1967 (1) TMI 70 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to recovery proceedings by Sales Tax Officer against dissolved firm under the Rajasthan Sales Tax Act, 1954.

Analysis:
The writ petition was filed by the legal representatives of a dissolved partnership firm, challenging recovery proceedings by the Sales Tax Officer for an assessment year. The firm, Messrs. Modern Shoe Mart, had two partners, one of whom passed away, leading to the dissolution of the firm. The Sales Tax Officer issued notices for assessment for the year 1956-57, despite being informed of the firm's dissolution. The petitioners contended that the assessment against a dissolved firm was not valid, and the subsequent legal proceedings were challenged through appeals and revisions.

The respondents opposed the writ petition, arguing that the statutory remedy of an appeal was not availed by the petitioners, and an amendment to the Rajasthan Sales Tax Act allowed proceedings against individual partners of a dissolved firm. However, the key issue revolved around whether a dissolved firm could be assessed under the Act, which had been addressed in previous court decisions. The Supreme Court's ruling in a similar case emphasized that a dissolved firm ceases to be a legal entity for tax purposes, and no assessment can be made without a specific statutory provision.

The court referred to previous judgments and highlighted that in cases of dissolved firms, assessments should be made under the amended section of the Act. As the firm in question was dissolved in 1956, the assessment order passed in 1961 was deemed invalid. The court rejected the argument that the assessment was against individual partners, emphasizing that the assessment order clearly targeted the dissolved firm. The court also dismissed the argument regarding the availability of an alternative remedy, stating that lack of jurisdiction overrides the need to exhaust statutory remedies.

In conclusion, the court allowed the writ petition, set aside the assessment order, and prohibited further recovery proceedings against the petitioners. However, the respondents were granted the option to pursue other legal actions within the bounds of the law.