1967 (4) TMI 189 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability of a dissolved firm for sales tax assessment.
2. Validity of assessment after dissolution of a firm.
3. Admissibility of objection regarding dissolution of firm in assessment proceedings.

Analysis:
The judgment by the High Court of Punjab and Haryana dealt with the liability of a dissolved firm for sales tax assessment. The petitioner-firm, registered under the Punjab General Sales Tax Act, was dissolved on 25th April, 1962. The Assessing Authority created a liability and imposed a penalty for the assessment year 1961-62, even though the firm had filed only one quarterly return. The petitioner contended that no liability could be imposed on a dissolved firm. The petitioner relied on a Supreme Court authority which stated that a dissolved firm cannot be assessed to sales tax even for turnover before dissolution. The court agreed with this proposition, emphasizing that the Assessing Authority cannot levy sales tax on a firm after its dissolution.

Regarding the objection raised by the State that the issue of dissolution was not raised before the Assessing Authority, the court noted that the department was aware of the dissolution based on documents filed by the petitioner. The court highlighted that the State cannot argue that the plea of dissolution was raised for the first time in court, as previous orders and documents acknowledged the firm's dissolution. The court concluded that the petitioner had the right to challenge the assessment based on the Supreme Court authority and ruled in favor of the petitioner, quashing the assessment and awarding costs.

In conclusion, the judgment clarified that a dissolved firm cannot be held liable for sales tax assessment after dissolution. The court emphasized the importance of following legal principles and allowed the petitioner's challenge to the assessment, ultimately ruling in favor of the petitioner and awarding costs.