Andhra HC (Pre-Telangana)
Ganji Venkateswara Rao vs Deputy Commercial Tax Officer And Ors. on 8 June, 2001
Equivalent citations: [2001]124STC705(AP)
ORDER S.R. Nayak, J.
1. These writ petitions are directed against the attachment proceedings passed by the Deputy Commercial Tax Officer - I, Samarangam Chowk, Vijayawada, the 1st respondent herein, dated 11.10.2000 in Rc. No. B.5/57/96. The relevant and necessary facts be noted first as under:
The property under attachment by the impugned proceedings is an extent of 430 sq. yards house property bearing Door No. 1-3-26-12, Municipal Ward No. 1/2 Assessment No. 650/E/2-A, Plot No. 3, situated at Vidhyadarapuram village, Vijayawada sub-registry being bounded by-
East -Property of Sistla Padmavathi - 81 ft.
South -Property of Kolluri Madhusudhan Rao and & Panduranga Rao 23.9 ft.
West-Remaining House property of Kommu Venkateswara Rao - 81 ft.
North-15 ft. wide road - 24 ft.
2. The said property originally belonged to Sri Govindarajulu Venkateswara Rao who had purchased it on 26.3.1947 from Matta Peda Subbaiah and others. Sri Lakshman Rao, his son had constructed a RCC building on the said land. Sri Appana Ramalingeswara Rao, partner of M/s Challamamba Coconut Products and Proprietor of M/s Hindustan Coconut Oil Industries purchased an extent of 430 sq. yards and the building from Sri Govindarajulu Venkateswara Rao and his children who are the legal representatives of Sri Govindarajulu Venkateswara Rao under the registered sale deed dated 17.7.1995. On 7.3.1996, Appana Ramalingeswara Rao, the 4th respondent herein, mortgaged the said property i.e., 215 sq. yards to each of the petitioners as security for a loan of Rs. 3,00,000/-. Subsequently on 2.8.1996, the 4th respondent herein being unable to discharge the loan sold the property to the petitioners and delivered possession of the same in consideration of the full discharge of the loan amount with interest.
3. M/s Challamamba Coconut Products is a dealer registered under the A.P. General Sales Tax Act, 1957 (the Act, for brevity) in which the 4th respondent herein is a partner. The 4th respondent is also the proprietor of M/s Hindustan Coconut Oil Industries. The demand notices for payment of tax were served on the said firms on the following dates:
M/s Challamamba Coconut Products
-------------------------------------------------------------------------------------------------
Year of Asst.Date of passing Date of service Amount of Of the asst.orderof the order the asst.
-------------------------------------------------------------------------------------------------
1993-94 (CST)27.3.199716.7.1997Rs.6122/-
(Rev.by DC)31.1.199831.8.1998Rs.30565/-
1994-95(APGST)27.1.199616.7.1991Rs.4332/-
1994-95 (CST)16.7.1991Rs.58087/-
1995-96 (APGST)10.3.199922.3.1999Rs.839847/ 1995-96 (CST)6.4.2000Rs.10,218/-
M/s Hindustan Coconut Oil Industries 1993-94(APGST)11.2.199815.6.1998
4. When the matters stood thus on 24.6.1999 notices of attachment of the property were issued purported to be under Section 27 of the Andhra Pradesh Revenue Recovery Act, 1864 (for short, Revenue Recovery Act) and the same were published in the Krishna District Gazette No. 6.3 dated 24.6.1999. The petitioners then filed W.P. Nos. 23293 of 1999 and 23297 of 1999 and challenged the attachment orders. This Court, by its final order dated 2.2.2000, disposed of the said writ petitions observing that the matter was pre-judged by the Deputy Commercial Tax Officer, the first respondent herein, without hearing the petitioners. The Court directed the first respondent to afford an opportunity of being heard to the petitioners after fixing a date of hearing. In response to that direction a notice was issued by the 1st respondent and the petitioners filed their objections on 3.8.2000. Thereafter wards the 1st respondent passed the impugned proceedings on 11.10.2000. Hence these writ petitions assailing the validity of the same.
