1955 (8) TMI 30 - HC - VAT and Sales Tax

Issues Involved:
1. Criminal liability of a sleeping partner for non-payment of sales tax.
2. Validity of the notice of demand service.
3. Liability of individual partners versus the firm under Section 14(b) of the U.P. Sales Tax Act.
4. Requirement of mens rea for conviction under Section 14(b).
5. Legality of recurring fines for continuing breaches.

Issue-wise Detailed Analysis:

1. Criminal liability of a sleeping partner for non-payment of sales tax:
The applicant contended that as a sleeping partner, he should not be held criminally liable for the non-payment of sales tax. However, the court found this defense unsubstantiated by the evidence, which indicated that the applicant managed the firm's affairs and interacted with the Sales Tax Officer. Even if assumed to be a sleeping partner, the court held that under Section 2(c) of the U.P. Sales Tax Act, every partner, whether active or not, is a "dealer" and is jointly and severally responsible for the dues of the firm. Therefore, the applicant could not escape liability under Section 14(b).

2. Validity of the notice of demand service:
The applicant argued that the notice of demand was not duly served on him. The court found that the procedure followed by the Sales Tax Office was in full accord with Rule 77, which allows for the delivery of notices to the firm's office manager or agent. The testimony of the peon who delivered the notice was accepted, and the court concluded that the service was valid.

3. Liability of individual partners versus the firm under Section 14(b) of the U.P. Sales Tax Act:
The applicant contended that the firm, not an individual partner, should be liable under Section 14(b). The court distinguished the present case from the Madras High Court decision in Public Prosecutor v. K. Jacob Nadar, where the prosecution of an individual partner was deemed invalid because he had ceased to be a partner and no notice was served on him. The court held that in the present case, the firm and its partners are collectively responsible, and it is permissible to prosecute any one or more of the partners without the necessity of prosecuting all.

4. Requirement of mens rea for conviction under Section 14(b):
The applicant argued that a guilty intention (mens rea) was necessary for conviction. The court reviewed the statutory language and found that Section 14(b) does not include any qualifying words like "wilfully" or "intentionally," unlike other clauses in Section 14. The court concluded that the Legislature intended the offense of non-payment of sales tax to be independent of the accused person's state of mind, thereby ruling out the necessity of mens rea.

5. Legality of recurring fines for continuing breaches:
The applicant challenged the legality of the recurring fine imposed on him. The court referred to similar provisions in Section 307 of the U.P. Municipalities Act and previous rulings, which held that recurring fines require a second prosecution to determine the duration of the continued breach and the appropriate amount of the daily fine. The court found the recurring fine imposed on the applicant to be illegal and set it aside.

Conclusion:
The applicant's conviction under Section 14(b) of the U.P. Sales Tax Act and the fine of Rs. 500 were upheld. However, the order imposing a recurring fine of Rs. 10 per day was set aside as illegal. The applicant was directed to pay the fine of Rs. 500 without delay, and leave to appeal to the Supreme Court was refused. The revision petition was dismissed with the stated modification.

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