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2018 DIGILAW 260 (GUJ)

CHETNA VIJAY SHAH v. STATE OF GUJARAT

2018-01-25

A.S.SUPEHIA, HARSHA DEVANI

body2018
JUDGMENT : A.S. SUPEHIA, J. 1. RULE. Mr.Chintan Dave, learned Assistant Government Pleader waives service of Rule for the respondent – State. 2. The present writ petition is directed against the Notice dated 22.07.2016 issued by the respondent no.2 instructing the respondent no.3 not to issue “No Objection Certificate” to the petitioner apropos the property being Flat No.1005/B Wing, in her name. 3. The Petitioner is residing in Flat No.204 B Wing, of Respondent no.3 Walkeshwar Chandanbala Cooperative Housing Society Ltd. In the year 2016 the Petitioner came to know that her neighbour Mr. Sureshchandra N. Shah and his wife Mrs. Dharmishtaben Shah intended to sell their flat in the same society being Flat No. 1005/ B Wing. Since the Petitioner was interested in purchasing the flat, she approached the owners and finalized the terms of the deal. The Petitioner gave public notice on 1.2.2016 in two newspapers regarding the intended purchase and any person having any claim in respect of the property was requested to inform the Petitioner regarding the claim. The sale deed was thereafter, executed between the sellers of the flat in question and the petitioner, and the same was registered on 27.04.2016. 4. The sellers of the flat in question as well as the petitioner filed appropriate applications as required under the byelaws of the cooperative housing society for the purpose of transfer of name in the share certificate of the society. Transfer fees had also been duly paid to the society with respect to the flat in question. While the Petitioner had already taken possession of the flat on the basis of the registered sale deed and she was about to initiate the process of making renovations in the flat, she was informed by the Chairman of the society that the impugned notice had been received from Commercial Tax Officer of the State of Gujarat on 25.7.2016 regarding outstanding tax dues of a partnership firm “M/s Apurva Aluminium Corporation" in which the erstwhile owners and sellers of the flat were allegedly partners and hence the Chairman had been instructed not to transfer the said flat in any other name or issue a no-objection certificate in respect of the property. 5. The petitioner immediately contacted the Sellers of the flat to inquire about the issue. The sellers informed the Petitioner that they were never partners in the partnership firm “Apurva Aluminium Corporation”. 5. The petitioner immediately contacted the Sellers of the flat to inquire about the issue. The sellers informed the Petitioner that they were never partners in the partnership firm “Apurva Aluminium Corporation”. It was their son Daxesh who was a partner but he did not have any right over the flat in question which was sold to the Petitioner. The sellers further informed that they had initiated the process of joining the partnership firm but the deed was never finalized since the retiring partners did not sign the deed. The sellers said that they have in their possession the original deed which was sought to be relied upon and such deed was never fully executed. The petitioner requested the sellers to accordingly address a letter to the Commercial Tax Officer. The sellers duly addressed a letter on 30.8.2016 through their consultant. Request was made for withdrawal of the impugned notice. Since the communications addressed by the petitioner, the sellers and by the Respondent no.3 Society have been not been taken into cognizance by the Respondent authorities, the petitioner has approached by filing the present writ petition. 6. Mr. Uchit Sheth, learned advocate for the petitioner has submitted that the impugned notice issued by the respondent authority to the housing society is wholly without jurisdiction, bad and illegal as the petitioner is a bonafide purchaser of property for valuable consideration. No charge was or has been imposed by the respondent authority on the property in question. The petitioner is not at all related to the sellers of the property. The petitioner gave public notice regarding the intended purchase of property before finalizing the purchase of property. The sale deed was registered on 27.4.2016 and the petitioner paid a total consideration of Rs. 7.02 crores for purchasing the property with the last installment also paid on 27.4.2016. The ownership of the property vests with the petitioner as per the Transfer of Property Act, 1882. He has contended that the impugned notice was issued after the flat in question was already transferred in the name of petitioner, hence in such facts and circumstances the action of the Respondent authorities in denying full right of ownership to the petitioner by issuing impugned notice is wholly without jurisdiction, bad and illegal. 7. He has contended that the impugned notice was issued after the flat in question was already transferred in the name of petitioner, hence in such facts and circumstances the action of the Respondent authorities in denying full right of ownership to the petitioner by issuing impugned notice is wholly without jurisdiction, bad and illegal. 