/2022 INSC 0817/
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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