Kerala High Court
T.Krishnakumar vs State Of Kerala Represented By The
Author: Antony Dominic
Bench: Antony Dominic
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE ANTONY DOMINIC
FRIDAY, THE 16TH DAY OF MARCH 2012/26TH PHALGUNA 1933
WP(C).No. 21475 of 2009 (D)
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PETITIONER(S):
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T.KRISHNAKUMAR,
S/O.LATE K.P.DAMODARAN NAIR, THEKKIL HOUSE
P.O.PONMERI, VADAKARA, KOZHIKODE DISTRICT.
BY ADV. SRI.S.RAMESH BABU
RESPONDENT(S):
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1. STATE OF KERALA REPRESENTED BY THE
SECRETARY TO GOVERNMENT, REVENUE DEPARTMENT
SECRETARIAT, THIRUVANANTHAPURAM.
2. THE LAND REVENUE COMMISSIONER,
THIRUVANANTHAPURAM.
3. DISTRICT COLLECTOR, KOZHIKODE.
4. TAHSILDAR(RR) VADAKARA,
KOZHIKODE.
BY SR GOVERNMENT PLEADERSRI.NOBLE MATHEW
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16-03-
2012, ALONG WITH WPC. WPC. 22859/2009, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
WPC NO.21475/09
APPENDIX
PETITIONER'S EXHIBITS
EXT.P1(a): TRUE COPY OF THE NOTICE DT 30.7.02 ISSUED BY
DTY.TAHSILDAR (RR) VADAKARA.
EXT.P1(b): TRUE COPY OF THE NOTICE DT 27.7.02 ISSUED BY
THE DTY.TAHSILDAR (RR) VADAKARA.
EXT.P2: TRUE COPY OF THE JUDGMENT DT 12.8.02 IN OP
NO.22822/02.
EXT.P3: TRUE COPY OF THE NOTICE DT 24.2.2003 ISSUED BY THE
TAHSILDAR (RR) VADAKARA.
EXT.P4: TRUE COPY OF THE PROCEEDINGS OF THE TAHSILDAR (RR)
VADAKARA DTD 6.7.05.
EXT.P5: TRUE COPY OF THE PROCEEDINGS O THE DITRICT
COLLECTOR, KOZHIKODE DT 3.7.06.
EXT.P6: TRUE COPY OF THE JUDGMENT IN WP(C) No. NO.23723/06
DT 1.9.06.
EXT.P7: TRUE COPY OF THE PROCEEDINGS 2.7.07 OF THE LAND
REVENUE COMMISSIONER, THIRUVANANTHAPURAM.
EXT.P8: TRUE COPY OF the JUDGMENT DT 18.12.07 IN WP(C) No.
NO.25044/07.
EXT.P9: TRUE COPY OF THE ORDER DT 12.6.08 OF LAND REVENUE
COMMISSIONER, THIRUVANANTHAPURAM.
EXT.P10: TRUE COPY OF the REVISION DATED 28.7.08 FILED BY
THE PETITIONER BEFORE THE GOVERNMENT.
EXT.P11: TRUE COPY OF the NOTICE DT 25.7.08 ISSUED BY
TAHSILDAR (RR) VADAKARA.
EXT.P12: TRUE COPY OF THE JUDGMENT DT 8.8.08 WP(C) No.
NO.23893/08.
WP(C) No. NO.21475/09 -2-
EXT.P13 TRUE COPY OF GO(MS) 252/09/RD DT.30.6.09.
EXT.P14(a): ASSESSMENT ORDER FOR THE YEAR 1986-87.
EXT.P14(b): ASSESSMENT ORDER FOR THE YEAR 1987-88
EXT.P14(c): ASSESSMENT ORDER FOR THE YEAR 1988-89
EXT.P14(d): ASSESSMENT ORDER FOR THE YEAR 1989-90
EXT.P14(e): ASSESSMENT ORDER FOR THE YEAR 1990-91
EXT.P14(f): ASSESSMENT ORDER FOR THE YEAR 1991-92
EXT.P14(g): ASSESSMENT ORDER FOR THE YEAR 1992-93
RESPONDENTS' EXHIBITS
EXT.R4(a): A TRUE COPY OF THE REPRESENTATION DT 1.8.02.
//True Copy//
PA to Judge
Rp
ANTONY DOMINIC, J.
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W.P.(C) NOs. 21475 & 22859 OF 2009
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Dated this the 16th day of March, 2012
J U D G M E N T
Though the facts pleaded in these two cases are different, the issues raised for consideration are common. Therefore these cases were heard together and are disposed of by this common judgment.