7. Learned Advocate Mr.Sheth has further submitted that the respondent authority in any case does not have any jurisdiction under the Gujarat Value Added Tax Act, 2003(herein after referred to as Act) to issue the impugned notice to 'the Society of the Petitioner since the Petitioner had already purchased the flat before any proceeding was initiated by the VAT authorities. It was also contended that in case, the VAT authorities intended to stake any claim over the property for the alleged VAT dues then the only recourse available to them was to approach the Civil court. To strengthen his contention, he has placed reliance on the judgments in the case of Jayesh Vadilal Parekh Vs. Commercial Tax Officer, reported in (2015) 78 VST 19(Gujarat) and Tax Recovery Officer Vs. Gangadhar Vishwanath Ranade (Decd), reported in (1998) 234 LTR 188 (SC). He has also placed reliance on the judgment in the case of The Ahmedabad Municipal Corporation of the City of Ahmedabad Vs. Haji Abdul Gafur Haji Hussenbhai, reported in AIR 1971 SC 1201 for the proposition of law that the petitioner cannot be fixed with any constructive notice for the arrears of VAT authorities. In view of the aforesaid submissions, he urged that impugned letter dated 22.07.2016 may be quashed and set aside. 8. A fortiori, Mr.Chintan Dave, learned AGP for the respondent authorities has submitted that the recovery proceedings for the arrears of VAT were initiated against the owner i.e. Sureshchandra N. Shah and his wife Dharmishtaben S. Shah and the registered saledeed executed between them on 27.04.2016 could not have been entered since the outstanding dues amount of Rs.7,61,94,462/- is due and payable from them. He has submitted that the aforesaid outstanding demand was of the partnership firm i.e. Apurva Aluminum Corporation” of which there were seven partners. He has submitted that assessment proceedings initiated by the respondent authorities for the period between 1995-96, 1996-97 and 2002-03 to 2006-07, a huge amount of almost Rs.7.61 crores was raised. 9. He has submitted that the aforesaid outstanding demand was of the partnership firm i.e. Apurva Aluminum Corporation” of which there were seven partners. He has submitted that assessment proceedings initiated by the respondent authorities for the period between 1995-96, 1996-97 and 2002-03 to 2006-07, a huge amount of almost Rs.7.61 crores was raised. 9. It is contended by learned AGP that there was an amendment to the nomenclature of the partnership deed on 24.05.2006, wherein Sureshchandra N. Shah, Dharmishtaben S. Shah and Jagdish N. Shah were inducted as partners in M/s. Apurva Aluminum Corporation. He has submitted that Sureshchandra N. Shah has personally attended the assessment proceedings by remaining present as a partner of M/s. Apurva Aluminum Corporation. Hence, it cannot be said that he was never a partner. A notices dated 11.01.2016 and 03.08.2016 was issued by the respondent authorities for recovery of the outstanding amount upon Sureshchandra N. Shah and his wife Dharmishtaben S. Shah. 10. Learned AGP invited attention of this Court to Section 47 of Act and has submitted that in order to defraud the respondent authorities, Mr. Sureshchandra N. Shah and his wife Dharmishtaben S. Shah transferred the housing the property in favour of the petitioner for deliberating and avoiding the payment of statutory government dues which is in violation of Section 47 of the Act, hence the respondent-authority was justified in issuing the impugned notice. 11. The significant undisputed facts in the present writ petition are that : a. The Petitioner gave public notice on 1.2.2016 in two newspapers regarding the intended purchase and inviting objections / information regarding any claim. Thereafter, sale-deed was executed by the petitioner with respect of Flat No.1005/B Wing, on 26.04.2016. The petitioner paid entire consideration of Rs.7, 02,00,00,000/- to the seller of the property in question prior to the registration of the saledeed. b. The sellers Sureshcandra N Shah and Dharmishtaben S Shah are partners of M/s.Apurva Aluminum Corporation. An outstanding demand to the tune of Rs.7,61,94,462/- is due and payable by the partnership firm. There is no relationship between the petitioner and the sellers. c. No charge is created on the property in question by the Respondent authorities. 12. b. The sellers Sureshcandra N Shah and Dharmishtaben S Shah are partners of M/s.Apurva Aluminum Corporation. An outstanding demand to the tune of Rs.7,61,94,462/- is due and payable by the partnership firm. There is no relationship between the petitioner and the sellers. c. No charge is created on the property in question by the Respondent authorities. 