June 11, 2007, the Recovery Officer therein ordered for attachment of plot Nos. 49 and 81 on March 14, 2007, proclaimed the sale on March 21, 2007 and served the same on M/s. Industries and Chemical Ltd., as well as the Sub-Registrar, Walajapet on March 21, 2007. It was contended on behalf of the Regional Provident Fund Commissioner that if any amount was due from the employer, in respect of the employees'' contribution or employers'' contribution, there will be a first charge on the assets of the establishment, and in the above-said circumstances, the impugned order was challenged in the abovesaid writ petition.

23. Placing reliance on a judgment of this court in A. Senthil Kumar and Another Vs. Assistant Commissioner (CT) and Others, a honourable judge set aside the impugned demand notice issued by the Regional Provident Fund Commissioner II and Recovery Officer, the second respondent therein.

24. Thus, in the light of the above judgments, it could be seen that even though a charge is created on the properties on the finalisation of the assessment of tax or contribution to the Regional Provident Fund Commissioner, as the case may be, and a demand is raised, the same would not preclude the bona fide purchaser from seeking protection u/s 24A of the Act. Constructive notice means, "legal inference from established facts". "Notice imputed by the law to a person not having actual notice". "Knowledge of any fact which would put a prudent man upon inquiry." "Knowledge of such facts as should induce inquiry, and as would lead to injury in the case of an ordinarily prudent man and which cannot be neglected without a voluntary closing of the eyes, and conduct inconsistent with good faith."

25. In the case on hand, the contention of the learned counsel for the petitioner is that prior to the purchase of the property in the year 2004, the petitioner had verified with the encumbrance details in the Registration Department and finding that there was no encumbrance over the property, she had purchased the same, which would show that she had made bona fide efforts to find out as to whether there was any encumbrance over the property. Though the assessment of tax had already been finalised in the year 1995-96 by the orders, on the appeal preferred by the dealer, the recovery officers have not reported the charge over the property to the Registration Department. Even though a reference has also been made in paragraph No. 2 of the counter-affidavit that the demand notice was duly served on the defaulter-assessee, no specific date is mentioned. As rightly contended by the learned counsel for the petitioner, there is no specific averment, rebutting the contention of the petitioner that the purchase was made bona fide. Establishment of fact arises only when there is a dispute. When the respondent has not even made any averments disputing the fact of bona fide purchase, and proved that the sale effected by the first purchaser Mr. S. Prabhakaran was to defraud the revenue, this court is of the view that it would not be appropriate to drive the petitioner, the second purchaser, to approach the civil court of competent jurisdiction to prove her bona fide. In normal circumstances, when a sale is made immediately, after the finalisation of an assessment, the attempt to defraud the revenue by the defaulting dealer, who is in arrears of tax, can be presumed. But, in the case on hand, the sales effected are not in quick succession. The second sale has been made, after six years from the date, on which the assessment has been finalised. The tax officials have not reported the charge over the property, held by the dealer to the Registration Department. Even assuming that there is a charge, by virtue of the statutory provision, the bona fides of the petitioner in purchasing the property, after six years from the date of assessment, cannot be doubted, as it is the case of the petitioner that she had verified the encumbrance. On the contra, the contention of the respondent that the demand notices have been issued to the dealer has not been substantiated. At this juncture, this court deems it fit to extract a decision of the apex court, which has distinguished the pleadings and proof required in a writ proceeding and a civil suit. In Bharat Singh and Others Vs. State of Haryana and Others, at paragraph 13, the Supreme Court held as follows:

. . . In our opinion, when a point which is ostensibly a point of law is required to be substantiated by facts, the party raising the point, if he is the writ petitioner, must plead and prove such facts by evident which must appear from the writ petition and if he is the respondent, from the counter-affidavit. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition or to the counter-affidavit, as the case may be, the court will not entertain the point. In this context, it will not be out of place to point out that in this regard there is a distinction between a pleading under the CPC and a writ petition or a counter-affidavit. While in a pleading, that is, a plaint or a written statement, the facts and not evidence are required to be pleaded, in a writ petition or in the counter-affidavit not only the facts but also the evidence in proof of such facts have to be pleaded and annexed to it. . .

