1980 (12) TMI 156 - HC - VAT and Sales Tax

Summary

Issues:
1. Liability of a partner for sales tax assessment during a partnership period.
2. Interpretation of section 17 of the Bengal Finance (Sales Tax) Act, 1941.
3. Joint liability of partners for sales tax dues.

Detailed Analysis:

1. The case involved the liability of a partner, Shri Suraj Mal, for sales tax assessment during a partnership period with Shri Abdul Ghani. The partnership was formed to carry on business in bidi, cigarettes, and cigars. After the dissolution of the partnership, an assessment order was made against Shri Suraj Mal for an additional tax demand. The key issue was whether Shri Suraj Mal remained liable for the tax during the partnership period or if the liability was transferred to Shri Abdul Ghani as the transferee.

2. The interpretation of section 17 of the Bengal Finance (Sales Tax) Act, 1941, was crucial in determining the liability. The section stated that upon the transfer of a business, the transferee is deemed to be the registered dealer for all purposes under the Act. This includes assessment and tax realization. The central question was whether the transferor remained liable for tax payment during the partnership period, especially when a statement was made indicating joint liability.

3. The court referred to relevant case laws to analyze the issue of joint liability of partners for sales tax dues. In the case of Ranjit Singh v. Assessing Authority, it was held that a partnership firm ceases to be liable to assessment after dissolution. Another case, Jagdish Kaur v. Sales Tax Officer, established that a transferee is liable to pay arrears of sales tax only if the previous owner has not paid the tax. The court considered these precedents in determining the liability of the partners in the present case.

In conclusion, the court held that Shri Suraj Mal was only liable for the sales tax demand pertaining to the period when he was a partner with Shri Abdul Ghani. The liability for the subsequent period was not imposed on him. The court emphasized that the liability of the transferor had not ceased due to the statement made by Shri Suraj Mal regarding joint liability. Therefore, the court answered the questions raised in the negative and affirmed that Shri Suraj Mal was liable for the specific period mentioned.