1986 (12) TMI 349 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 19 of the Orissa Sales Tax Act, 1947 regarding the liability of a transferee of a business for unpaid taxes.

Analysis:
The case involved a reference under section 24(1) of the Orissa Sales Tax Act, concerning the interpretation of section 19 of the Act. The question raised was whether the opposite party, who acquired the business of a registered dealer, should be treated as an entire transferee of the business under section 19(1) of the Act. The dealer had sold his stock-in-trade to the opposite party, who continued the business under a different name. The Sales Tax Officer held the opposite party liable for unpaid sales tax under section 19(1) of the Act. The opposite party appealed the decision, leading to references made to the High Court.

The crux of the matter revolved around the interpretation of section 19 of the Act, which deals with the transfer of business ownership and liability for unpaid taxes. The Tribunal, considering precedents and legal provisions, concluded that for the provisions of section 19 to apply, there must be an entire transfer of the business from the predecessor to the successor. The Tribunal found no evidence to prove that the opposite party had acquired the goodwill, assets, and liabilities of the original dealer, leading to the decision that the opposite party was not the entire transferee of the business.

The provisions of section 19(1) of the Orissa Act are similar to those in other state Acts. The language of the section specifies that the transferee is liable only when the entire business is transferred. The Tribunal's decision was supported by legal authorities and a Patna High Court decision, emphasizing the need for a complete transfer of the running concern, including assets, goodwill, and properties, for the transferee to be held liable for unpaid taxes. As the Tribunal found no evidence of such a complete transfer, the liability under section 19 was not established.

Additionally, the High Court highlighted that the liability of the transferee arises only if any tax amount remains unpaid at the time of transfer. In this case, there was no evidence of any assessment or demand raised against the original dealer, indicating that the assessment proceedings were initiated directly against the opposite party. Therefore, the Court answered the question in the affirmative against the petitioner and in favor of the opposite party, emphasizing the need for a complete transfer of the business for liability to be imposed.