1970 (5) TMI 64 - HC - VAT and Sales Tax

Summary

Issues:
Recovery of arrears of sales tax from a partner of a dissolved firm without serving a separate notice of demand.

Analysis:
The case involved a question of law regarding the recovery of arrears of sales tax from a partner of a dissolved firm without serving a separate notice of demand. The firm in question, M/s. Mangal Sen Sita Ram, was dissolved, and the partner, Sri Sampat Ram, was being pursued for the arrears of sales tax for the years 1961-62 to 1964-65. The Judge (Revisions) initially allowed the revision application, directing the Sales Tax Officer to follow the procedure as laid down in the U.P. Sales Tax Act before attempting to recover the arrears from the assessee.

In a similar case, Bishwanath Lohia v. The Collector, Aligarh, it was held that the Sales Tax Officer could recover arrears of sales tax from a partner of a firm without serving a separate notice of demand. The counsel for the assessee tried to distinguish this case by highlighting the dissolution of the firm in the present case.

Section 3-C of the U.P. Sales Tax Act deals with the liability of a dissolved firm and its partners for tax arrears. The legal fiction created under this section treats every partner as jointly and severally liable for the tax due against the dissolved firm. The Judge (Revisions) misinterpreted this provision, suggesting that a fresh notice of demand should be served on a partner before initiating recovery proceedings, which would defeat the purpose of the legal fiction.

The Supreme Court's interpretation of a similar provision in the Indian Income-tax Act emphasized the continuity in the application of assessment proceedings even after the discontinuance of a firm. The counsel for the assessee referenced a case under the Income-tax Act, but the court clarified that the provisions of the U.P. Sales Tax Act were distinct.

In conclusion, the court answered the question in the negative, favoring the Commissioner of Sales Tax. The court held that the legal fiction under section 3-C deemed the partner to be the dealer in default, allowing for the recovery of arrears from him without a separate notice of demand. The court distinguished this case from a scenario involving a legal representative of a deceased assessee, where a separate notice of demand was deemed necessary before initiating recovery proceedings.