THE HONBLE Sr.JUSTICE RAMESH RANGANATHAN AND THE HONBLR Sr.JUSTICE M.SATYANARAYANA MURTHY WRIT PETITION No.13475 OF201028-08-2014 M/s.Showtech Stone International PVT.Ltd..Petitioner The Deputy Commercial Tax Officer-I, Saroornagar Circle, Hyderabad & Ors.Respondents Counsel for the petitioner: Sr.J.V.Rao Counsel for respondents: Sr.D.Srinivas, Learned Special Standing Counsel for Commercial Taxes.

HEAD NOTE: ?.

Citations: 1.

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(1935) All ER259(HL) THE HONBLE Sr.JUSTICE RAMESH RANGANATHAN AND THE HONBLR Sr.JUSTICE M.SATYANARAYANA MURTHY WRIT PETITION No.13475 OF2010

ORDER

: (per Honble Sr.Justice Ramesh Ranganathan) The proceedings of the fiRs.respondent dated 10.08.2009 and 13.06.2010, proposing to recover arrears of tax of the defaulting dealer from the petitioner by invoking the provisions of the Revenue Recovery Act, are questioned in this Writ Petition as being illegal, arbitrary and contrary to law.

The petitioner herein, a private limited company incorporated under the Companies Act, 1956, is a registered dealer on the rolls of the second respondent from 10.11.2004 onwards.

They purchased one hectare of land in Survey No.112/2 of Erraballigudem Village, Nellikuduru Mandal, Warangal District from M/S.Baba Mines and Minerals (the 4th respondent in this Writ Petition) by registered sale deed dated 17.03.2007, and claim to have paid the sale consideration through Demand Draft No.006382 dated 14.03.2007 for Rs.6,39,600/-.

It is their case that they were informed by M/S.Baba Mines and Minerals that there were no dues, lien, charges or arrears of tax; on their application, to quarry black-granite on the subject land, the Assistant Director of Mines and Geology granted them permission on 31.05.2007, after which the quarry lease was transferred and a deed executed in their favour on 16.06.2007; they had verified, whether there were any encumbrances on the subject land, from the Sub-Registrar Office, and were informed that there were none; the third respondent issued notice dated 10.08.2009 informing them that M/S.Baba Mines and Minerals, who had sold the subject land, were in arrears of tax for the years 2005-06 to 2007- 08 and, under Section 27(1) of the A.P.Value Added Tax Act, 2005 (for short, the A.P.VAT Act).persons who have purchased property, belonging to a defaulting dealer, can be proceeded against for recovery of tax arreaRs.they had informed him, by letter dated 24.08.2009, that they had purchased the property, under registered sale deed, from M/S.Baba Mines and Minerals - a registered dealer on the rolls of the third respondent; the fiRs.respondent had again issued notice dated 13.05.2010 informing them that action was proposed to be initiated, under the Revenue Recovery Act, for recovery of tax arrears of the defaulting dealer i.e., the fourth respondent; and they had replied thereto, by letter dated 29.05.2010, that they were not responsible for the tax arrears of the defaulting dealer, they had purchased the land under a bonafide belief and without being aware of any tax arrears allegedly due to the department from the defaulting dealer, and that further proceedings be dropped.

In the counter-affidavit filed by the fiRs.respondent, it is stated that the fourth respondent is an assessee, under the provisions of the A.P.VAT Act, on the rolls of the third respondent; it was a partnership firm consisting of four partneRs.and was carrying on business in mines and minerals; they fell in arrears of tax, pursuant to the assessment order made under the AP VAT Act, for the years 2005-06 Rs.3,53,828/-; 2006-07 Rs.7,46,958/- and 2007-08 Rs.42,686/-; the total arrears of tax due from them was Rs.11,43,468/-; despite several notices, the fourth respondent did not respond and pay the arrears of tax; the fourth respondent has immovable property in Survey No.307/2 and 308/2 of Errabelligudem Village, Nellikuduru Mandal of Warangal District; in order to recover the tax dues, the subject immovable property was attached under the provisions of the A.P.Revenue Recovery Act; Form-IV was issued by the Deputy Commercial Tax Officer, Mahaboobabad Circle, who has territorial jurisdiction over the said land; pursuant to issuance of Form-IV notice, the fourth respondent paid Rs.1,00,000/-; subsequently Form-V notice was also issued and, pursuant thereto, the fourth respondent paid another Rs.1,00,000/-; thus the fourth respondent had paid Rs.2,00,000/-, leaving tax arrears of Rs.9,43,468/- unpaid; while these arrears were due and payable by them, the fourth respondent had sold the subject property to the petitioner without obtaining permission from the department, and without their knowledge; sale of the subject property, to the petitioner by the fourth respondent, is void in view of Section 27(1) of the A.P.VAT Act; the subject immovable property must, therefore, be treated as still belonging to the fourth respondent; notices dated 10.08.2009 and 13.05.2010 were issued to the petitioner who had purchased the subject property; the self serving statement of the fourth respondent at the time of sale, that there were no tax dues, does not make the petitioner a bonafide purchaser; the petitioner cannot claim ignorance of Section 27(1) of the A.P.VAT Act; the fourth respondent did not prove that the transfer was not with an intention to defraud revenue; and as the fourth respondent is, admittedly, a registered VAT dealer, the petitioner ought to have enquired from the 1st respondent, before purchasing the property, whether the fourth respondent was in arrears of tax.