12. Now adverting to the case before us, we notice that the affidavit filed by the respondent no.2 would suggest that the VAT dues to the tune of Rs.7,61,94,462/- have accrued for the period between the Years 1995 and 2007. The respondent authorities thus, have issued the impugned notice with respect to the aforesaid properties in the Year 2016, whereas the demand was pending since the Year 1995. The respondent authorities did not respond to the public notice given by the petitioner on 01.12.2016 in two newspapers and only after the saledeed was registered they informed the respondent no.3 Society not to issue an No Objection Certificate regarding property in question. Thus, it is axiomatic that the respondent authorities are negligent in not raising any objection or providing any information of any dues in response to the notice of the petitioner though the dues had accrued since 1995. The respondent-authority has not produced any documents indicating that any steps were taken by them qua recovering the dues prior to 2016. The Supreme Court in the case of The Ahmedabad Municipal Corporation (Supra) while dealing with the issue of the dues of the Corporation and in reference to Section 3 of the Transfer of the Properties Act, 1882 has observed thus: “Now the circumstances which by a deeming fiction impute notice to a party are based on his willful abstention to enquire or search, which a person ought to make or, on his gross negligence. This presumption of notice is commonly known as constructive notice. Though originating in equity this presumption of notice is now apart of our statute and we have to interpret it as such. Willful abstention suggests conscious or deliberate abstention and gross negligence is indicative of a higher degree of neglect. This presumption of notice is commonly known as constructive notice. Though originating in equity this presumption of notice is now apart of our statute and we have to interpret it as such. Willful abstention suggests conscious or deliberate abstention and gross negligence is indicative of a higher degree of neglect. Negligence is ordinarily understood as an omission to take such reasonable care as under the circumstances it is the duty of a person of ordinary prudence to take in other words it is an omission to do something which a reasonable man guided by considerations which normally regulate the conduct of human affairs would do or doing something which normally a prudent and reasonable man would not do. The question of willful abstention or gross negligence and, therefore, of constructive notice considered from this point of view is generally a question of fact or at best mixed question of fact and law depending primarily on the facts and circumstances of each case and except for cases directly falling within the three explanations no inflexible rule can be laid down to serve as a straight jacket covering all possible contingencies.” “In any event the plaintiff could not reasonably have thought that the Municipal Corporation had not cared to secure payment of the taxes due since, 1949. On the facts and circumstances of this case, therefore, we cannot hold that the plaintiff as a prudent and reasonable man was bound in enquire from the Municipal Corporation about the existence of any arrears of taxes due from the receivers. It appears from the record, however, that he did in fact make enquiries from the receivers but they did not give any intimation. The plaintiff made a statement on oath that when he purchased the building in question it was occupied by the tenants and the rent used to be recovered by the receivers. There is no rebuttal to this evidence. Now, if the receivers were receiving rent from the tenants, the reasonable assumption would be that the Municipal taxes which were a charge on the property and which were also given priority under Section 61 of the Provincial Insolvency Act. 1920, had been duly paid by the receivers out of the rental income. The plaintiff could have no reasonable ground for assuming that they were in arrears. 1920, had been duly paid by the receivers out of the rental income. The plaintiff could have no reasonable ground for assuming that they were in arrears. From the plaintiffs testimony it is clear that he did nevertheless make enquiries from the receivers if there were any dues against the property though the enquiry was not made specifically about Municipal dues. Apparently he was not informed about the arrears of Municipal taxes. This seems to us explainable on the ground that the receivers had, after securing appropriate orders, for some reason not clear on the record, omitted to pay the arrears of Municipal taxes and they were, therefore, reluctant to disclose this lapse on their part. On these facts and circumstances we do not think that the plaintiff could reasonably be fixed with any constructive notice of the arrears of Municipal taxes since 1949”. 13. In the present case it is evident that the petitioner had issued public notices dt.1.2.2016 in two newspapers inviting any claim on the property. The respondent authorities did not respond to the same. The petitioner was never informed about the VAT dues either by the sellers or by the Respondents. Therefore, in our opinion the respondents can be said to be negligent in not being attentive to the notice issued by the petitioner, hence, the petitioner cannot be fixed with any constructive notice of the VAT dues. 14. Learned AGP Mr.Dave has tried to justify the action of the Respondents by taking shelter under section 47 of the Act, the same reads as under: 47. Transfer to defraud revenue void: "Where a dealer after any tax has become due from him creates a charge on or parts with the possession by way of sale, mortgage, exchange or any other mode of transfer whatsoever of any of his property in favour of any other person with the intention of defrauding the Government 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 revenue void. " 15. The core component which emanates from a bare reading of the aforesaid section is that the charge or transfer of