1. The first petitioner, Smt. Kannamba, died in the course of the pendency of this writ petition, and petitioners 2 to 4 have been impleaded as her legal representatives. Their prayer in the writ petition is for the issue of a writ of certiorari under Article 226 of the Constitution, quashing an order dated 14th February, 1964, passed by the Commissioner of Commercial Taxes, Madras. The prior facts necessary for a consideration of this writ petition are briefly the following :-
Premises No. 10-A, Dandayuthapani Street, Madras-17, belonged formerly to one Ranganatham Chetty who sold it on 18th April, 1958, to one Ramaswami, and from Ramaswami the first petitioner purchased it on 11th May, 1961. This Ranganatham Chetty had some business as a dealer both in Madras City and at Tindivanam in South Arcot, and there were arrears of sales tax due by him, for an amount of Rs. 6,750 and odd, for the years 1954-55 to 1956-57. On the ground that Ranganatham Chetty did not have sufficient means to pay the sales tax, the aforesaid house property was proposed to be attached and sold under the provisions of the Madras Revenue Recovery Act, (Madras Act 2 of 1864). For this purpose the Special Assistant Commercial Tax Officer for Sales Tax Collections, South Madras, the second respondent, sent a notice on 11th March, 1963, to the first petitioner calling upon her to pay the arrears within seven days from the date of receipt, and a notice of attachment under the Revenue Recovery Act was also sent along with the notice. The first petitioner tried to obtain relief against these proceedings, by approaching the authorities of the Commercial Tax Department. But they did not give her any relief, and the first respondent, the Commissioner of Commercial Taxes, Board of Revenue, finally dismissed her revision petition on 14th February, 1964.
2. The first petitioner's brief contention is that she could not. be considered as a defaulter in respect of the arrears of sales tax due on account, of his business as a dealer, by Ranganatham Chetty, a pre-decessor-in-title of the suit property, and therefore it is illegal to make her property liable under the Revenue Recovery Act (Madras Act 2 of 1864) for the arrears of sales tax due by Ranganatham Chetty.
3. The first respondent, the Commissioner of Commercial Taxes in his counter affidavit, stated that the arrears of sales tax due by Ranganatham Chetty referred partly to his business at Tindivanam in the South Arcot District, and partly to his business in Madras City. According to the affidavit, under Section 10 of the Madras General Sales Tax Act, 1939, and Section 24 of the 1959 Act, if the arrears of sales tax are not paid within the due dates specified in the demand notice, the whole of the amount outstanding on the date of default, shall become immediately due, and it shall be a. charge on the properties of the defaulter. In view of these provisions, the impugned proceedings were quite legal and valid. In her affidavit the first petitioner appears to have relied upon the saving clause in Section 100 of the Transfer of Property Act which states that no charge whether imposed by operation of law or by act of parties 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, save as otherwise expressly provided by any law for the time being in force. This claim was also denied by the first respondent in the counter, on the ground that Section 100 of the Transfer of Property Act would not be applicable to the present proceedings.
4. The arrears of sales tax in the present case related to a period when the Madras General Sales Tax Act. of 1939 was in force. That Act was amended in 1959. Section !0 of the earlier Act states that tax assessed under the Act shall be paid in such mariner and in such instalments and within such time as may be specified in the notice of assessment. If default is made in paying it, according to the notice of assessment, the whole of the amount outstanding on the date of the assessment shall become immediately due, and shall be a charge on the properties of the person or persons liable to pay the tax under the Act. Section 10(2) provides that any tax assessed or any other amount due under the Act from a dealer and any fee due from him under the Act may, without prejudice to any other mode of collection, be recovered as if it were an arrear of land revenue. In the later Act of 1959, the corresponding provision is found in Section 24. In the rules framed under the 1939 Act, namely, Madras General Sales Tax Rules, Rule 21-A makes the transferee of the business of a dealer also liable to pay the arrear of sales tax due by the transferor, but the liability of the transferee will be limited to the extent of the value of the business obtained by the transfer. A similar provision is contained in Section 27 of the 1959 Act, Now, one point to remember in this connection is that the first petitioner, Kannamba, is not the transferee of the business of Ranganatham Chetty. She is a subsequent transferee of an item of immovable property belonging to him. She could not be viewed as a defaulter so far as the assessment to sales tax is concerned. No doubt Section 10 of the Sales Tax Act of 1939 imposes a charge on the property of a dealer for the arrears of sales tax due by him. But here we are not dealing with a case of the enforcement of such a charge. It is only if we are dealing with a case of enforcement of such a charge that it will be necessary to examine the question, whether the first petitioner will be entitled, as a. transferee for consideration without notice, of the benefit of the saving clause in Section 100 of the Transfer of Property Act.
5. We have to consider, on the other hand, the scope of Act 2 of 1864 (or Act 6 of 1867 which is the corresponding Act applicable in the city of Madras), and as to how far it can be applied for proceeding against the property of the first petitioner, which she obtained by successive transfers from the sales tax assessee, for the realisation of an amount due by the assessee in respect of his business. We will have to construe the provisions of Act 2 of 1864 (or the corresponding enactment, Act 6 of 1867 applicable in this case) and decide how they can be applied when the Sales Tax Act lays it. down that the arrears of sales tax due by the sales tax assessee, will be recoverable as an arrear of land revenue.