The records placed before this Court show that, despite several notices, the fourth respondent had defaulted in payment of VAT for the years 2005-06 to 2007-08.

Section 25 of the A.P.Revenue Recovery Act, 1864 requires the officer, empowered to attach the land of the defaulter, to cause a written demand to be served on him specifying the amount due, the land in respect of which it is claimed, the name of the party in arrears etc., and the time allowed for payment.

Such demand shall be served by delivering a copy thereof to the defaulter.

Form IV is the demand, prior to attachment of land, under Section 25 of the A.P.Revenue Recovery Act.

The fiRs.respondent requested the Commercial Tax Officer, Mahaboobabad Circle, by letter dated 18.09.2007, to instruct the DCTO, Mahaboobabad to issue Form-IV Notice and further notices under the Revenue Recovery Act for collection of the taxes due.

Pursuant thereto, the Deputy Commissioner (CT).Warangal authorised the DCTO, Mahaboobabad to attach the subject land.

The fiRs.respondent issued another notice dated 15.12.2007 calling upon the fourth respondent to pay tax arrears of Rs.11,43,468/- for the years 2005-06 to 2007-08 (upto June, 2007).The fourth respondent, by letter dated 26.12.2007, informed the fiRs.respondent that their partner was in hospital, and they be granted time upto 15.01.2008 to produce the records.

A demand notice in Form-IV, under Section 25 of the A.P.Revenue Recovery Act, was issued by the Deputy Commercial Tax Officer, Mahaboobabad Circle, on 06.02.2008 calling upon the fourth respondent to pay sales tax arrears of Rs.11,43,468/- within seven days.

The fourth respondent, while acknowledging receipt of the Form-IV notice, informed the fiRs.respondent, by letter dated 25.02.2008, that they had paid Rs.50,000/- by demand draft No.623291 dated 07.02.2008; and they were enclosing two pay orders bearing No.632586 dated 25.02.2008 for Rs.50,000/- and No.632587 dated 25.02.2008 for Rs.19,717/-.

The fourth respondent requested the fiRs.respondent to adjust these amounts towards their tax dues.

Section 26 of the A.P.Revenue Recovery Act stipulates that, when the amount due has not been paid pursuant to the demand and no arrangement for securing the same has been entered to the satisfaction of the Collector, the empowered officer shall proceed to recover the arrears by attachment and sale of the defaulters land.

Section 27 prescribes the mode of attachment and, thereunder, the attachment shall be effected by affixing a notice thereof to some conspicuous part of the land.

This notice is required to set-forth that, unless the arrears with interest and expenses be paid within the date therein mentioned, the land will be brought to sale in due couRs.of law.

The attachment is to be notified by public proclamation on the land, and by publication of the notice in the District Gazette.

Form V is the notice of attachment under Section 27 of the Act.

Form-V notice of attachment, under Section 27 of the Revenue Recovery Act, was issued by the DCTO, Mahaboobabad on 20.09.2008 informing the fourth respondent that they had neither paid nor shown sufficient cause for non-payment of the tax liability of Rs.9,43,468/- i.e., Rs.4,53,828/- for the year 2005-06; Rs.4,46,958/- for the year 2006-07; and Rs.42,682/- for the year 2007-08; and the total dues were Rs.9,43,468/-.

The Form-V notice of attachment, under Section 27 of the Revenue Recovery Act, was published in the Warangal District Gazette on 22.10.2008.

Sr.J.V.Rao, Learned Counsel for the petitioner, would submit that, as the fourth respondent was in default of payment of value added tax for the years 2005-06 to 2007-08, the department should have exercised abundant caution by notifying the properties of the fourth respondent to the public; without taking any precautionary steps, they had abruptly issued the impugned notices to a genuine dealer; the petitioner cannot be made a scapegoat for the negligent acts of the fiRs.and second respondents; they had purchased the land in good faith, under a bonafide belief, and without being aware of the tax arrears due from the defaulting dealer i.e., the fourth respondent; the fiRs.respondent cannot proceed against them, for recovery of the tax arrears of the defaulting dealer, under Section 27(1) of the A.P.VAT Act; the fiRs.respondent can only proceed against the defaulting dealer who is an existing registered dealer on the rolls of the third respondent; they could not, therefore, have proceeded against the petitioner without making any attempt to realize tax arrears from the fourth respondent; the respondents are not justified in asking the petitioner to discharge the liability of the defaulting dealer; the fourth respodnent had stated, in the registered sale deed, that they had paid all taxes due to the commercial tax department; as the petitioner was informed that there were no arrears of tax, they had purchased the subject land after taking all necessary precautions; the competent authority had, by letter dated 31.05.2007, granted them permission to quarry the subject land; and the action of the respondents, in proceeding against them, is contrary to law.

Learned Counsel would rely on Abdul Shukoor v.

Arji Papa Rao ; Ahmedabad Municipal Corporation v.

Haji Abdul Gafur Haji Hussenbhai ; State of Karnataka v.

