1968 (7) TMI 53 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the heir or legal representative of a deceased dealer can be assessed to sales tax under the Bombay Sales Tax Act, 1953.
2. Interpretation of relevant sections and rules under the Bombay Sales Tax Act, 1953, concerning the liability of heirs or legal representatives.
3. Validity of the assessment order issued to the petitioner firm.

Issue-wise Detailed Analysis:

1. Whether the heir or legal representative of a deceased dealer can be assessed to sales tax under the Bombay Sales Tax Act, 1953:

The primary question in this petition is whether the respondent had jurisdiction to assess an heir or a legal representative of a deceased dealer under the Act of 1953. The petitioner, a partnership firm, was issued a notice for sales tax assessment on the ground that Champaklal, one of the partners, continued his deceased father's business. The petitioner challenged the assessment order, arguing that there is no provision in the Act enabling the respondent to assess an heir of a deceased dealer.

2. Interpretation of relevant sections and rules under the Bombay Sales Tax Act, 1953, concerning the liability of heirs or legal representatives:

The court examined various sections of the Act:

- Section 2(6) defines a dealer as any person who carries on the business of selling or buying goods.
- Section 5 is the charging section, making every dealer whose turnover exceeds a specified limit liable to pay tax.
- Section 11(1) prohibits a dealer from carrying on business without registration.
- Section 25 requires dealers to inform the authority of any changes in ownership or discontinuation of business.
- Section 26(1) deals with the transfer of business ownership, making both the transferor and transferee jointly and severally liable for tax.

The court noted that the definition of "dealer" does not include heirs or legal representatives. The charging section 5 also does not extend liability to heirs or legal representatives. The court emphasized that fiscal statutes must be strictly construed in favor of the taxpayer.

3. Validity of the assessment order issued to the petitioner firm:

The court found that sections 25 and 26 do not extend the scope of the charging section 5 to include heirs or legal representatives. Section 26(1) specifically deals with voluntary transfers inter vivos, not transfers by operation of law such as succession. The court cited previous judgments, including the Supreme Court's decision in State of Punjab v. Jullundur Vegetables Syndicate, which held that unless there is a statutory provision, a dissolved firm or the estate of a deceased person cannot be assessed.

The court concluded that the assessment order against the petitioner, based on the continuation of the deceased dealer's business, cannot be supported. The order was a composite one, not severable, and thus the entire order had to be quashed.

Conclusion:

The petition was allowed. The court issued a writ of certiorari quashing the assessment order and the demand notice. A writ of mandamus was issued restraining the respondent from recovering the assessed amount. The respondent was ordered to pay the costs of the petition to the petitioner. Rule was made absolute with costs.