6. Act 2 of 1864 (Act 6 of 1867) in Section 26, provides that when the amount due shall not have been paid pursuant to the terms of the demand, the Collector or any other officer empowered by the Collector in that behalf, shall proceed to recover the arrear by the attachment and sale of the defaulter's land. It will be necessary, therefore, to consider the meaning of the word 'defaulter' for the purpose of applying Section 26 of Act. 2 of 1864 (Act 6 of 1867). At the time of the attachment in the present case, the premises in Dandayuthapani Street had ceased long previously to be the assessee's property. Therefore Section 26 will not enable the Collector to attach the first petitioner's property as it had ceased to be the property of Ranganatham Chetty at the time of the attachment, and there is no other provision in the statute by which the first petitioner could be construed as a defaulter for the sales tax arrears due by Ranganatham Chetty. Rule 21-A of the General Sales Tax Rules framed under the 1939 Act, and Section 27 of the 1959 Act permit the transferee of the business of a dealer, to be considered as a defaulter for the arrears of sales tax due by the transferor in certain contingencies, but such an extended meaning of the term 'defaulter' cannot be availed of to make the transferee of the defaulter's immovable property liable for the demand.
7. The position however is different in the case of an arrear of land revenue due in respect of a piece of land. Section 3 of Act 2 of 1864 makes every landholder liable to pay to the Collector or other officer empowered to receive the revenue due upon his land on or before the date on which it falls due. Therefore if for a given piece of land the appropriate revenue had not been paid by the transferor, the transferee, as the owner of the land, will be liable to pay the arrears and by reference to Section 3 he must be considered to be a defaulter in respect of those arrears, in the same way as the original owner was a defaulter at the time when the land had belonged to him before the transfer. It is this interpretation of the provision in Section 3 of Act 2 of 1864, that makes the transferee of a piece of land liable for arrears of land revenue due upon that land, even if the arrears related to a period anterior to the transfer ; it gives the right to the Collector to sell the land to recover such arrears of land revenue.
8. The above-mentioned view is based on the decision of this Court in Subbayyagaru v. The Secretary of State for India : (1911)21MLJ656 . In that case, a village in the Karvetnagar Zarnindari was brought by the Collector for sale on 26th May, 1890, for arrears due for a prior period, and at the time of the sale the village had been sold to a different person who was not the owner at the period for which the land revenue was not paid. The learned Judges referred to Section 2 (evidently a mistake for Section 3) of Act 2 of 1864 which states that every landholder was bound to pay the revenue due upon his land on the date on which it falls due, and to Section 4, which says that when the whole or part of the cist shall not be so paid, the amount or its unpaid portion shall be deemed to be an arrear of revenue. Then they observed that arrear of revenue remains an arrear until it is paid, and the landholder or its registered proprietor is liable to pay it, and when the plaintiff (in the case before them) became the registered proprietor, there were arrears of revenue due on the village and he, as the landholder, became liable to pay them to the Collector and on failure to pay them he became a defaulter. They also derived support from Section 2 of Act 1 of 1890, the Revenue Recovery Act (Central), wherein the word defaulter is defined as a person from whom an arrear of land revenue is due. The principle laid down in the above decision cannot be applied to the case of sales tax arrears, because neither the Sales Tax Act nor any other enactment makes the transferee of the land of the assessee, a defaulter in respect of the assessment of sales tax due by the transferor.
9. In this connection reference may also be made to the Central Revenue Recovery Act, 1 of 1890. Section 3 of that Act states that where an arrear of land revenue or a sum recoverable as an arrear of land revenue is payable to a Collector, by a defaulter having property in a district other than that in which the arrear accrued or the sum is payable, the Collector may send to the Collector of that other district a certificate in a form as nearly as may be to the schedule. Section 6 of that Act states that when the Collector of a district receives a certificate under the above provision, he may issue a proclamation prohibiting the transfer or charging of any immovable property belonging to the defaulter in the district. Under Section 6(3) of that Act, any private alienation of the property or of any interest of the defaulter therein made after the issue of the proclamation and before the withdrawal thereof shall be void as against the Government, and any person who may purchase the property at a sale held for the recovery of the amount stated in the certificate. In the present case, for the arrears of sales tax due for the business of Ranganatham Chetty in Tindivanam in South Arcot District, it is stated before me that the necessary certificate from the authorities in South Arcot was received by the authorities in Madras on 12th March, 1959, but the Madras property in this case belonging to Ranganatham Chetty had been sold by him long prior to that date. Therefore by virtue of none of these provisions of law can it be considered that the 1st petitioner, Kannamba and her legal representatives are defaulters for the sales tax arrears due by Ranganatham Chetty, and therefore their property cannot be proceeded against under the Revenue Recovery Act for the recovery of the arrears of sales tax due by Ranganatham Chetty.
10. But whether that property can be proceeded against by other methods, for example, by a suit to enforce the charge mentioned in Section 10 of the Act, it is not necessary to decide in the present proceedings, which deal with the limited question of the applicability of the procedure prescribed by Act 2 of 1864 (Act 6 of 1867).
11. The writ petition is allowed and the rule nisi is made absolute. No costs.