Author: Khushi J Prajapati
The Madras High Court ruled that GST laws make it impossible for debtors to part with their properties that are potentially dangerous to state interests.
The Court observed that Section 81 of the Goods and Service Tax Act limits assessors in prosecution with an aim of safeguarding government’s fiscal interests from being dissipated by properties transfer or disposition. This clause has similarities with previous legal provisions like TNVAT Act, 2006 or TNGST Act, 1959. Therefore, proving one’s bona fides rests with the petitioner within legal parameters.
The Court further observed that it was not sufficient to rely solely on an encumbrance certificate. The consideration paid for 1.25 acres was also too small to exclude scrutiny – Rs.3,96,600/-.
It was ruled by the court that not to interfere with the disputed order of attachment but ordered that the respondents should refrain from escalating the matter by selling the property so long as the petitioner files a suit for declaration within thirty days of the order.
The court stated that the petitioner is also permitted to request an interim order against further coercive measures from official respondents.
It was further ordered by the court that the respondent should hold on all recovery proceedings for three months, pending suit outcome. Failure to file as directed will cause respondent to pursue him through lawful means.
Fact
The petitioner obtained two parcels of land through two different sale deeds. They were purchased for a total of 1.25 acres at Rs2,41,600/- and Rs1,55,000/- respectively. Those lands were acquired from a partnership comprising four partners namely S. Senthil Kumar, N. Gowri, R. Mohan and R. Nisha Nirmala.
The firm along with its partners owed a debt worth Rs9,81,867 in tax arrears to be paid on demand basis after order passed by way of certain dues encompassing such time when enactment took place under GST Act on August 23rd, 2021 instead of their own standing debts which existed on December 3rd, 2021 for M/s RRSF Ltd.
As there were no encumbrances registered at the time she bought them; thus she claimed to be a bona fide buyer who had nothing against her according to principles of natural justice but attachment and other relevant notifications were sent without prior notice so that made them invalid in nature perhaps even though they claim ownership rights for such case; because any attachment made should have been done after considering everything beforehand just like in this case where her title was unblemished till then when it went under such order that resulted from notice served at later stage than purchase date itself which is something unexpected most often.
In line with the GST Act 2017 Section 81, there is still a protracted argument over a letter which was contested by the Petitioner. On 03/08/2022, two pieces of land were bought through a sale agreement at a total cost of Rs 2,41,600/- and Rs 1,55,000/-2 respectively.
Submissions
The petitioner alleged that the attachment and notices were issued against the principles of natural justice because it was not informed in any way before the placement of the said attachment.
It was further submitted that they maintain their position as legitimate buyers, saying this property had no charges associated with it before its purchase.
Additional Government Pleader contended that the writ petition lacks merit and should be dismissed on grounds that it is affected by section 81 of the GST Act.
It was alleged that these partnerships had accumulated significant debts amounting to Rs 981867/- long before hence making them suspicious to some members of the local community regarding this transaction.
Counsel for the Respondent contended that the petitioner must prove their bona-fide status by means of a suit instead of through summary judgment proceedings under Article 226 of the Constitution.
Conclusion
The bench directed that all further action will be subject to the final outcome of the suit to be filed by the petitioner within the period provided in the judgment.
It was made clear that if the petitioner failed to file a suit as directed, the respondent is at liberty to proceed against the petitioner in the manner known to law.
Case Details
Case Name – S Geetha vs The state tax officer, Om Namashivaya Paper and Boards through partners
Court – Madras High Court
Date of Judgement – 25.07.2024
Judge – C.Sarvanan