Shreyas Papers P.

LTD.; Deputy Commercial Tax Officer v.

R.K.Steels Ltd ; Rukmani v.

Deputy CTO (Mad.) ; and Damera Ramakrishna v.

The Commercial Tax Officer, Suryapet .

On the other hand Sr.D.

Srinivas, Learned Special Standing Counsel for Commercial Taxes, would submit that Section 27(1) of the A.P.VAT Act places, on the defaulting dealer, the onus to prove that the transfer was not with the intention to defraud revenue; unlike the proviso to Section 17-A of the APGST Act which made transfer of the property of the defaulting dealer, for adequate consideration and without notice of the pendency of assessment proceedings under the APGST Act or without notice of the tax or other sum payable by the dealer, not to be a void transaction, no such protection is conferred on the transferee under Section 27(1) of the A.P.VAT Act; as the person, who has purchased property from a defaulting dealer, must be held to have constructive notice of the charge in view of Section 26 of the AP VAT Act, it is only if the defaulting dealer discharges the onus, to prove that the transfer is not with the intention of defrauding any tax or other sum payable, can such transfer be held to be valid; as transfer of the subject property, by the fourth respondent to the petitioner, is void it continues to remain their property; and the revenue is entitled to recover VAT even for the assessment period subsequent to the transfer of the property.

Learned Special Standing Counsel places reliance upon State Bank of India v.

DCTO, Suryapet .

Section 53(1) of the Transfer of Property Act, 1882, as it stood before the Amending Act, 1929, read thus:- Every transfer of immovable property made with intent to defraud prior or subsequent transferees thereof for consideration or co-owners or other persons having an interest in such property or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded or delayed.

Where the effect of any transfer of immovable property is to defraud, defeat or delay any such person, and such transfer is made gratuitously or for a grossly inadequate consideration, the transfer may be presumed to have been made with such intent as aforesaid.

Nothing contained in this section shall impair the rights of any transferee in good faith and for consideration.

Section 53(1).as it stands after the Amending Act, 1929, is as under:- Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.

Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.

A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor, shall be instituted on behalf of, or for the benefit of, all the creditORS.While examining the scope of Section 53(1) of the Transfer of Property Act, and the question whether the plaintiff was a bonafide purchaser for value so as to be protected by the second paragraph of Section 53(1).the Supreme Court, in Abdul Shukoor1, held that, where fraud on the part of the transferor is established, i.e.by the terms of paragraph (1) of Section 53(1) being satisfied, the burden of proving that the transferee fell within the exception is upon him; and, in order to succeed, he must establish that he was not a party to the design of the transferor, he did not share the intention with which the transfer had been effected, and that he took the sale honestly believing that the transfer was in the ordinary and normal couRs.of business.

Section 100 of the Transfer of Property Act stipulates that, where immovable property of one person is, by act of parties or operation of law, made security for the payment of money to another and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property' and all the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge; and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.

Section 141 of the Bombay Provincial Municipal Corporation Act, 1949 provided for property taxes to be the fiRs.charge on the premises on which tax was assessed.

Sub- section (1) thereof provided that property taxes due under the Act in respect of any building or land, subject to prior payment of land revenue, if any, due to the State Government thereupon, would be a fiRs.charge, in the case of any building or land held immediately from the Government, upon the interest in such building or land of the person liable for such taxes and upon the movable property, if any, found within or upon such building or land and belonging to such person ; and, in the case of any other building or land, upon the said building or land and upon the moveable property, if any, found within or upon such building or land and belonging to the person liable for such taxes.

In Ahmedabad Municipal Corporation of the City of Ahmedabad2, the defaulter was in arrears of property tax due under the Bombay Provincial Municipal Corporation Act, and the property was brought to sale in execution of a mortgage decree.

When the municipality purported to exercise their charge over the property, the purchaser, in the court auction, filed a suit for declaration that he was the owner of the property and, therefore, arrears of municipal taxes due by the transferor were not recoverable by attachment and sale of the property in the hands of the purchaser.

A Division Bench of the Gujarat High Court accepted the case of the purchaser, and decreed the suit, holding that the charge created in favour of the municipal corporation was not enforceable against the property.

Before the Supreme Court it was contended that there was an express provision in Section 141(1) of the Bombay Provincial Municipal Corporation Act, 1949 for holding the present property to be liable for the recovery of municipal taxes, and, though the property was subject only to a charge not amounting to mortgage and did not involve transfer of interest in the property, the same could nevertheless be sold, for realizing the amount charged, even in the hands of a transferee for consideration without notice; Section 141 was an express saving provision as contemplated by Section 100 of the Transfer of Property Act; the saving provision, contemplated by Section 100 of the Transfer of Property Act, without using express words, could, in effect, provide that the property was liable to sale in enforcement of the charge; if this liability was fixed by a provision expressly dealing with the subject, then the charge would be enforceable against the property even in the hands of a transferee for consideration without notice of the charge; it was not necessary for the saving provision to expressly provide for the enforceability of the charge against the property in the hands of a transferee for consideration without notice of the charge; the plaintiff must be deemed to have constructive notice of the arrears of municipal taxes; as an auction purchaser, he must be held liable to pay these taxes; and the property purchased must also be held subject to this liability in his hands.

