1968 (7) TMI 51 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Liability of the petitioner to pay sales tax dues of Bhagwanji Tulsidas.
2. Jurisdiction of the Sales Tax Authorities to demand payment from the petitioner.
3. Validity of the notices and orders issued by the Sales Tax Authorities.
4. Application of Section 39 of the Bombay Sales Tax Act, 1959.

Detailed Analysis:

1. Liability of the Petitioner to Pay Sales Tax Dues of Bhagwanji Tulsidas:

The petitioner, an agriculturist from Plasva village, contended that he was merely a creditor of Bhagwanji Tulsidas and not liable for the latter's sales tax dues. Bhagwanji Tulsidas had mortgaged Hari Oil Mills to the petitioner and three other creditors due to his inability to repay a debt of Rs. 6,750. The petitioner argued that there was no agreement obligating him to discharge Bhagwanji's sales tax arrears. The Sales Tax Authorities, however, asserted that an endorsement on the mortgage deed indicated the petitioner's acceptance of liability for the sales tax dues. Despite this, the court found that any such liability was merely contractual and did not create a direct obligation between the petitioner and the government.

2. Jurisdiction of the Sales Tax Authorities to Demand Payment from the Petitioner:

The Sales Tax Authorities issued notices demanding payment from the petitioner, treating him as a partner in Hari Oil Mills based on Bhagwanji's assertion. The petitioner successfully challenged this in Civil Appeal No. 114 of 1963, where it was determined that he was not a partner. The court reaffirmed that there was no direct contract between the petitioner and the government for the payment of sales tax dues, referencing the Supreme Court's reasoning in Deputy Commercial Tax Officer, Madras v. Sukraj Peerajee.

3. Validity of the Notices and Orders Issued by the Sales Tax Authorities:

The court examined the notices and orders issued under Section 154 of the Bombay Land Revenue Code, which demanded payment from the petitioner and threatened to recover the amount by attaching and selling his property. The court found these actions to be without jurisdiction, as the Sales Tax Authorities lacked the authority to adjudicate the petitioner's liability for Bhagwanji's debts. Consequently, all notices and orders, including the attachment and sale proclamations, were declared invalid and set aside.

4. Application of Section 39 of the Bombay Sales Tax Act, 1959:

The respondents argued that under Section 39 of the Act, the Sales Tax Authorities could recover dues from any person holding money for the dealer. However, the court clarified that Section 39 did not empower the Commissioner to adjudicate the liability of a third party to the dealer. The provision allowed for a summary and informal enquiry, not a determination of substantive liability. The court emphasized that taxing statutes must be construed strictly, and without explicit legislative authority, the Commissioner could not decide the petitioner's liability for Bhagwanji's sales tax dues.

Conclusion:

The court issued a writ of mandamus directing the respondents to cease any further recovery actions against the petitioner for Bhagwanji Tulsidas's sales tax dues. It held that the notices and orders issued by the Sales Tax Authorities were invalid and without jurisdiction. The rule was made absolute, and the respondents were ordered to pay the costs of the special civil application to the petitioner.