Commr.Trade Tax U.P. vs M/S Radico Khetan Ltd.

CIVIL APPEAL NOS. 6396­6397 OF 2009

The Commissioner, Trade Tax, U.P. ...Appellant(s)

Versus

M/s Radico Khetan Ltd. …Respondent(s)

JUDGMENT

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

1 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.

2 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

3 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

4 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.

5 (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

6 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

7 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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