It is in this context that the Supreme Court held that Section 141(1) of the Bombay Provincial Municipal Corporation Act merely created a charge in express language; this charge was subject to prior payment of land revenue due to the State Government on such building or land; the Section, apart from creating a statutory charge, did not further provide that this charge was enforceable against the property charged in the hands of a transferee for consideration without notice of the charge; what was enacted in the second half of Section 100 of the Transfer of Property Act was the general prohibition that no charge could be enforced against any property in the hands of a transferee for consideration without notice of the charge; the exception to this general rule must be expressly provided by law; the real core of the saving provision of the law must not be the mere enforceability of the charge against the property charged, but enforceability of the charge against the said property in the hands of a transferee for consideration without notice of the charge; Section 141 was clearly not such a provision; according to Section 3 of the Transfer of Property Act, which is described as the interpretation clause, a person is said to have notice of a fact when he actually knows that fact or when, before wilful abstention from an enquiry or search which he ought to have made or gross negligence, he would have known it; there were three explanations to this definition dealing with three contingencies when a person acquiring immovable property is to be deemed to have notice of certain facts; the circumstances, which by a deeming fiction, impute notice to a party are based on his wilful 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 a part of the statute and has to be interpreted as such; wilful abstention suggests conscious or deliberate abstention and gross negligence, and is indicative of a higher degree of neglect; negligence is, ordinarily, understood as an omission to take such reasonable care as, under the circumstances, 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 consideration which normally regulate the conduct of human affaiRs.would do or doing something which a normally prudent and reasonable man would not do; the question of wilful abstention or gross negligence and, therefore, of constructive notice considered from this point of view is generally a question of fact or at best a mixed question of fact and law depending primarily on the facts and circumstances of each case; 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; the question is not whether the purchaser had the means of obtaining, and might with prudent caution have obtained, knowledge of the charge, but whether in not doing so he acted with wilful abstention or gross negligence; and, being a question depending on the behaviour of a reasonably prudent man, the Courts have to consider it in the background of indian conditions.

In R.K.Steels Ltd.4, a Division Bench of the Madras High Court held that the judgment of the Supreme Court, in Ahmedabad Municipal Corporation2, was comprehensive in all respects, and should be taken note of while dealing with the cases of a transferee for value without constructive notice of sales tax arreaRs.the emphasis laid down by the Supreme Court, to avoid Section 100 of the Transfer of Property Act, was to have an express provision providing for the contrary; mere enforcement of a charge, resorting to the Revenue Recovery Act, was not an answer to Section 100 of the Transfer of Property Act; Section 24(2) of the Tamil Nadu General Sales Tax Act did not provide anything contrary to Section 100 of the Transfer of Property Act; and unless a provision was made in any statute, contrary to the rule of Section 100 of the Transfer of Property Act, a bona fide purchaser for consideration, without notice of the charge, was protected.

In Shreyas Papers (P) Ltd.3, it was contended that, since Section 13(2)(i) of the Karnataka Sales Tax Act created a charge on the property of the defaulting company, the charge would continue on the properties even if it changes hands by transfer.

It is in this context that the Supreme Court held:- ..While the expression ".charge".

is not defined by the KST Act, this concept is well known in property law and has been defined by Section 100 of the Transfer of Property Act, 1882 (hereinafter ".the TP Act".) .As the section itself unambiguously indicates, a charge may not be enforced against a transferee if s/he has had no notice of the same, unless, by law, the requirement of such notice has been waived.

This position has long been accepted by this Court in Dattatreya Shanker Mote v.

Anand Chitaman Datar, and Ahmedabad Municipal Corporation of the City of Ahmedabad v.

Haji Abdul Gafur Haji Hussenbhai (hereinafter ".Ahmedabad Municipal Corporation".).In this connection, we may refer to the latter judgment, which is particularly relevant for the present case In these circumstances, we are of the view that the FiRs.Respondent was a purchaser for value without notice of the sales tax arrears of the Defaulting Company or the consequent charge on the property.

This would, therefore, attract the principle laid down by this Court in Ahmedabad Municipal Corporation, which is also embodied in the proviso to Section 100 of the TP Act.

Thus, the property in the hands of the FiRs.Respondent was free of the charge and it is not open to the appellants to enforce the liabilities of the Defaulting Company in this manner against the FiRs.Respondent.

The High Court, rightly in our view, held that the FiRs.Respondent before us was not liable for the tax arrears of the Defaulting Company.

No issue as to the liability of the Corporation was raised or argued before, or decided by the High Court.

In the present case, firstly, no provision of law has been cited before us that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same.

It remains to be seen, therefore, if in the facts of the present case, the fiRs.respondent had notice actual or constructive of the charge.

..Thus, it is evident that the fiRs.respondent had no actual notice of the charge prior to the transfer.

As to whether the fiRs.respondent had constructive notice of the charge, no substantive argument on this issue was made, either before the High Court or at any rate before us.

Hence, we cannot hold that the fiRs.respondent had constructive notice of the charge.

In these circumstances, we are of the view that the fiRs.respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent charge on the property.