2. I shall now refer to the facts in these two cases separately.
3. In so far as WP(C) No. 21475/09 is concerned, petitioner's father was the partner of a firm by name Malabar Wires and Allied Products. In 1990, he conveyed the property comprised in RS No.338/7 of Thiruvalloor Desom to his wife by document Nos.507/90 and 533/90. Subsequently, on 6/5/93, his father expired.
4. Long thereafter, assessments under the KGST Act for the assessment years 1986-87 to 1992-93 were completed as per Ext.P14 series of orders issued on 25/11/96. Subsequently, by Exts.P1(a) and P1(b) notices dated 30/7/2002, revenue recovery was initiated against the property conveyed to the petitioner's WPC.Nos.21475 & 22859/09 :2 : mother, to recover the tax dues of the firm. Petitioner's mother challenged these notices by filing OP No.22822/02. That O.P was disposed of by Ext.P2 judgment holding that the department is free to proceed against the firm and its partners and against the assets of the partners for recovery of the tax. It was also held that if the respondents have a case that the petitioner's husband had transferred property to the petitioner to evade tax, then of course, the respondents are free to adjudicate the matter by attaching the said property.
5. Respondents continued the revenue recovery action by issuing Ext.P3 notice under Section 49 of the Revenue Recovery Act. Thereupon, petitioner's mother again filed OP No.9562/03 which was disposed of leaving it open to her to file a claim petition before the revenue recovery authorities. Accordingly, she filed a claim petition which was rejected by Ext.P4 order of the Tahsildar. Against Ext.P4 order, petitioner's mother filed appeal to the District Collector, which was also rejected by Ext.P5 order. While the revision filed by the petitioner's mother against Exts.P4 and P5 orders were pending before the Land Revenue Commissioner, revenue recovery proceedings were again WPC.Nos.21475 & 22859/09 :3 : initiated. Thereupon, petitioner's mother filed WP(C) No. 23723/06 and that writ petition was disposed of by Ext.P6 judgment directing disposal of the revision, which was pending before the Land Revenue Commissioner and to keep further recovery action in abeyance.
6. The revision was accordingly considered and the Land Revenue Commissioner passed Ext.P7 order rejecting the revision. Immediately thereafter, the revenue recovery proceedings were revived and therefore the petitioner's mother once again approached this court by filing WP(C) No. 25044/07. By Ext.P8 judgment rendered on 18th of December, 2007, the writ petition was disposed of directing the Land Revenue Commissioner to reconsider the revision and staying recovery pursuant to the assessment orders. The revision was accordingly reconsidered and was rejected by Ext.P9 order. In the meantime, his mother expired and therefore the petitioner filed Ext.P10, a further revision, before the Government of Kerala invoking its powers under Section 83(2) of the Revenue Recovery Act.
7. During the pendency of this revision, by Ext.P11, revenue recovery proceedings were again revived and that WPC.Nos.21475 & 22859/09 :4 : provoked the petitioner to file WP(C) No. 23893/2008. The writ petition was disposed of by Ext.P12 judgment directing consideration of Ext.P10 revision. Accordingly, the revision was considered and was rejected by the Government as per Ext.P13. It is in these circumstances, WP(C) No. 21475/09 is filed.
8. As far as WP(C) No. 22859/09 is concerned, by Ext.P1 sale deed bearing No.1983/1992 of SRO, Perinthalmanna dated 20/7/92, petitioner herein purchased 35 cents of land and a building comprised in RS No.21/8 of Angadipuram Village. After the property was purchased, Ext.P2 notice of sale of immovable property under Section 49(2) of the Revenue Recovery Act was issued by the respondents proposing to sell the property for realising the sales tax dues of the 3rd respondent, the vendor of the petitioner, for the assessment years 1987-88 to 1993-94. Petitioner thereupon filed reply disputing the proceedings initiated and by Ext.P3 order, those objections were overruled by the respondents.
9. Challenging Exts.P2 and P3, petitioner approached this Court by filing WP(C) No. 37392/03. By Ext.P4 judgment, on the ground that, the objections raised by the petitioner in his reply to WPC.Nos.21475 & 22859/09 :5 : Ext.P2 were not dealt with, this court set aside Ext.P3 and directed that fresh orders shall be passed after hearing him. Accordingly, the 1st respondent reconsidered the matter with notice to the petitioner and by Ext.P5 proceedings, rejected his contentions.
