1960 (9) TMI 87 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of the petitioner under Section 26(1) of the Bombay Sales Tax Act, 1953.
2. Applicability of Section 26(1) to forced sales by the Collector.
3. Validity of the proceedings and demand notices issued against the petitioner.
4. Impact of delay in filing the petition on the relief sought by the petitioner.
5. Jurisdiction of the High Court under Article 226 of the Constitution in the context of the Sales Tax Act.

Issue-wise Detailed Analysis:

1. Liability of the Petitioner under Section 26(1) of the Bombay Sales Tax Act, 1953:
The petitioner challenged the demand for payment of Rs. 7,432-65, arguing that he was not liable under Section 26(1) of the Bombay Sales Tax Act, 1953, as a transferee. The court examined Section 26(1), which states, "When the ownership of the business of a dealer liable to pay the tax is entirely transferred, the transferor and the transferee shall jointly and severally be liable to pay any tax including penalty, if any, payable in respect of such business." The petitioner contended that this section applies only to voluntary transfers made by the dealer, not to forced sales by the Collector.

2. Applicability of Section 26(1) to Forced Sales by the Collector:
The court analyzed whether Section 26(1) includes forced sales by the Collector. The language in sub-section (1) is passive and ambiguous, unlike sub-section (2) which explicitly mentions a dealer. The court found that the provisions in Section 26 are intended to refer to voluntary dealings by a dealer as outlined in Section 25, which does not mention forced sales by the Collector. The court concluded that a purchaser at an auction sale in recovery proceedings does not fall under the definition of a transferee in Section 26(1), as the original owner is not a transferor in such sales.

3. Validity of the Proceedings and Demand Notices Issued Against the Petitioner:
The court held that the proceedings and demand notices issued against the petitioner were invalid. The petitioner argued that there was no mode of recovery prescribed under the Act for amounts payable by a transferee under Section 26(1). The court found that the transfer mentioned in Section 26(1) does not include sales by the Collector in recovery proceedings. Therefore, the impugned order dated 3rd November, 1958, and the notice of demand dated 11th March, 1959, were quashed.

4. Impact of Delay in Filing the Petition on the Relief Sought by the Petitioner:
The respondents argued that the petition should be dismissed due to the delay in filing. The demand was made on 3rd November, 1958, and the petition was filed on 24th September, 1959. However, the court held that the petitioner would be wrongfully and illegally deprived of his property without authority of law unless relief was granted. Therefore, the delay did not defeat the petitioner's claim.

5. Jurisdiction of the High Court under Article 226 of the Constitution:
The respondents contended that the Sales Tax Act provides a complete code for resolving disputes and that the petitioner should not proceed with the petition under Article 226. However, the court held that where a citizen is about to be deprived of his property without authority of law and where fundamental rights under Article 19 are at risk, it is appropriate for the court to grant relief under Article 226. Consequently, the court quashed the impugned order and notice of demand, directing the respondents not to recover any amount from the petitioner in respect of arrears of sales tax dues.

Conclusion:
The High Court allowed the petition, quashing the impugned order dated 3rd November, 1958, and the notice of demand dated 11th March, 1959. The respondents were directed not to proceed with the recovery of any amount from the petitioner concerning the arrears of sales tax dues. The respondents were also ordered to pay the costs of the petition to the petitioner.

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