Sanjay Jain vs. Commissioner, Central Goods And Services Tax And Others

Held

The Court held that the penalty of ₹1,47,55,230/- imposed on Harbhajan Singh under the Customs Act in 2009 was prior in time to the agreement to sell executed in 2018. Consequently, the penalty constituted a first charge on the property as per Section 142A of the Customs Act, 1962. The Court also noted that the property, a commercial building measuring 414 square yards in Ludhiana, was agreed to be sold for ₹20 lakhs, which appeared significantly undervalued given its location and size, creating doubt about the genuineness of the agreement to sell and raising the possibility of collusion between the petitioner and the deceased's legal heirs to avoid the auction. Therefore, the Court was not inclined to interfere with the auction proceedings initiated by the respondents for the recovery of the penalty. The writ petition was dismissed.

Facts

The petitioner, Sanjay Jain, filed a writ petition challenging an e-auction notice issued by the Commissioner, Central Goods & Service Tax, Ludhiana, for the auction of a property owned by Harbhajan Singh (since deceased). The petitioner claimed to have a loan agreement and an agreement to sell for the property, valued at ₹20 lakhs, executed on December 17, 2018, in lieu of the loan. He also filed a suit for specific performance, obtaining a court order on February 20, 2020, restraining Harbhajan Singh from alienating the property. The respondents (Customs Department) stated that Harbhajan Singh owed a penalty of ₹1,44,55,230/- imposed under the Customs Act, 1962, in 2009, for evading customs duty. As the penalty remained unpaid, his property was put up for auction, and the department claimed a first charge on the property under Section 142A of the Customs Act, 1962.

Key Issues

1. Whether the e-auction notice issued by the respondents for the recovery of penalty is liable to be set aside in light of the subsisting stay order granted by the Civil Court in favour of the petitioner in a suit for specific performance of an agreement to sell? Petitioner's contentions: The petitioner argued that he is a bonafide purchaser for valuable consideration without notice of any penalty imposed on Harbhajan Singh. He emphasized the existence of the agreement to sell dated December 17, 2018, and the subsequent stay order dated February 20, 2020, restraining the alienation of the property. He contended that the auction notice, issued despite this stay order, should be set aside. Respondents' contentions: The respondents argued that the petitioner filed the petition in collusion with the legal heirs of Harbhajan Singh to avoid the auction. They asserted that the penalty of ₹1,47,55,230/- imposed in 2009 was a prior charge on the property under Section 142A of the Customs Act, 1962, and the property was being auctioned to recover this outstanding amount.