This would, therefore, attract the principle laid down by this Court in Ahmedabad Municipal Corpn.6 which is also embodied in the proviso to Section 100 of the TP Act.

Thus, the property in the hands of the fiRs.respondent was free of the charge and it is not open to the appellants to enforce the liabilities of the defaulting company in this manner against the fiRs.respondent.(emphasis supplied).In Rukmani5 the Madras High Court held that, as the proviso to Section 24-A of the T.N.G.S.T.Act itself indicated, a charge may not be enforced against a transferee if he/she has had no notice of the same unless, by law, the requirement of such notice had been waived; the principle laid down, in Ahmedabad Municipal Corporation2, had been applied in Shreyas Papers P.Ltd3; though the respondent had contended that the petitioner ought to have obtained a 'No Objection' from the revenue, before purchasing the property, no provision had been quoted by the respondent in the counter affidavit; a purchaser, in the normal course, would only verify from the Registration Department as to whether the property to be purchased has any encumbrance; unless the charge is duly registered in the Registration Department, it would not be possible for any prospective buyer to know whether there is any charge over the property for arrears of tax or statutory dues to be paid to the Government or statutory body; no material had been produced before the Court to prove that the notice, demanding arrears of tax, had been served on the defaulter; no material had been placed before the Court to prove that steps had been taken, under the provisions of the Revenue Recovery Act, against the defaulter or the subsequent fiRs.purchaser from whom the petitioner had purchased the property six years after the date of finalisation of the assessment; there was no material to indicate that the petitioner had any constructive notice of the charge; there was no pleading to that effect and, rightly, no arguments had been advanced; and, therefore, the Court was of the view that the case on hand would squarely fall within the ambit of the judgment of the Apex Court in Ahmedabad Municipal Corporation2.I.GENERAL HISTORY OF A STATUTORY PROVISION CAN BE EXAMINED TO ASCERTAIN THE INTENTION OF THE LEGISLATURE: As Section 26 of the AP VAT Act makes the tax, or other sum payable by a VAT dealer, the fiRs.charge on the property of the VAT dealer, the property of the defaulting VAT dealer is, by operation of law, subject to the fiRs.charge of the tax due or any other sum payable by him under the Act.

Under Section 53(1) of the Transfer of Property Act, the right of a creditor to exercise the option to invalidate transfer of immovable property, made with the intention to defeat or delay payment of his dues, is subject to the right of a transferee who has purchased the immovable property, from the transferor, in good faith and for consideration.

Likewise under Section 100 of the Transfer of Property Act, in the absence of any express provision in any law to the contrary, the right of a transferee over the property transferred to him for consideration and without notice of the charge is not affected by the charge of a creditor over the said property.

Is Section 27(1) of the A.P.VAT Act a provision saved from the rigour of Section 100 of the Transfer of Property Act thereby enabling the charge to be enforced against the property in the hands of the transferee for consideration and without notice of the charge?.

If so the protection, conferred by Section 100 of the Transfer of Property Act, would not be available to such a transferee.

In examining the scope of Section 27(1) of the AP VAT Act, it is useful to consider the pre-existing law on the subject, and the changes brought about by the A.P.VAT Act to the pre-existing law i.e., the A.P.G.S.T.Act, 1957.

Interpretation must depend on the text and the context.

That interpretation is best which makes the textual interpretation match the contextual.

A statute is best interpreted when we know why it was enacted.

It is by looking at the provision as a whole in the setting of the entire Act, and by reference to what preceded the enactment and the reasons for it, that the Court should construe the provision.

(Reserve Bank of India v.

Peerless G.F.& I.

Co.LTD.).Where the phraseology, used in a statutory provision, is not clear or unambiguous, the question cannot be satisfactorily resolved without appreciation of the brief history of the Section culminating in the enactment of the provision in the present form.

(Income Tax Officer, Sitapur v.

M/s.M.Bhagwan Das ).The value of historical evolution of a provision, or reference to what preceded the enactment, as an external aid to understand and appreciate the meaning of a provision, its ambit or expanse has been judicially recognised and textually recommended.

(R.S.Nayak v.

A.R.Antulay ; Mohan Lal Tripathi v.

Dist.

Magistrate, Rae Bareilly ).The general history of a statute and the various steps leading upto an enactment, including amendments or modifications of the original bill, can be looked at for ascertaining the intention of the Legislature.

(R.S.Nayak10; Crawford on Statutory Construction (p.388).In examining whether the legislative intent, in amending the law or in enacting a new legislation, is to make substantial changes in the pre-existing law, it is necessary to consider what the law was previous to the particular enactment and to ascertain whether the words used in the statute can be taken to effect the change that is suggested as intended.

For this reason it becomes necessary to consider how the law stood prior to the enactment.

(Abdur Rahim v.

Syed Abur Mohd.

).Section 16-C of the A.P.G.S.T.Act, 1957 stipulated that, notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax, penalty, interest and any other sum, if any, payable by a dealer or any other person under the Act, shall be the fiRs.charge on the property of the dealer or such person.

Section 17-A of the A.P.G.S.T.Act, 1957 provided that where, during the pendency of any proceeding under the Act or after completion thereof, any dealer creates a charge on, or parts with possession by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever of, any of his assets in favour of any other person, with the intention to defraud the 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 as a result of the completion of the said proceeding or otherwise.