10. Thereupon petitioner challenged Ext.P5 in WP(C) No. 16299/05 and by Ext.P6 judgment rendered on 14/6/2005, the writ petition was dismissed following the judgment of this Court in Jaya v. State of Kerala (2005(2) KLT 543), by which a Division Bench of this Court upheld the validity of Section 26A of the KGST Act. Aggrieved by Ext.P6 judgment, the petitioner filed WA No.1771/05. By Ext.P7 judgment, a Division Bench of this Court allowed the writ appeal and set aside Ext.P6 judgment and remanded the matter to the 1st respondent for fresh orders directing that it is for the 1st respondent to find specifically as to what proceedings were pending as on the date when Ext.P1 sale took place in favour of the petitioner.
11. Accordingly, the matter was reconsidered and Ext.P8 order was issued by the 1st respondent, in which, after referring to Section 17 of the KGST Act and Rules 18 and 21(7) of the Rules, WPC.Nos.21475 & 22859/09 :6 : the 1st respondent found thus:-
"In this case by filing monthly returns and returns for the respective years the assessee has submitted his self assessment return and it is evident that, from the date of filing returns any proceedings as referred in 26(A) of the KGST Act is pending. Hence the provisions in section 26(A) is applicable in the facts of the case.
On enquiry and also from the records maintained in the office of Sales Tax in this case, I am satisfied that the assessee has filed the returns for the year.
1988-89 on 27.04.89.
1989-90 on 24.04.90 1990-91 on 27.04.91 1991-92 monthly returns for the different months on 16.12.91.
The date of transfer of property as per sales deed no.1983 is on 22.07.92. Thus it is clear that assessment proceedings with respect to the assessee for the year 1988-89 to 1991-92 were pending as on 22.07.92."
12. On this basis, it was held that Section 26A of the KGST Act applied to the case of the petitioner and objections were accordingly rejected. It was thereupon that WP(C) No. 22859/09 was filed.
13. The main contentions raised on behalf of the petitioners are that as far as sales tax is concerned, public revenue will become due on land only on completion of WPC.Nos.21475 & 22859/09 :7 : assessment of tax. According to the petitioners, the assessments in question were completed long after the properties were transferred in their favour. On this basis, it was submitted that since as on the date of the transfer in their favour, no public revenue was due on land, Section 44 (2) or 44(3) of the Revenue Recovery Act are inapplicable to the proceedings in question.
14. Secondly, it is contended that the relevant assessment years in so far as WP(C) Nos. 21475/09 and 22859/09 are concerned, are 1986-87 to 1992-93 and 1987-88 to 1993-94 respectively. According to the counsel, the transfer in favour of the petitioners were prior to 01/04/93 and hence Section 26A of the KGST Act is inapplicable. Thirdly, it was also contended that the transfers in favour of the petitioners are protected by Section 100 of the Transfer of Property Act. Lastly, petitioner in WP(C) No. 22859/09 argued that he is a bonafide purchaser for value and, therefore, his property is not liable to be proceeded against.
15. The first issue to be dealt with is whether since assessment orders were issued subsequent to conveyance of the property in their favour, Section 44(2) or 44(3) of the Revenue Recovery Act could be invoked against the petitioners. Section 44 WPC.Nos.21475 & 22859/09 :8 : (2) of the Revenue Recovery Act reads thus:-
44(2) Any transfer of immovable property made by a defaulter after public revenue due on any land from him has fallen in arrear, with intent to defeat or delay the recovery of such arrear, shall not be binding upon the Government."
16. By virtue of this section, any transfer of immovable property made by a defaulter after the public revenue due on any land from him has fallen arrears, with intend to defeat or delay the recovery of such arrears shall not be binding upon the Government. Admittedly, the sales tax liability that is sought to be recovered by the impugned proceedings is that of partnership firms, which were assessees under the KGST Act. Section 21 of the KGST Act provides that where any firm is liable to pay any tax, fee or other amount under the KGST Act, the firm and each of the partners of the firm shall be jointly and severally liable for such payment. Further, as per Section 23(2) of the Act, any tax assessed or any other amount due under the Act may be recovered as if it were an arrear of land revenue.
17. Section 17 of the KGST Act provides for the procedure to be followed by assessing authority. This section provides that every registered dealer and every dealer liable to take WPC.Nos.21475 & 22859/09 :9 : registration under the Act shall submit such return or returns relating to his turnover in such manner and within such period as may be prescribed. Rules have been framed under the KGST Act providing for the manner in which returns are to be filed and forms of returns also have been prescribed. As per the provisions of the Act and the Rules, the return should contain the details of the turn over and the tax payable and the assessee is also required to pay the tax that is due.