5. Sri S.Krishna Murthy, learned Counsel appearing for the petitioners while assailing the impugned attachment notices would first contend that the impugned attachment notices were issued under Section 27 of the Revenue Recovery Act read with Section 17-C of the APGST Act and these provisions enable the 1st respondent to attach only a property belonging to the defaulter-dealer and not to third parties and, therefore, the impugned attachment notices were issued without jurisdiction and beyond the powers of the 1st respondent. Secondly the learned counsel would contend that, at any rate, the 1st respondent being a statutory authority with a limited power and without having trappings of the Civil Court is incompetent to declare the subject sales as void and such a declaration could be granted only by a competent civil Court. In support of this contention the learned counsel would place strong reliance on the Judgment of the Apex Court in Tax Recovery Officer II, Sadar, Nagpur v. Gangadhar Viswanath Ranade.1 The learned Counsel would maintain that if the 1st respondent wants to attach the property of the petitioners he should first approach the Civil Court for a declaratory decree that the transfers in question are void before proceeding to attach the property for sale. Thirdly, the learned Counsel would contend that even in terms of Section 17-A of the Act, a petition to get the transfer declared as void can be filed by the Tax Recovery Officer before the competent Court only when some proceeding is pending. The expressions 'during the pendency of any proceeding' in Section 17-A refers only to the proceedings for recovery of tax. In the instant case, the learned Counsel would maintain, there was no demand for tax prior to the sale transactions and no proceedings for recovery of tax were pending and, therefore, the question of declaring the transfers as void do not arise in the fact situation of this case. Fourthly the learned Counsel would contend that Section 17-A of the Act states that the 'transfer shall be void as against any claim in respect of any tax'. From the above language employed in Section 17-A of the Act, the learned counsel would contend, it is clear that before the Tax Recovery Officer seeks a declaration that the transfer is void, there must be a claim in respect of tax. In the instant case, the learned Counsel would maintain, by the time the sale transactions were entered into between the parties, there was no determination of tax liability of the petitioners and consequently putting forth the claim by the respondent-authorities regarding tax does not arise. The pith and substance of this contention of the learned counsel is that where there is no tax outstanding on the date of sale, such sale cannot be declared as void.
6. On the other hand, Mr. Bhaskar Reddy, learned Special G.P. for Taxes would contest the correctness of the submissions of the learned Counsel for the petitioners and support the impugned action. The learned G.P. would point out that well before the sale transactions on 2.8.1996 proceedings were initiated against the vendor of the petitioners by issuing show cause notices for the assessment years 1993-94 and 1994-95 under both APGST Act and CST Act which were served on the dealer as early as on 23.7.1996 and 4.1.1996 respectively and, therefore, there is no merit in the contention of the learned counsel for the petitioners that no proceedings were pending on the date of sale and, therefore, the sale transactions would not be declared as void. The learned G.P. also would maintain the ratio of the Judgment of the Apex Court in Gangadhar Viswanath Ranade case (1 supra) is not attracted to the facts of this case inasmuch as the provisions similar to Rule 11 of the II Schedule to the Income Tax Act are absent in the APGST Act or the rules framed thereunder. The learned Government Pleader would specifically draw the attention of the Court to the following observations of the Apex Court in para 10 of the Judgment in RANADE's (supra 1) case -
"...No doubt, it is impossible to separate altogether the question of possession and of title. Thus, if the judgment-debtor was in possession, he may have been in possession as agent or trustee for another; and this has to be enquired into. To that extent, title may be a part of the inquiry. Similarly, if the property attached is claimed by a third party who adduces evidence to show that he was possessed of the property under some kind of a title, the property will have to be released from attachment. The procedure is not meant to decide intricate questions of law as to title to the property. Therefore, where a claim is made to the property attached by someone claiming to be a transferee from the judgment-debtor and the claim is disallowed, the claimant can institute a suit under Order 21 Rule 63 to establish his title to the property. In such a suit, it would be open to the attaching creditor to plead in defense that the transfer was in fraud of the general body of the creditors and was void under Section 53 of the Transfer of Property Act. Similarly, if the claim of the transferee is allowed, the attaching creditor may sue on behalf of himself and all other creditors under Section 53 of the Transfer of Property Act for a declaration that the transfer was void as it was in fraud of the creditors."
