Delve into the legal intricacies of recovery certificates and asset transfers as analyzed by the court. The case sheds light on the interpretation of Section 34 of the Act and its implications on transactions involving the defrauding of taxes and dues. Stay informed about the protection of rights for legitimate buyers under this provision.
Facts
- The original assessee, M/s. Shaw Scott Distillery (P) Ltd., Rampur, was in arrears of trade tax for the years 1980-81 and 1981-82.
- The High Court dismissed revision applications by the Revenue and confirmed the Tribunal’s orders in Appeal Nos. 259/97 and 260/97.
- The Tribunal held that the recovery certificate could not be proceeded against the purchaser as there were no pending assessment proceedings when the purchaser acquired the assets.
- It was deemed that the sale of assets between the original assessee and the purchaser was not intended to defraud tax or any dues, and the purchaser was a bona fide buyer.
- Recovery certificate issued against the original assessee.
- Recovery proceedings initiated against the original assessee.
- Plant, machinery, and goods purchased by the respondent – purchaser on specific dates for Rs. 12,12,000.
- First Appellate Authority dismissed appeals by the purchaser.
- Recovery certificate endorsed by Assessing Officer treating transfers as void, to recover the amount from the purchaser.
- Purchaser challenged First Appellate Authority’s order before Trade Tax Tribunal.
- Assessing Officer found the transfers to the purchaser as an attempt to defraud the Revenue.
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Analysis
- Section 34 of the Act can be exercised only if transfer of immovable property belonging to the original assessee occurred during pending proceedings under the Act with intention to defraud tax and other dues.
- Transfer of goods, plant, and machinery belonging to M/s. Shaw Scott Distillery (P) Ltd. took place prior to reassessment proceedings, therefore Section 34 is not applicable.
- The sale consideration of Rs. 12,12,000/- is not disputed by the Revenue, and no proceedings were pending at the time of transfer.
- Recovery certificate was issued against the original assessee on 15.04.1990, not at the time of transfer of property.
- Section 34 shall not impair the rights of a transferee in good faith and for consideration.
- Tribunal rightly set aside the endorsement against the purchaser as it was not applicable under Section 34 of the Act.
- Assessment proceedings concluded in 1984 were reopened in 1988.
- Section 34 of the Act allows for the recovery of the amount due and payable by the original assessee from the purchaser.
- The provision empowers the authorities to take action against any person who creates a charge or transfers immovable property with the intention to defraud taxes or dues.
- Such charges or transfers will be void against any claims for taxes or dues once proceedings under the Act are completed.
- The rights of a transferee in good faith and for consideration are protected under this section, ensuring they are not impaired.
- Section 34 of the Act is not applicable in the case
- No error has been committed by the
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Decision
- The High Court dismissed the revision applications.
- The orders passed by the Trade Tax Tribunal setting aside the endorsement of recovery certificate were confirmed.
- The recovery certificate was issued in favour of the original assessee against the purchaser.
- Both appeals failed and were dismissed.
- No costs were awarded.
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Case Title: COMMR.TRADE TAX U.P. Vs. M/S RADICO KHETAN LTD. (2022 INSC 976)
Case Number: C.A. No.-006396-006397 / 2009
