1966 (12) TMI 55 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of the transferor under section 17 of the Bengal Finance (Sales Tax) Act, 1941.
2. Validity of the certificate issued by the Certificate Officer.
3. Determination of the transferee's status under section 17.
4. Impact of the transfer on the liability for sales tax arrears.

Issue-wise Detailed Analysis:

1. Liability of the Transferor under Section 17 of the Bengal Finance (Sales Tax) Act, 1941:
The petitioner argued that his liability ceased upon transferring his business to Adhir Kumar Mukherjee, relying on section 17 of the Bengal Finance (Sales Tax) Act, 1941. However, the court determined that section 17 does not explicitly state that the transferor's liability is extinguished upon transfer. The section primarily addresses the transferee's position post-transfer, indicating that the transferee assumes the liabilities of the transferor but does not absolve the latter. The court emphasized that the phrase "except for liabilities under this Act already discharged by such dealer" implies that the transferor's liabilities persist even after the transfer. The court concluded that section 17 imposes an additional liability on the transferee without absolving the transferor.

2. Validity of the Certificate Issued by the Certificate Officer:
The Certificate Officer initially upheld the petitioner's objection and set aside the certificate, suggesting that the Commercial Tax Officer could pursue the transferee for the dues. However, this decision was overturned by the Additional Collector, and subsequently, the Commissioner restored the Certificate Officer's original order. The Board of Revenue later set aside the Commissioner's order, reinstating the certificate against the petitioner. The court found that the Board of Revenue's decision to restore the certificate was justified, as the transferor's liability was not absolved by the transfer.

3. Determination of the Transferee's Status under Section 17:
The Commercial Tax Officer questioned the bona fides of the transfer to Adhir Kumar Mukherjee, suggesting it was a sham transaction designed to evade tax liabilities. The court noted that it was unclear whether the Commercial Tax Officer had given proper notice to the petitioner before making this determination. The court decided not to base its decision on this finding due to the lack of details on how the Commercial Tax Officer reached this conclusion. However, the court maintained that even if Adhir Kumar Mukherjee was a legitimate transferee under section 17, the transferor's liability remained intact.

4. Impact of the Transfer on the Liability for Sales Tax Arrears:
The court examined the implications of the transfer on the petitioner's liability for sales tax arrears. It was argued that the transfer of business, including the clause in the deed of sale where the transferee took up past and outstanding sales tax liabilities, did not absolve the transferor from his liabilities. The court referenced the interpretation of similar provisions in other jurisdictions, such as the Bombay Sales Tax Act and the Mysore High Court's interpretation, which supported the view that the transferor's liability continues post-transfer. The court concluded that the transferor remains liable for the outstanding tax liabilities, and the transferee's liability is supplementary.

Conclusion:
The court discharged the rule, affirming that the transferor's liability for sales tax arrears was not extinguished by the transfer of the business. The decision was based on the construction of section 17 of the Bengal Finance (Sales Tax) Act, 1941, rather than the Commercial Tax Officer's determination of the transfer's bona fides. The court did not impose costs as the rule was discharged on a ground not specifically raised by the revenue authorities below.

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