Under the proviso thereto, such charge or transfer shall not be void if it is made (i) for adequate consideration and without notice of the pendency of such proceeding under this Act or, as the case may be, without notice of such tax or other sum payable by the dealer; or (ii) with the previous permission of the assessing authority.

In Damera Ramakrishna6, a Division Bench of this Court held that, under Section 16-C of the A.P.G.S.T.Act, the sales tax due to the government shall be the fiRs.charge on the property of the dealer notwithstanding anything to the contrary contained in any law; Section 17-A of the Act lays down that after the initial burden is discharged by the revenue, that the property was sold to defraud the department and avoid payment of sales tax, the onus would shift to the purchaser to show that they were bonafide purchaseRs.they were not parties to the fraud being played by the assessee, and they had paid adequate consideration for the purchase; onus, in the fiRs.instance, is on the department to prove that there was a fraud, and the transaction was made only to defeat the rights of the department to recover the tax; and, in case the department was able to prove it, then the onus would shift to the petitioner to show that they were not parties to the fraud played by the assessee against the department.

In State Bank of India7 a Division Bench of this Court held that, under Section 17-A of the APGST Act, the charge created by the dealer on his assets in favour of any other person, with the intention to defraud the revenue, shall be void; however, as per the proviso, such charge or transfer shall not be void if it is made for adequate consideration and without notice of the pendency of such proceeding under the APGST Act; Section 17-A appears to have diluted the absolute precedence given to arrears of tax under Section 16-C; however the principles of statutory interpretation required the Court, in such circumstances, to have regard to the consequences and to reject a construction that results in hardship, absurdity or anomaly or which leads to inconsistency in the system which the Statute purports to regulate; the contention that Section 17-A should be read as an exception to Section 16-C of the APGST Act could not be accepted as the very purpose of insertion of Section 16-C would be defeated thereby, and it would render the said Section otiose; the non-obstante clause, incorporated in Section 16-C, was intended to exclude not only other statutes but also other provisions of the APGST Act; in Damera Ramakrishna6, the Division Bench of this Court had considered the question relating to burden of proof under Section 17-A; and the question, whether Section 17-A operated as an exception to Section 16-C of the APGST Act, was not examined therein.

II.

IS SECTION271) OF THE A.P.VAT ACT AN EXCEPTION TO THE GENERAL RULE PRESCRIBED UNDER SECTION100OF THE TRANSFER OF PROPERTY ACT?.

Just like Section 16-C of the APGST Act, Section 26 of the A.P.VAT Act, 2005 also stipulates that, notwithstanding anything to the contrary contained in any law for the time being in force, any amount of tax, penalty, interest and any other sum payable by a dealer shall be the fiRs.charge on his property.

However, unlike Section 17-A of the APGST Act, Section 27(1) of the AP VAT Act, 2005 provides that where, during the pendency of any proceedings under the Act or after completion thereof, any dealer creates a charge on, or parts with possession, by way of sale, mortgage, gift, exchange or any other mode of transfer, of any of his assets in favour of any other person, such charge or transfer shall be void unless he proves that such charge or transfer was not with the intention to defraud any tax or any other sum payable.

The words with the intention to defraud the revenue and as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise in Section 17-A of the APGST Act have been deleted, and the words unless he proves that such charge or transfer was not with the intention to defraud any tax or any other sum payable have been introduced in Section 27(1) of the AP VAT Act.

As Section 17-A of the APGST Act was construed, by the Division Bench of this Court in Damera Ramakrishna6, as placing the initial onus on the department to prove that the property was transferred only to defraud their right to recover the tax; and only then would the onus shift on a bonafide transferee, for adequate consideration and without notice of the pendency of proceedings under the Act, to show that they were not parties to the fraud played by the assessee against the department; has Section 27(1) of the A.P.VAT Act been so made as to place the initial onus on the defaulting dealer to prove that transfer by him, of his property to another, was not with the intention to defraud any tax or other sum payable under the Act.

In amending the provision, the Legislature has sought to clarify the position and to avoid arguments based on the interpretation of the statute before it was amended.

(1st I.T.Officer, Salem v.

Short Bros.

(P) LTD.).The general prohibition in Section 100 of the Transfer of Property Act is that no charge can be enforced against the property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge.

Section 3 of the Transfer of Property Act and its three explanations have a bearing in determining whether or not the transferee has notice of the charge.

The three explanations deal with three contingencies under which a person is deemed to have notice of certain facts.

These circumstances, by deeming fiction, impute notice to a party.

This presumption of notice is known as constructive notice.

If a transferee has constructive notice of the charge he would not be entitled for the protection of Section 100 of the Transfer of Property Act as he cannot then be said not to have notice of the charge.

The protection conferred on a bonafide transferee, by Section 100 of the Transfer of Property Act, was also extended to him under the proviso to Section 17-A of the APGST Act.

This protection has been specifically excluded by Section 27(1) of the A.P.VAT Act which not only does not contain a provision similar to the proviso to Section 17-A of the APGST Act but has also now shifted the initial onus, (which under Section 17-A of the APGST Act was on the department to prove that the transfer was with the intention to defraud revenue).on to the defaulting dealer.