7. and would contend that the above observations would clearly indicate that the 1st respondent-authority could attach the subject property and if it is attached it is always open to the petitioners to institute a suit in a competent jurisdictional civil Court for the reliefs envisaged in Section 17 of the Revenue Recovery Act.
8. The impugned attachment of the property was made under Section 27 of the Revenue Recovery Act read with Section 17-C of the Act on the ground that the sale transactions entered into between the petitioners and the 4th respondent, the defaulter-assessee on 2.8.1996 are fraudulent and, therefore, they are void in terms of Section 17-A of the Act. Therefore, it is relevant, at the threshold, to notice the above statutory provisions.
9. Section 17-A of the APGST Act reads-
17-A: Transfers to defraud revenue void: Where during the pendency of any proceeding 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.
10. Section 17-C of the APGST Act reads-
17-C. Special powers of Deputy Commissioner under the Revenue Recovery Act :
(1) A Deputy Commissioner shall have the powers of a Collector under the Andhra Pradesh Revenue Recovery Act, 1864 for the purpose of recovery of any amount due under this Act.
(2) Subject to the provisions of sub-section (3) all Deputy Commercial Tax Officers shall, for the purposes of recovery of any amount due under this Act, have the powers of the Mandal Revenue Officer under the Andhra Pradesh Rent and Revenue Sales Act, 1839 for the sale of property distrained for any amount due under this Act.
(3) Notwithstanding anything contained in the Andhra Pradesh Rent and Revenue Sales Act, 1839, the Deputy Commercial Tax Officer in the exercise of the powers conferred by sub-section (2) shall be subject to the control and superintendence of the Deputy Commissioner.
11. Section 27 of the Revenue Recovery Act reads-
27. Mode of attachment:- The attachment shall be effected by affixing a notice thereof to some conspicuous part of the land. The notice shall set forth that unless the arrears, with interest and expenses, be paid within the date therein mentioned, the land will be brought to sale in due course of law. The attachment shall be notified by public proclamation on the land, and by publication of the notice in the District Gazette.
12. It is also relevant to notice the provisions of Section 17 of the Revenue Recovery Act inasmuch as it will have a bearing on the decision-making in these cases. Section 17 of the Revenue Recovery Act reads-
"17. Claims to property distrained and sold- Revenue to be the first charge:- Where any person, not being a defaulter or responsible for a defaulter, may claim a right to the property distrained, and the distrainer may, notwithstanding, cause the same to be sold such claimant, on proof of such right in any Civil Court of competent jurisdiction, and in the event of the distrainer being unable to prove the responsibility for the arrear of revenue, on account of which the property may have been sold, shall recover from the distrainer the full value of such property, with interest, costs and damages, according to the circumstances of the case. But claims to crops upon the ground or to gathered products of the ground attached, in the possession of the defaulter, whether founded upon a previous sale, mortgage, or otherwise, shall not bar the prior claim of revenue due from the ground upon which such crop or product may have been grown."
13. A careful reading of Section 17-A of the APGST Act would indicate that this Section itself does not authorize attachment of any property. But it contains a statutory declaration that a fraudulent sale during the pendency of any proceeding under the APGST Act or after completion thereof would be void.
14. The primary question that falls for consideration is whether the declaration envisaged under Section 17-A of the Act could validly be made by the 1st respondent-authority as claimed by the learned Special G.P. for Taxes or such a declaration could be granted only by a competent Civil Court as asserted by the learned counsel for the petitioners in the premise of the ratio laid down by the Apex Court in Gangadhar Viswanadh Ranade's case (1 supra). The second question that would arise for consideration is whether on the date of the sales i.e., 2.8.1996 the proceedings as envisaged under Section 17-A of the Act were pending or not so as to attract that Section.