26. Going through the judgments relied on by both parties, this court is inclined to accept the submissions of the learned counsel for the petitioner that the decision rendered in Deputy Commercial Tax Officer, Thudiyalu Assessment Circle, Coimbatore and another Vs. R.K. Steels, has been approved in D. Senthil Kumar, C.P. Senthil and C.P. Sakthivel Vs. The Commercial Tax Officer and The Sub Registrar, following State of Karnataka and Another Vs. Shreyas Papers Pvt. Ltd. and Others, and this court is inclined to follow the same.

27. Even in N. Padma Coffee Works'' case [1999] 114 STC 494 (TNTST) the Special Tribunal has clearly observed that the legislative intent in engrafting proviso to section 24A of the Act, is to protect a honest person, who had purchased the property from a seller and further observed that there should not be any collusion with the seller, but the necessary ingredients of section 24A of the Act should be there, i.e., the sale effected should be for adequate consideration and want of notice. Taking note of section 3 of the Transfer of Property Act, the Special Tribunal in N. Padma Coffee Works'' case [1999] 114 STC 494 (TNTST) has also observed that if there was any willful absenteeism or gross negligence in making any enquiry, that would tantamount to notice of fact, by the purchaser of the property, upon which a charge is created by operation of law. As per the version of the petitioner, she had purchased the property from a subsequent purchaser in the year 2004 and it was not a direct purchase from the defaulter. There is nothing on record to indicate that action has been taken against the vendor of the purchaser. There are no averments to suggest collusion of the petitioner with the defaulting dealer. On the contra, there are clear averments made by the petitioner to the effect that she had verified the encumbrance details from the Registration Department, in the year 2004, when she had purchased the property. When the subsequent sale has been effected after six years from the first sale, it is incumbent on the respondent to prove collusion, with the defaulting dealer. There can be a presumption of collusion with the defaulting dealer, if the transactions are in quick succession. But, if there is a long gap of six years between the first sale and the subsequent sale, without there being any action by the Revenue to realise the arrears of tax from the defaulter or against the immediate subsequent purchaser on the facts of this case, this court is of the view that even collusion cannot be presumed. In the absence of any rebuttal to the bona fides of the purchase, absenteeism or negligence, in making due enquiry with the Registration Department, prior to purchase, the conduct of the subsequent purchaser cannot be doubted by making any allegation of fraud, being played on the revenue.

28. Though the respondent has contended that the petitioner ought to have obtained a "no objection" from the Revenue before purchasing the property, no provisions have been quoted by the respondent in the counter-affidavit. Needless to say that a purchaser in normal course would only verify from the Registration Department as to whether the property to be purchased has any encumbrance. Unless the charge is duly registered in the Registration Department, it would not be possible for any prospecting buyer to know whether there is any charge over the property, for any arrears of tax or any statutory dues to be paid to the Government or statutory body. As stated supra, no materials have been produced before this court to prove that notice demanding arrears of tax, has been served on the defaulter. No materials have been placed before this court to prove that steps have been taken under the provisions of the Revenue Recovery Act, against the defaulter or the subsequent first purchaser, from whom the petitioner has purchased the property in the year 2004, after six long years, since the date of finalisation of the assessment. In the absence of any specific plea of collusion, rebuttal of even doubting the bona fide of the purchase, the action taken in the year 2005, after seven years, from the date of finalisation of the assessment, against the second purchaser, who has taken diligent steps to verify from the Registration Department, before purchasing the property cannot be approved. That apart, there are no materials to indicate that the petitioner had any constructive notice of the charge. There is no pleading to the effect and rightly, no arguments have been advanced, and therefore, this court is of the view that the case on hand would squarely also fall within the ambit of the apex court in The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdulgafur Haji Hussenbhai, also. On the facts and circumstances of this case, this court is of the view that the legislative protection has to be extended to the petitioner. For all the reasons stated above and in the light of the decisions and the discussion on facts, this court is of the view that the petitioner is a bona fide purchaser and is entitled to protection under the proviso to section 24A of the Act. Hence, the impugned distraint order dated February 13, 2006 issued by the respondent is liable to be set aside and accordingly set aside. The writ petition stands allowed. No costs. Consequently, connected miscellaneous petition is closed.