The Commissioner, Trade Tax, U.P. Versus M/s Radico Khetan Ltd.

The Commissioner, Trade Tax, U.P. Versus M/s Radico Khetan Ltd.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



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
as the Tribunal) allowing Appeal Nos. 259/97 (80­81) and
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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