18. In a case of self assessment by an assessee by filing returns as provided under the KGST Act, the liability to pay tax arises atleast from the date of filing of the return. Therefore, the fact that for some reason or the other, assessment has been issued belatedly does not postpone the liability to pay tax. In other words, even if assessment is completed after a couple of years from the relevant assessment year, tax became due on the filing of the returns during the assessment year itself. This principle has been recognised by the Apex Court in Maruti Wire Industries (P) Ltd. v. Sales Tax Officer (2001(2) KLT 100) where it has been held thus:
"8. In view of the law laid down by the Constitution WPC.Nos.21475 & 22859/09 :10 : Bench, we are clearly of the opinion that the liability of the assessee appellant to pay sales tax could have arisen either on return of turnover being filed by way of self-assessment or else on an order of assessment being made."
19. In these two cases, it is not the case of the petitioners that returns were filed during the relevant assessment years itself. Therefore, tax became due to be paid to the State at that point of time itself. If that be so, public revenue became due on the land and had fallen in arrear on the filing of the return. Therefore the contention that tax became due only on passing the assessment order, and that thereupon only public revenue has become due on land, is only to be rejected. As a consequence, it must be held that when the transfers in question were effected in 1990 and 1992, tax was due for the prior assessment years, and therefore, public revenue was due on the land transferred, at the time of execution of the conveyances.
20. One aspect which is to be adverted to in this context is that Section 44(2) of the Revenue Recovery Act, provides that transfers shall not be binding on the Government if the transfer is after public revenue has become due on land and if such transfer is intended to delay or defeat the recovery of such arrear. WPC.Nos.21475 & 22859/09 :11 : Therefore, these two conditions should be satisfied to avoid the transfer effected by a defaulter and the burden is upon the State to prove these ingredients of the Section. In so far as WP(C) No. 22859/09 is concerned, though it is found in Ext.P8 Government Order that the sale is hit by Section 44(2) of the Act, there is no finding whatsoever that sale was intended to defeat or delay recovery of the dues. In such circumstances, Ext.P8 deserves to be set aside for that reason and the matter needs to be reconsidered by the 1st respondent with notice to the parties concerned.
21. There is yet another aspect of the matter. In so far as the petitioner in WP(C) No. 21475/09 is concerned, the transferee is the wife of the defaulter. In cases where, transfers are to close relatives, Section 44(3) of the Revenue Recovery Act assumes significance and therefore, is extracted below for reference.
" 44(3) Where a defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has fallen in arrear, it shall be presumed until the contrary is proved, that such transfer is made with intent to defeat or delay the recovery of such arrear, and the Collector or the authorized officer may,subject to the order of a competent Court, proceed to recover such arrear of public revenue by attachment and sale of the property so transferred, as if such transfer has not taken place:
WPC.Nos.21475 & 22859/09 :12 :
22. A perusal of Section 44(3) shows that where a defaulter transfers an immovable property to a near relative after public revenue due on any land has fallen in arrear, it shall be presumed until the contrary is proved, that such transfer was made with intent to defeat or delay the recovery of such arrear. In such a case, the Collector is authorised to proceed to attach and sell the property, as if such transfer has not taken place. Explanation to the section defines the expression, near relative as including, among others, wife also. Therefore, when property is transferred to a near relative, there is a presumption that the transfer was to defeat or delay the recovery of arrears and the burden of proving the contrary, is on the defaulter or the transferee, as the case may be. In WP(C) No. 21475/09, there is absolutely no material whatsoever, produced by the defaulter, discharging the burden of proof, as required in Section 44(3) of the Revenue Recovery Act. Consequently, transfer in favour of the mother of the petitioner in WP(C) No. 21475/09 is hit by Section 44(3) of the Revenue Recovery Act and is liable to be invalidated for that reason itself.
23. In so far as the applicability of Section 26A of the Act WPC.Nos.21475 & 22859/09 :13 : canvassed by the learned Government Pleader is concerned, this section was introduced into the KGST Act w.e.f. 01/04/93 and reads thus:-
26A: Certain transfers to be void:-(1) Where, during the pendency of any proceedings under this Act or after the completion thereof, any assessee 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 person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee under this Act."
24. This section provides that where, during the pendency of any proceedings under KGST Act or after the completion thereof, any assessee creates a charge on, or parts with the possession of any of his assets in favour of any person, such transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee under this Act. The contention raised by the learned counsel for the petitioners is that since the transfers in their favour were effected prior to 01/04/93 and the Section being only prospective, cannot have any application.
