Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 63966397 OF 2009
The Commissioner, Trade Tax, U.P. ...Appellant(s)
Versus
M/s Radico Khetan Ltd. …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgments and orders dated 16.12.2008 passed by the
High Court of Judicature at Allahabad in Trade Tax
Revision Nos. 664/1999 and 667/1999, by which, the
High Court has dismissed the said revision applications
preferred by the Revenue and has confirmed the orders
passed by the Trade Tax Tribunal (hereinafter referred to
Signature Not Verified
as the Tribunal) allowing Appeal Nos. 259/97 (8081) and
Digitally signed by
SNEHA
Date: 2022.09.19
17:06:42 IST
Reason:
260/97 (8182) holding that recovery certificate issued in
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the name of M/s. Shaw Scott Distillery (P) Ltd. (hereinafter
referred to as the original assessee) and endorsed against
M/s. Radico Khaitan Ltd. (hereinafter referred to as the
purchaser) could not be proceeded against the purchaser,
the Revenue has preferred the present appeals.
2. The facts leading to the present appeals in a nutshell are
as under:
2.1 That the original assessee – M/s. Shaw Scott Distillery (P)
Ltd., Rampur was in arrear of Rs. 11,28,877/ and Rs.
53,89,035/ of trade tax for the year 198081 and 1981
82, respectively. The recovery proceedings were initiated
against the original assessee. The recovery certificate was
issued. The plant, machinery and the goods belonging to
the original assessee came to be purchased by respondent
herein – purchaser on 12.12.1985 and 01.01.1986 for a
total consideration of Rs. 12,12,000/. The Assessing
Officer (AO) found that the transfer of aforesaid property
was effected by the original assessee at the time when the
assessment proceedings were pending and the Assessing
Officer found that the said transactions in favour of the
purchaser were for the purpose to defraud the Revenue.
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Therefore, in exercise of powers under Section 34 of the
U.P. Trade Tax Act (hereinafter referred to as the Act), the
recovery certificate issued in the name of original assessee
was endorsed by the Assessing Officer treating the
aforesaid transfers void to be recovered the amount from
the purchaser in same way as it had to be recovered from
the original assessee.
2.2 The purchaser – respondent herein M/s. Rampur
Distillery & Chemicals Ltd. (subsequently renamed as M/s.
Radico Khaitan Ltd.) challenged the endorsement of
recovery certificate against it before the First Appellate
Authority. The First Appellate Authority dismissed the
appeals preferred by the purchaser. Feeling aggrieved with
the order of the First Appellate Authority, the purchaser
challenged the same before the Trade Tax Tribunal. The
Tribunal allowed the said appeals and held that the
endorsement of recovery certificate against the purchaser
is bad in law by observing that (i) no assessment
proceedings/proceedings under the Act were pending
when the purchaser – M/s. Rampur Distillery & Chemicals
Ltd. purchased the goods, plant and machinery from the
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original assessee and (ii) that the transactions of sale of
goods, plant and machinery between the original assessee
and the purchaser cannot be said to be with the intention
of defrauding tax or any other dues and (iii) that the
purchaser was the bona fide purchaser.
2.3 Feeling aggrieved with the common judgment and order
passed by the Trade Tax Tribunal, the Revenue preferred
the revision applications before the High Court. By the
impugned judgments and orders, the High Court has
dismissed the said revision applications which has given
rise to the present appeals.
3. We have heard learned counsel appearing on behalf of the
respective parties at length.
4. At the outset, it is required to be noted that the dispute is
with respect to the amount of tax due and payable by the
original assessee – M/s. Shaw Scott Distillery (P) Ltd. for
the assessment years 198081. It has come on record that
the assessment proceedings were concluded in the year
1984. The assessment was reopened in the year 1988. The
transfer of goods, plant and machinery belonging to the
original assessee M/s. Shaw Scott Distillery (P) Ltd. took
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place on 12.12.1986 and 01.01.1986 for a total sale
consideration of Rs. 12,12,000/ which were much prior to
the initiation of reassessment proceedings. It is not in
dispute that the recovery certificate against original
assessee came to be issued on 15.04.1990 and the
endorsement for recovery against the purchaser was on
26.03.1993. It is also required to be noted that the sale
consideration of Rs. 12,12,000/ has not be disputed by
the Revenue. The endorsement to recover the amount due
and payable by the original assessee against the purchaser
is sought to be made in exercise of powers under Section
34 of the Act. Section 34 of the Act reads as under:
“(1) Where, during the pendency of any
proceedings under this Act, any person
liable to pay any tax or any dues creates
a charge on, or transfers any immovable
property belonging to him in favour of
any other person with the intention of
defrauding any such tax or other dues,
such charge or transfer shall be void as
against any claim in respect of any tax or
other dues payable by such person as a
result of the completion of the said
proceedings;
Provided that nothing in this section shall
impair the rights of a transferee in good faith
and for consideration.
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(2) Nothing in subsection (1) shall apply to a
charge or transfer in favour of a banking
company as defined in the Banking
Regulation Act, 1949 or any other
financial institution specified by the State
Government by notification in this
behalf.”
5. Section 34 of the Act shall be applicable only in a case
where there is a transfer of immovable property belonging
to the original assesee, during the pendency of any
proceedings under the Act with the intention of defrauding
any such tax or other dues. As per proviso to Section 34,
nothing in Section 34 shall impair the rights of a
transferee in good faith and for consideration. Thus, the
power of Section 34 can be exercised only in a case where
the transfer of immoveable property belonging to the
original assessee is made during the pendency of any
proceedings under the Act and such transfer is found to be
with the intention to defraud any such tax and other dues.
In the present case, the transfer of goods, plant, and
machinery (may be treated as immoveable property) had
taken place on 12.12.1985 and 01.01.1986 for a sale
consideration of Rs. 12,12,000/. On that day, no
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assessment proceedings and/or any proceedings under the
Act and/or recovery proceedings were pending. As
observed hereinabove, the assessment proceedings were
concluded in the year 1984 and the same was reopened in
the year 1988. The recovery certificate was issued against
the original assessee on 15.04.1990. Thus, at the time of
transfer of immoveable property of the assessee which was
for value/consideration, no proceedings under the Act
were pending, Section 34 of the Act shall not be applicable.
Under the circumstances, the endorsement against the
purchaser dated 26.03.1993, which was in exercise of
powers under Section 34 of the Act has rightly been set
aside by the Tribunal. At the cost of repetition, it is
observed that in the facts and circumstances of the case
narrated hereinabove, Section 34 of the Act shall not be
applicable at all.
6. Under the circumstances, no error has been committed by
the High Court in dismissing the revision applications
confirming the orders passed by the Trade Tax Tribunal
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setting aside the endorsement of recovery certificate issued
in favour of original assessee against the purchaser.
7. In view of the above and for the reasons stated above, both
the appeals fail and the same deserve to be dismissed and
are accordingly dismissed. No costs.
………………………………….J.
[M.R. SHAH]
NEW DELHI; ………………………………….J.
SEPTEMBER 19, 2022 [KRISHNA MURARI]
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