IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. CWP No. : 836 of 2000 with CWPs No. 837 and 842 of 2000. Date of decision : 17.3.2008. CWP No. 836/2000 M/s Ajit Plastic Industries & another …Petitioners. Versus State of H.P. & others … Respondent. CWP No. 837/2000 M/s Extol Chemicals Pvt. Ltd. …Petitioner. Versus State of H.P. & others … Respondent. CWP No. 842/2000 M/s Sun Plast Indo. …Petitioner. Versus State of H.P. & others … Respondent. Coram The Hon’ble Mr. Deepak Gupta, J. The Hon’ble Mr. Rajiv Sharma, J. Whether approved for reporting ?1 No. For the petitioner : Mr. M.M.Khanna, Sr. Advocate with Mr. Goverdhan Sharma, Advocate. For the respondents : Mr. R.M.Bisht and Mr. Rajesh Mandhotra, No. 1, 2, 4 & 5 Deputy Advocate Generals. For the respondent No.3 : Mr. Ajay Kumar, Advocate. For the respondent No.6 : Mr. Balwant Kukreja, Advocate. Deepak Gupta, J. These three petitions are being disposed of by a common judgement since an identical question of law arises for determination in all the cases. The question which arises for determination in these petitions is :- “Whether a person who purchases property from the H.P.Financial Corporation pursuant to an auction held in 1 Whether the reporters of Local Papers may be allowed to see the judgment? Yes. terms of the State Financial Corporations Act, without notice to any party of any arrears sales tax dues payable by the erstwhile assessee - owner of the property is liable to pay the arrears of sales tax of the erstwhile assessee – owner.” The factual background of each of the petitions is hereby given separately: CWP No. 836 of 2000 A unit was set up by M/s Ganesh Plastic Private Ltd., which had taken an loan from the H.P.Financial Corporation (HPFC). M/s Ganesh Plastic Pvt. Ltd. could not pay off the dues of the H.P.Financial Corporation and the unit was taken over by the H.P.Financial Copration in terms of Section 29 of the State Financial Corporation Act. The unit was put up for auction vide advertisement dated 29th May, 1998, wherein the lists of assets and liabilities was described. The petitioners bid for the said unit and purchased the same for a sum of Rs.3.90 lacs. The unit was handed over to the petitioners by the H.P.Financial Corporation on 25th November, 1998. Temporary registration for fresh unit in terms of H.P.General Sales Tax Act was granted to the petitioner herein on 8th December, 1998. It was only on 16th April, 1999 that the petitioners were informed that there were arrears of sales tax payable by the previous owner-M/s Ganesh Plastic Pvt. Ltd and those arrears were sought to be recovered from the petitioners. After notices were issued to the petitioners, they have filed the present petition. CWP No. 837 of 2000 In this case a unit was set up at 16-17 Industrial Area, Mehatpur, Distt. Una by M/s Orient Herbs and Chemicals Pvt. Ltd. Since this unit failed to pay off loans advanced to it by H.P.F.C and Himachal Pradesh State Industrial Development Corporation (H.P.S.I.D.C), the same was advertised for auction vide advertisement dated 4.2.1992. This unit was purchased in the auction by M/s H.P.C. Plastics Pvt. Ltd. Negotiations were held and H.P. Financial Corporation vide letter dated 26th March, 1992 accepted the offer of M/s H.P.C.Plastics Pvt. Ltd. M/s H.P.C.Platics Pvt. Ltd. further sold the unit to the petitioner herein on 18th June, 1999. Petitioner was granted provisional certificate under the H.P. General Sales Tax Act on 3rd October, 1997 and regular registration certificate was granted to petitioner on 31st March, 1998. On 4th July, 2000 the excise and taxation authority issued a letter to the petitioner directing it to deposit arrears of sales tax amounting to Rs.7,86,289/- payable by M/s Oriental Herbs and Chemical Pvt. Ltd, the original owner - assessee. Hence the present petition challenging the said order. CWP No. 842 of 2000 In this writ petition a unit at 130-A Industrial Area Mehatpur, Distt. Una was initially set up by M/s S.K.Industries, who were unable to pay off the loans of the HPFC and HPSIDC. Since these loans were not paid off by it the unit was taken over by the H.P.Financial Corporation and thereafter in the early 1998 the property of the unit was advertised for sale. The petitioner took part in the auction and purchased the unit on 5th March, 1998. When the petitioner applied for the grant of registration, the excise and taxation authority informed the petitioner that the registration would only be granted when the arrears of the previous owner of the unit were paid by the petitioner. On 19th August, 1998 the petitioner was issued registration certificate. On 4th July, 2000 the tax authority issued the notice to the petitioner asked him to pay a sum of Rs.1,73,985/- being the arrears of the loan of M/s S.K.Industries. Perusal of the above facts shows that in none of the case was the petitioner-purchaser put to notice of the fact that there are arrears of sales tax payable by the previous owner-assessee which the purchaser would be liable to pay. In all these cases, the units were put for auction by the H.P. Financial Corporation. In the auction notice there is no mention that the arrears of sales tax of the previous owner-assessee, if any, have to be paid by the purchaser. There is no mention of the amount of sales tax and no notice to the petitioner what so ever that it would be liable to pay sales tax. In one of the case, in fact, some other party first purchased the unit and sold it to the present petitioner more than seven years after the initial auction. When a party bids for an industrial unit in an auction held by the H.P.Financial Corporation, it purchases the unit on “as is where is basis” on the information held out to it by the H.P. Financial Corporation which was the party selling the unit. In case the parties were aware that there were other liabilities which it would have to bear, it may not have purchased the unit or may have decreased the bid amount. However, we are clear that no party can be taken by surprise after many years and asked to pay an amount which it was not aware that it would be liable to pay. The State has failed to show any provision in H.P.General Sales Tax Act or in the State Financial Corporations Act, which enables the respondents to recover the arrears of sales tax of a previous owner-assessee from the person who purchased such units in auction held by the HPFC without their being any stipulation that these arrears are to be paid by the successful bidders/purchasers. We are clear that this amount should not have been recovered from the petitioner. Arrears payable by the original assessee-owner of the unit could not have been recovered from the petitioner. It has been contended on behalf of the HPFC that the State of H.P in fact took a decision that arrears of sales tax would not be recovered from the purchaser. This contention is refuted by the respondents. We are not commenting or deciding this issue. We are not going to enter into this dispute because that dispute does not arise before us. The petitions before us have been filed by the purchasers who have purchased the unit. We have held that they are not liable to pay the arrears of sales tax on account of what may have been due from the original owner-assessee. Whether the State recover this amount from the HPFC or not is something which we are not asked to decide in the petition. In view of the above discussion, the writ petitions are allowed and the order/notices issued by the respondents directing the petitioners to pay the arrears of sales-tax of the previous owners-assessee are quashed and set aside and the respondents restrained from recovering these amount(s) from the petitioners. No order as to costs. ( Deepak Gupta) J. March 17, 2008 ( Rajiv Sharma ) J. ™