Unless the defaulting dealer proves that the transfer of property was not with the intention to defraud revenue, Section 27(1) of the A.P.VAT Act, in effect, provides that such transfer of property is with the intention to defraud revenue.

It matters little, therefore, whether or not such property is in the hands of a person who has purchased it for valid consideration and without notice of the charge.

Section 27(1) of the A.P.VAT Act, in substance, exempts the requirement of a prior notice of the charge for its enforcement against the property in the hands of a bonafide transferee.

If the transfer of property is valid the title passes from the transferor to the transferee and the statutory charge on the subject property cannot be enforced, to recover arrears of tax due, as the transferor no longer has title over the property.

If, however, the transfer is void then the title over the property continues to remain with the transferor and the statutory charge, under Section 26 of the A.P.VAT Act, can be enforced against his property.

Section 26 of the AP VAT Act creates a charge, on the property of a defaulting dealer, in express language.

The protection conferred, by Section 100 of the Transfer of Property Act, on a transferee is available save as otherwise expressly provided by any law for the time being in force.

If there is an express provision, providing otherwise in any other law for the time being in force, the protection, of a charge not being enforceable against the property in the hands of the person to whom such property has been transferred for consideration and without notice of the charge, would not be available.

The statutory presumption, underlying Section 27(1) of the AP VAT Act, is that any charge created by a dealer on, or any transfer by him of, any of his assets in favour of any other person, during pendency of any proceedings under the Act or after completion thereof, shall be void.

It is this premise underlying Section 27(1) which places the onus on the defaulting dealer to prove that such charge or transfer was not with the intention to defraud any tax or any other sum payable by him under the Act.

Unless the defaulting dealer discharges this onus, transfer by him of his assets, either during the pendency of proceedings under the AP VAT Act or after completion thereof, is void.

Unlike Section 100 of the Transfer of Property Act and the proviso to Section 17-A of the APGST Act, Section 26 and 27 of the AP VAT Act, conjointly, provide that the charge, created on the property, can be enforced unless the defaulting dealer proves that the transfer was not with the intention to defraud tax or any other sum payable under the Act.

If, notwithstanding Section 27(1) of the A.P.VAT Act, the protection under Section 100 of the Transfer of Property Act is construed to be still available to a transferee, without notice of the charge, then the very object of placing the onus on the defaulting dealer would be defeated as, even if the defaulting dealer fails to discharge this onus, the transfer of property would not be void as title over the property would have passed on to the transferee in view of the protection conferred on him under the general rule prescribed in Section 100 of the Transfer of Property Act.

If Section 27 of the A.P.VAT Act is not construed as an exception to the general rule of Section 100 of the Transfer of Property Act, of a notice of the charge being essential for its enforcement against a transferee who had no notice thereof, it would also render the words .transfer shall be void unless he proves that such charge or transfer was not with the intention to defraud any tax or any other sum payable.in Section 27 of the A.P.VAT Act inapposite surplusage.

Courts have adhered to the principle that effort should be made to give meaning to each and every word used by the legislature and it is not a sound principle of construction to brush aside words in a statute, as being inapposite surplusage, if they can have a proper application in circumstances conceivable within the contemplation of the statute.

(Gurudevdatta VKSSS Maryadit v.

State of Maharashtra , Manohar Lal v.

Vinesh Anand ; and Aswini Kumar Ghose v.

Arabhinda Bose ).A construction which requires, for its support, addition or substitution of words or which results in rejection of words, has to be avoided.

(Gwalior Rayons Silk Mfg.

(Wvg.) Co.Ltd.v.Custodian of Vested Forests , Shyam Kishori Devi v.

Patna Municipal Corpn , A.R.Antulay v.

Ramdas Sriniwas Nayak , Dental Council of India v.

Hari Prakash , J.P.Bansal v.

State of Rajasthan and State of Jharkhand v.

Govind Singh ).Section 27(1) of the A.P.VAT Act without using express words, in effect, provides that the charged property can be brought to sale, in enforcement of the charge, even at the hands of a bonafide transferee without notice of the charge unless the defaulting dealer discharges the onus and proves that the transfer of property was not with the intention to defraud revenue.

The express language of Section 27(1) of the A.P.VAT Act disables a transferee, even if he is a bonafide purchaser of the property for consideration and without notice of the charge, from claiming protection of Section 100 of the Transfer of Property Act or to contend that he cannot be deprived of his title over the property, even if transfer of property by the defaulting dealer is to defraud the revenue of the tax or other sum payable by him under the Act.

It is only if the defaulting dealer proves that transfer of the property, which is subject to fiRs.charge under Section 26 of the A.P.VAT Act, is not with the intention to defraud revenue, would the transferee be entitled to claim title over the subject property for, otherwise, such transfer of property is void.

Where property has been transferred and the defaulting dealer, who has transferred the property which is subject to a statutory charge under Section 26 of the A.P.VAT Act, does not discharge the onus of proving that the transfer was not with the intention to defraud revenue, a person, who has purchased such immovable property from the defaulting dealer, cannot claim protection either of Section 53 of the Transfer of Property Act or of Section 100 thereof, on the ground that he is a bonafide purchaser of the property for valid consideration and without notice of the charge.