25. From the facts noticed herein before, it is obvious that as on 01/04/93, assessment proceedings in relation to the WPC.Nos.21475 & 22859/09 :14 : assessment years in question were pending and the assessments were completed and orders were issued only thereafter. It is clear from Section 26A that even if the assessment years include years prior to 01/04/93, Section 26A will apply if as on 01.04.1993, the assessment is pending or completed, provided the property of the defaulter is transferred after 01/04/93. In so far as these cases are concerned, the property in WP(C) No. 21475/09 was transferred in 1990 and the property in WP(C) No. 22859/09 was transferred on 20/7/92. Therefore, though as on 01.04.93 assessments were pending, since transfers were effected prior to 01.04.93, there is substance in the contention of the petitioners that Section 26A of the KGST Act rendering the transfers subsequent to 01/04/93 void, is inapplicable to these cases.
26. In so far as the protection under Section 100 of the Transfer of Property Act claimed by the petitioners is concerned, that contention of the petitioners stands answered against them by virtue of the Division Bench judgment of this Court in Sherry Jacob v. Canara Bank (2004(3) KLT 1089).
27. The contention raised by the petitioner in WP(C) No. 22859/09 is that he is a bonafide purchaser for consideration and WPC.Nos.21475 & 22859/09 :15 : therefore his property is not liable to be proceeded against. This contention was sought to be substantiated by the counsel for the petitioners referring to a Division Bench judgment of this Court in St.Arnold Divine Works Society v. State of Kerala (2006(3) KLT S.N Case No.67), where it was held thus:-
"Petitioner is a bona fide purchaser who purchased the property for valid consideration before attachment and, therefore, the property cannot be sold for the purpose of the dues of the defaulter. Petitioner is not a guarantor, but, he is a total stranger to the defaulter. He, being a bona fide purchaser, the revenue recovery proceedings taken against the petitioner is wholly unwarranted".
28. However, learned Government Pleader relied on the judgment of the Division Bench of this Court in Hamsa v. Asst.Commissioner (2008(3) KLT 180), where it was held thus:-
9. To attract S.26A, it is not necessary that the assessment should be completed. It is also not necessary that a demand should be made to the assessee to pay any amount. If the transfer is made by the assessee during the pendency of any proceedings, such transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee under the K.G.S.T. Act.
Inspection of the shop, factory or business premises of the assessee by the sales tax officers would also come within the meaning of the expression "during the pendency of any proceedings" under S.26A. The transfer as such is not void. It would be a valid transfer as between the transferor and the transferee. But it would be void against any claim in respect of any tax or any other sum payable by the assessee-transferor under the Act. The transferee is not entitled to put forward any defence that the transfer was made for valid consideration or that he is a bonafide purchaser for value. Such defences are outside the purview of S.26A of the Act. Once the ingredients of S.26A are attracted, the transfer made by the assessee would be void. The transferee cannot claim any valid title in such WPC.Nos.21475 & 22859/09 :16 : cases as against "any claim in respect of any tax or any other sum payable by the assesee" under the K.G.S.T. Act. In the present case, the transfers were effected after proceedings were initiated against the assessee under the Act. Therefore, the assignment deeds executed by the partners of the assessee firm in favour of the petitioners are void under S.26A. Exhibit P2 order is valid and the learned Single Judge has rightly rejected the contentions raised by the petitioners.
29. Relying on this paragraph, counsel contended that in a case of this nature, the defence that the transfer was made for valid consideration or that the petitioner is a bonafide purchaser for value are not available. However, a close reading of the above judgment shows that the Division Bench was persuaded to take such a view because that was a case to which provisions of Section 26A of the KGST Act was applicable. Therefore, in the light of the statutory provision rendering the transfer void, the Division Bench had taken the view that the aforesaid defences were not available to the transferee.
30. On the other hand, in these cases, I have already held that on facts these are not cases to which Section 26A of the KGST Act applies. If Section 26A does not apply, there is no reason why a purchaser shall not be entitled to the benefit of the ratio laid down by the Division Bench in its judgment in St.Arnold Divine Works Society referred to supra, provided the bonafides WPC.Nos.21475 & 22859/09 :17 : of the transaction is established. Bonafides of the transfer, is a factual issue and it is for one who pleads it to prove the same. In these cases, it is the petitioner in WP(C) No. 22859/09, who pleads that the transfer in his favour is a bonafide one. Since I have set aside Ext.P8 in this writ petition and directed reconsideration of the matter, I leave open this issue to be decided by the 1st respondent, the Tahsildar.
In the result, WP(C) No. 21475/09 will stand dismissed and WP(C) No. 22859/09 is disposed of quashing Ext.P8 Government Order and there will be a direction to the 1st respondent to pass fresh orders in the mater in the light of the findings hereinabove.
ANTONY DOMINIC, JUDGE Rp