the property shall be void if it is made with an “intention of defrauding the government revenue”. Thus, the transfer of property can be declared void provided there is intention to defraud the government revenue. " 15. The core component which emanates from a bare reading of the aforesaid section is that the charge or transfer of the property shall be void if it is made with an “intention of defrauding the government revenue”. Thus, the transfer of property can be declared void provided there is intention to defraud the government revenue. The Act does not lay down any mechanism to declare the transfer as void. In our considered opinion, the only remedy available to the respondent authorities is to approach the Civil Court for a declaration to treat the transfer as void by adducing evidence of an “intention to defraud”. The Division Bench in the case of Jayesh Vadilal Parekh(supra) while examining the provisions of section 47 and 48 of the Act, visàvis similarly worded section 218 of the Income Tax Act, 1961 has observed thus: “Quite apart from this, as would be clear from the discussion hereinafter, courts have taken a view that subsection(1) of section 281 of the Act only provides for the eventuality of the transaction hit by the said provisions as being void. It does not create any machinery for the Revenue authorities to entertain dispute and declare the transaction to be void for which purpose, only a civil suit would lie.” “It is true that there is no explicit provision made under the GVAT Act as is provided under the IInd Schedule of the Income Tax Act, however, it is a well settled law that in the event of any dispute in relation to the title of any property, it is the civil court which shall have a jurisdiction. This has also been emphatically held and observed by the Apex Court in Tax Recovery Officer v. Gangadhar Viswanath Ranade (Decd) 234 ITR 188(SC)…..” 16. Unquestionably, in the present case no tax was due on the petitioner and no charge is created on the property in question in respect of the alleged dues of the erstwhile owner which is an essential requirement of the section. Hence, the applicability of the provisions of section 47 in the case of the petitioner itself is an argumentative issue. In such circumstances, the only recourse available for the VAT authorities is to approach the Civil Court to annul the transfer on the ground that it was made with an intention to defraud the government. 17. Hence, the applicability of the provisions of section 47 in the case of the petitioner itself is an argumentative issue. In such circumstances, the only recourse available for the VAT authorities is to approach the Civil Court to annul the transfer on the ground that it was made with an intention to defraud the government. 17. There is yet another issue which has been perceived by us and the same necessitates observations. The Respondent no.2 authority vide impugned notice/communication dt.22.7.2016 has instructed respondent no.3 Society instructing it not to issue “No objection Certificate” to the petitioner. The genesis of section 47 lies in section 44 which envisages special mode of recovery to be initiated by issuing notice in writing by the Commissioner to the dealer who holds or subsequently hold monies for or on account of such dealer. Subsection( 6) contemplates recovery of unpaid monies as an arrears of land revenue. Section 45 of the Act, confers power of provisional attachment of property. Subsection(2) states that such provisional attachment shall cease to have effect after the expiry of period of one year from the date of order. Section 46 envisages special powers of tax authorities for recovery of tax as arrears of land revenue. A conspectus of the aforenoted sections of the Act, will postulate that the authorities are not conferred with any powers to issue any communication/notice to the Society instructing it not to issue a “No due certificate” in relation to the property. In our opinion, such notice will circumvent the provisions of the Act as they do not intend to empower or authorize the department to issue directions/instructions directing the Society to refuse “No due certificate” of the property on which charge is established. By issuing the impunged notice debarring the Society from issuing the No due certificate, the authorities have conferred upon themselves with the power which is lacking in the provisions of the Act, hence, the same can be said to be extralegal and unwarranted. Thus, the impugned notice merits to be set aside as the same travels beyond the scope of the provisions of the GVAT Act. However, the department may, if so desire, take appropriate proceedings in accordance with law for having the transfer to be declared as void under section 47 of the GVAT Act. 18. Thus, the impugned notice merits to be set aside as the same travels beyond the scope of the provisions of the GVAT Act. However, the department may, if so desire, take appropriate proceedings in accordance with law for having the transfer to be declared as void under section 47 of the GVAT Act. 18. In the backdrop of the aforenoted legal and factual position, the impugned notice dated 22.07.2016 is quashed and set aside. The Respondent no.3 is directed to issue “No due Certificate” to the petitioner forthwith. The petition is allowed. Rule is made absolute.