III.

IF A PROVISION IN A TAXING STATUTE IS CAPABLE OF TWO INTERPRETATIONS, THE CONSTRUCTION FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED: The only other contention which necessitates examination is whether the tax due and payable by the defaulting dealer, after the property has been transferred, can be recovered by putting the charged property to sale.

Sr.D.

Srinivas, Learned Special Standing Counsel for Commercial Taxes, would submit that the property continues to vest in the defaulting dealer as the transfer made by him, during the pendency of or on completion of assessment proceedings, is void and the respondents are entitled to also recover tax which fell due after the property was transferred on 17.03.2007.

As noted hereinabove, it is only the tax payable by a VAT dealer which is the fiRs.charge on his property.

Under Section 27(1) of the A.P.VAT Act it is only transfer of property by the defaulting dealer, during the pendency of proceedings under the Act or after completion thereof, which is prohibited.

Transfer of property, before commencement of proceedings under the Act, is not affected thereby, as no tax is either due or payable, under the A.P.VAT Act, prior to such transfer.

As the fiRs.charge on the property is only on the tax payable, Section 26 of the A.P.VAT Act has no application to taxes due and payable by the defaulting dealer after he transfers the property.

The respondents are, therefore, not entitled to proceed against the property in the hands of the petitioner for recovery of tax or other sum due and payable by a defaulting dealer after transfer of the property.

Even if the contention urged on behalf of the revenue, by Sr.D.

Srinivas, Learned Special Standing Counsel for Commercial Taxes, is held to be a possible view, it is settled law that if a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee must be accepted.

If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be.

On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law, the case might otherwise appear to be.

(Partington v.

Attorney-General J.K.Steel Ltd.v.Union of India ).While dealing with a taxing provision, the principle of 'strict interpretation' should be applied.

The Court shall not interpret the statutory provision in such a manner which would create an additional fiscal burden on a person.

When two interpretations are possible, ordinarily the Court would interpret the provisions in favour of a tax-payer and against the Revenue.

In case of doubt or dispute, the construction should be made in favour of the taxpayer and against the Revenue.

(Manish Maheshwar v.

Asst.

CIT ; Sneh Enterprises v.

Commissioner of CustoMs.New Delhi ; J.

Srinivasa Rao v.

Govt.

of A.P.; CIT v.

Naga Hills Tea Co.Ltd., ; Petron Engineering Construction (P) Ltd.v.Central Board of Direct Taxes ; CIT v.

Madho Pd.

Jatia ; CIT v.

Vegetable Products LTD.; CIT v.

Kulu Valley Transport Co.(P) LTD.).In interpreting a fiscal statute the court cannot proceed to make good deficiencies if there be any.

It must interpret the statute as it stands and, in case of doubt, in a manner favourable to the taxpayer, (C.A.Abraham v.

ITO, Kottayam ; J.K.Steel Ltd.24).and not the one that imposes a burden on him.

(Central India Spg., Wvg.

& Mfg.

Co.Ltd.v.Municipal Committee ).If there is any ambiguity in the language of a fiscal statute, the benefit of that ambiguity must be given to the assessee.

The doctrine that in taxation cases the subject is to be taxed, if in the Court's view the case falls within the contemplation or spirit of the statute, must be viewed with disfavour.

The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case.

(J.K.Steel Ltd.24; CIT v.

Karamchand Premchand Ltd., Ahmedabad ; Inland Revenue Commissioners v.

Duke of Westminister .

IV.

CONCLUSION: From the aforesaid facts it is evident that, even after a notice was issued in Form IV, the 4th respondent did not dispute their liability to pay arrears of VAT for the years 2005-06 and 2006-07 and, instead, made part-payment.

Though notice of this Writ Petition was served on the 4th respondent, no counter-affidavit has been filed by them to show that transfer of property, during pendency of proceedings under the A.P.VAT Act for the years 2005-06 and 2006-07, was not with the intention to defraud the revenue.

As the 4th respondent (defaulting dealer) has not discharged the initial onus, and as Section 26 of the AP VAT Act creates a fiRs.charge on the subject property for arrears of tax due, the action of the respondents in seeking to recover arrears of tax due and payable upto 17.03.2007, putting the charged property to sale, cannot be faulted.

It is made clear that in case the petitioner makes payment of the tax arreaRs.due from the 4th respondent prior to the date of transfer i.e., 17.03.2007, within four weeks from today the subject property shall not be put to sale.

On such payment it is open to the petitioner to institute appropriate legal proceedings to recover the amount, paid by them to the revenue, from the 4th respondent.

It is also made clear that, in case the petitioner does not make payment within four weeks from today, it is open to the respondents to bring the charged property to sale for recovery of the tax arrears due from the 4th respondent prior to the date of transfer i.e., 17.03.2007.

The Writ Petition is, accordingly, disposed of.

Miscellaneous petitions pending, if any, shall also stand disposed of.

There shall be no order as to costs.

______________________________ (RAMESH RANGANATHAN, J.___________________________________ (M.SATYANARAYANA MURTHY, J.Date:28-08-2014