1968 (7) TMI 62 - HC - VAT and Sales Tax

Summary

Issues:
- Liability of sales tax on the sale of mustard oil by Radha Krishna Maheshwari after the dissolution of the firm Jeet Mal Kalloo Mal.

Analysis:
The judgment delivered by the High Court of Allahabad pertained to the liability of sales tax on the sale of mustard oil by Radha Krishna Maheshwari following the dissolution of the firm Jeet Mal Kalloo Mal during the assessment year 1961-62. The appellate authority initially held that sales tax could not be levied on the sale, but the revising authority disagreed and sided with the Sales Tax Officer. The primary question before the Court was whether Radha Krishna Maheshwari was liable to pay sales tax on the sale of the oil. The Court analyzed the relevant provisions of the U.P. Sales Tax Act, particularly Section 3 and Section 3-A, which govern the imposition of sales tax on dealers. The State Government had issued a notification specifying that sales tax is payable on the sale of mustard oil by the manufacturer, which in this case would be the dealer-cum-manufacturer. The Court emphasized the definition of "dealer" under Section 2(c) of the Act, which includes any person or association of persons engaged in buying or selling goods. Additionally, Section 3-C(1) clarified that a firm is considered a dealer for sales tax assessment purposes, independent of its partners.

The Court further referenced the case law of J.B. Tandon v. Sales Tax Officer, Etawah, to establish that a firm, when engaged in manufacturing goods for sale, is deemed the dealer-manufacturer. In this context, the dissolved firm Jeet Mal Kalloo Mal would have been liable for sales tax if it had sold the mustard oil. However, since the oil fell to the share of Radha Krishna Maheshwari upon the firm's dissolution, and he subsequently sold it under his new business name Rameshwar Oil Mills, the Court concluded that Radha Krishna Maheshwari could not be categorized as the dealer-manufacturer. As a result, the Court allowed the petition, quashed the order of the revising authority dated 3rd December 1966, and directed the petitioner to receive costs from the second respondent.

In summary, the judgment clarified that in the context of sales tax liability on the sale of goods post-firm dissolution, the individual partner who receives and sells the goods cannot be considered the dealer-manufacturer for assessment purposes, as the dissolved firm retains that status. The decision underscored the distinction between a firm and its partners in the context of sales tax obligations, ultimately ruling in favor of Radha Krishna Maheshwari and setting aside the revising authority's order.