15. The impugned attachments were made admittedly in the purported exercise of power conferred upon the 1st respondent under Section 17-C of the APGST Act read with Section 27 of the Revenue Recovery Act. The provisions of Section 17 of the Revenue Recovery Act clearly and specifically provide that the Recovery Officer would be entitled to sell the property of the defaulter-assessee and any person having claim over the property would have to institute a suit in a Civil Court of competent jurisdiction for the reliefs envisaged in the said Section. The validity of Section 17 of the Revenue Recovery is not assailed before us. Therefore the provisions contained in Section 17 of the Revenue Recovery Act should be given effect to. In that view of the matter, we should state the Judgment of the Apex Court in Gangadhar Viswanath Ranade's case (1 supra) has no application to the facts of the present case. In that case, the Apex Court was considering the provisions of the Income Tax Act and Rule 11 of the II Schedule to the Income Tax and held that wherever the claim of the third party relating to the title to the distraint property arises, the tax recovery officer will necessarily have to get the title adjudicated before a Court of competent civil jurisdiction. In the instant case the recovery proceedings are undertaken under Section 27 of the Revenue Recovery Act read with Section 17-C of the Act and, therefore, the provisions of Section 17 of the Revenue Recovery Act are equally applicable. If the provisions of Section 17 of the Revenue Recovery Act are attracted, it makes abundantly clear that the 1st respondent will have undoubtedly the power to attach the property of even a third party and it is open for the third party, who claims title or interest in the property, to institute a suit in a Civil Court of competent jurisdiction for appropriate reliefs specified in the said Section. The observations of the Apex Court in paragraph 10 of the Judgment in RANADE's case (supra 1) extracted above would also support our view otherwise.
16. It is true that generally speaking a statutory authority with a limited jurisdiction and without trappings of a Civil Court cannot go into the question of title and only a competent Civil Court can decide question of title. But, if a statute empowers a statutory authority specifically or by necessary implication to declare a sale transaction as void if the same is entered into between the parties to defraud the public revenue, even then it cannot be said that such authority is not entitled to enquire into the nature of the transaction, whether it is a fraudulent one or a bonafide one and record its finding. It may be that any finding that may be recorded by such statutory authority with limited jurisdiction may not be final and it may be subject to the decree of a Civil Court unless the jurisdiction of the Civil Court is ousted by the statute. Any contrary view will defeat very purpose of Sections 17 and 27 of the Revenue Recovery Act read with Sections 17-A and 17-C of the APGST Act. In the instant case, as already noticed above Section 17 of the Revenue Recovery Act itself provides for the remedy to the third party whose property is sought to be distrained to institute a suit in a competent Civil Court for the reliefs specified therein. Therefore, we do not find any merit in the contention advanced on behalf of the petitioners that the 1st respondent lacked jurisdiction to record a finding that the sales effected on 2.8.1996 are void inasmuch as the same were effected to defraud the public revenue and such a declaration would have been granted only by a competent civil Court.
17. The contention that as on the date of the sales i.e., 2.8.1996 no proceedings were pending and, therefore, Section 17-A of the Act is not attracted, in our considered opinion, is not well founded. The language employed in Section 17-A of the Act is clear, unambiguous, precise and it does not admit more than one meaning. Section 17-A of the Act gets attracted in two situations (i) during the pendency of any proceeding; and (ii) after completion thereof. If the contention of the learned Counsel for the petitioners is accepted and the meaning of the words 'any proceeding' occurring in Section 17-A of the Act is restricted only to a proceeding after completion of assessment, the second limb of Section 17-A of the Act would be rendered nugatory. It is trite to state that recovery proceedings would be taken to have been completed only when the total tax payable has been recovered. If that is so and if the contention of the learned Counsel for the petitioners is accepted, the second limb of Section 17-A of the Act would become totally superfluous and unnecessary and such an interpretation is totally impermissible. Added to this, it is relevant to note that the words 'any proceeding' occurring in Section 17-A of the Act are not qualified by any preceding or succeeding words. Under these circumstances, these words should be given full meaning and content and if they are so given, understood and interpreted, the words 'any proceeding' would include assessment proceedings also. In the instant case, admittedly assessment proceedings were initiated by issuing show cause notices which were served on the dealer on 23.7.1996 and 4.1.1996, well before the execution of the sale deeds on 2.8.1996.
18. In the result and for the foregoing reasons, we do not find any merit in the writ petitions and they are accordingly dismissed with no order as to costs.