Supreme Court of India
THE COMMISSIONER, TRADE TAX, U.P.versusM/S RADICO KHETAN LTD
- Citation
- 2022 INSC 976
- Decided
- 19 September 2022
- Disposal
- Dismissed
- Bench
- M R SHAH
Holding
Section 34 is applicable only when an immovable property transfer by the original assessee occurs during pendency of proceedings with intent to defraud; since no proceedings were pending at the time of transfer, the endorsement under Section 34 is invalid.
Summary
The original assessee, M/s. Shaw Scott Distillery (P) Ltd., owed trade tax for the years 1980-81 and 1981-82. It sold its plant, machinery and goods to M/s. Radico Khaitan Ltd. on 12‑12‑1985 and 01‑01‑1986 for Rs.12,12,000, i.e., before any assessment or recovery proceedings were pending. The assessment for 1980‑81 was concluded in 1984, reopened in 1988, and a recovery certificate was issued in 1990, which the Assessing Officer later endorsed against the purchaser under Section 34 of the U.P. Trade Tax Act, 1948. The Tribunal held that Section 34 could not be invoked because the transfer was not made during pendency of proceedings and was not intended to defraud the revenue, and the High Court affirmed this view. The Revenue appealed, arguing that the transfer was a voidable conveyance under Section 34. The Supreme Court examined the statutory language of Section 34, emphasizing that it applies only to transfers of immovable property made during pending proceedings with a fraudulent intent, and noted that the transferred assets were sold for full consideration when no proceedings were pending. Consequently, the Court dismissed the appeals, confirming that the endorsement of the recovery certificate against the purchaser was unlawful.
Issues considered
- Whether Section 34 of the U.P. Trade Tax Act, 1948 applies to the transfer of plant, machinery and goods when the transfer occurred before any assessment or recovery proceedings were pending.
- Whether the transfer was made with the intention of defrauding tax dues, thereby rendering it void under Section 34.
- Whether the purchaser, as a transferee in good faith and for consideration, is protected from liability under the endorsement of the recovery certificate.
Legislation cited
Subjects
Trade taxSection 34Transfer of propertyTax fraudBona fide purchaserAssessment proceedingsRecovery certificateU.P. Trade Tax Act
Judgment
[2022] 12 S.C.R. 797 797
THE COMMISSIONER, TRADE TAX, U.P. A
v.
M/S RADICO KHETAN LTD.
(Civil Appeal Nos. 6396-6397 of 2009)
SEPTEMBER 19, 2022 B
[M. R. SHAH AND KRISHNA MURARI, JJ.]
U.P. Trade Tax Act, 1948 – s.34 – When applicable – Held:
s.34 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 C
defrauding any such tax or other dues – As per proviso to s.34,
nothing in s.34 shall impair the rights of a transferee in good faith
and for consideration – In the present case, the transfer of goods,
plant, and machinery (may be treated as immovable property) in
favour of the respondent-purchaser took place on 12.12.85 and
01.01.86 for consideration, whereas the assessment proceedings D
(for the assessment years 1980-81,w.r.t which the amount of tax
due andpayable by the original assesseeis in dispute) had concluded
in the year 1984 and assessment was reopened in the year 1988 –
Also, the recovery certificate was issued against the original assessee
on 15.04.90 and the endorsement for recovery against the purchaser E
was on 26.03.93 – Thus, at the time of transfer of immoveable
property of the assessee which was for value/consideration, no
proceedings under the Act were pending, therefore s.34 shall not
be applicable – Hence, the endorsement to recover the amount due
and payable by the original assessee against the purchaser which
was in exercise of powers u/s.34 was rightly set aside by the Trade F
Tax Tribunal – No error committed by High Court in dismissing the
revision applications confirming the orders passed by the Tribunal.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.6396-
6397 of 2009.
G
From the Judgment and Order dated 16.12.2008 of the High Court
of Judicature at Allahabad in Trade Tax Revision Nos.664 and 667 of
1999.
R. K. Raizada, Sr. Adv., Bhakti Vardhan Singh, Vikas Bansal,
Advs. for the Appellant.
H
797
798 SUPREME COURT REPORTS [2022] 12 S.C.R.
A Dhruv Agarwal, Shwetank Sailakwal, Nishit Agarwal, Shubham
Sharma, Ms. Kanishka Mittal, Vipin Kumar Jai, Advs. for the Respondent.
The Judgment of the Court was delivered by
M. R. SHAH, J.
B 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 Courthas dismissed the said revision applications preferred by
the Revenue and has confirmed the orders passed by the Trade Tax
Tribunal (hereinafter referred to as the Tribunal) allowing Appeal Nos.
C 259/97 (80-81) and 260/97 (81-82) holding that recovery certificate issued
in 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.
D 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 1980-81 and 1981-82, respectively. The recovery
E 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
F 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. 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
G 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.)
H
THE COMMISSIONER, TRADE TAX, U.P. v. M/S RADICO 799
KHETAN LTD. [M. R. SHAH, J.]
challenged the endorsement of recovery certificate against it before the A
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
B
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
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) C
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 D
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 – E
M/s. Shaw Scott Distillery (P) Ltd. for the assessment years 1980-81. 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 place on 12.12.1986 and F
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. G
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 H
800 SUPREME COURT REPORTS [2022] 12 S.C.R.
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;
B
Provided that nothing in this section shall impair the rights of a
transferee in good faith and for consideration.
(2) Nothing in sub-section (1) shall apply to a charge or transfer
in favour of a banking company as defined in the Banking
C 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
D of defraudingany 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
E 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 assessment proceedings and/or any proceedings under the Act and/
F or recovery proceedings were pending. As observed hereinabove, the
assessment proceedings were concluded in the year1984 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/
G 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
H of the Act shall not be applicable at all.
THE COMMISSIONER, TRADE TAX, U.P. v. M/S RADICO 801
KHETAN LTD. [M. R. SHAH, J.]
6. Under the circumstances, no error has been committed by the A
High Court in dismissing the revision applications confirming the orders
passed by the Trade Tax Tribunal 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 B
appeals fail and the same deserve to be dismissed and are accordingly
dismissed. No costs.
Divya Pandey Appeals dismissed.
(Assisted by : Deepak Panwar, LCRA) C
D
E
F
G
H
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Trade tax"Sign in to search