1982 (4) TMI 268 - HC - VAT and Sales Tax

Summary

Issues:
Enforcement of sales tax dues for assessment years 1965-66 to 1970-71 challenged under Article 226 of the Constitution. Dispute regarding the nature of business ownership and management between family members. Liability of sales tax dues during the receiver's management period. Interpretation of the definition of "dealer" under the U.P. Sales Tax Act.

Analysis:
The petitioners challenged the enforcement of sales tax dues for the assessment years 1965-66 to 1970-71 under Article 226 of the Constitution. The dispute arose from the ownership and management of a business named "Badshah Pasand Karyalaya" involving family members. The court appointed a receiver to manage the business during the pendency of a civil suit filed by one of the family members. The receiver was later replaced, and the suit was ultimately withdrawn in 1972. Meanwhile, sales tax assessments were made for the business, resulting in a demand of Rs. 45,000.75 for those years, with additional interest. The petitioners argued that the receiver was responsible for discharging the sales tax liabilities as he had complete charge of the business during his tenure. They sought to restrain the enforcement of the liability against them and requested it to be realized from the receiver instead.

The State of Uttar Pradesh and the Deputy Collector, Sales Tax, contended that the assessments were proper and final since they were not challenged through appeal or revision. They argued that the liability to pay sales tax dues rested with the proprietors of the business, i.e., the petitioners, and not the receiver. They denied any collusion between the tax authorities and the receiver. The petitioners admitted that the demand could not be enforced against them as it pertained to the period when the business was under the receiver's management. They claimed that the receiver should be considered a "dealer" under the U.P. Sales Tax Act, making him liable for the dues. However, the court disagreed, stating that a court-appointed receiver does not fall under the definition of a dealer as per the Act. The court clarified that the liability of an agent is co-extensive with that of the principal, and any liabilities left undischarged by the receiver would pass on to the principal.

Ultimately, the court held that the demand created as a result of the assessments was enforceable against the proprietors of the business, i.e., the petitioners. The court deemed the action taken by the tax authorities in attaching the properties of the petitioners as legal and justified. Consequently, the petition was dismissed, and each party was directed to bear their own costs.