1965 (1) TMI 60 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the petitioner under Section 33 of the Madhya Pradesh General Sales Tax Act, 1958.
2. Determination of whether there was a complete transfer of business ownership.
3. Assessment of the role of goodwill in the transfer of business.
4. Evaluation of the evidence presented regarding the transfer of business.

Detailed Analysis:

1. Liability of the Petitioner under Section 33 of the Madhya Pradesh General Sales Tax Act, 1958:
The petitioner sought a writ of certiorari to quash an order of assessment made by the Sales Tax Officer, Jabalpur, and upheld by the Additional Commissioner of Sales Tax. The Sales Tax Officer had held the petitioner liable for the payment of Rs. 6,970-78 nP., being the amount of tax and penalty levied on M/s. Rajasthan Paper Mart (hereinafter called the Mart), under Section 33 of the Act. The petitioner contended that he was not liable as he had merely purchased the goods in stock and not the entire business.

2. Determination of Whether There Was a Complete Transfer of Business Ownership:
The court examined whether the ownership of the Mart's business was entirely transferred to the petitioner. According to Section 33(1) of the Act, "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 the tax together with penalty." The court noted that for liability to be fastened under this provision, there must be a transfer of the ownership of the business as such, not merely the goods or material with which the business is carried on.

3. Assessment of the Role of Goodwill in the Transfer of Business:
The court emphasized that the transfer of a business implies the transfer of a running business together with all its rights, liabilities, stock-in-trade, and goodwill. The court cited legal definitions and precedents to assert that goodwill is an integral part of a business and cannot be sold apart from it. The Sales Tax Authorities had found that the goodwill of the Mart's business was not transferred to the petitioner, which the court held as a significant factor in determining that there was no complete transfer of business.

4. Evaluation of the Evidence Presented Regarding the Transfer of Business:
The court found that there was no material evidence before the Sales Tax Officer and the Additional Commissioner to conclude that the Mart transferred its business to the petitioner. The only material referred to was a receipt (exhibit A-1) produced by the petitioner, which clearly showed that the petitioner purchased only the stock-in-trade for Rs. 6,100 and did not take over any liabilities of the Mart. The court noted that the burden of proof was on the Revenue to establish that the Mart had transferred the ownership of its business to the petitioner, which they failed to do.

Conclusion:
The court concluded that the ownership of the Rajasthan Paper Mart's business was not transferred to the petitioner when he purchased the stock of stationery paper, pencils, fountain-pens, etc., on 9th April, 1960. Consequently, the petitioner could not be held liable under Section 33 of the Act to pay the tax and penalty which the Mart was liable to pay. The petition was allowed, and the orders of the Sales Tax Officer and the Additional Commissioner of Sales Tax were quashed. The petitioner was awarded costs of the application, and the outstanding amount of security deposit was ordered to be refunded to him.

Petition allowed.