1986 (3) TMI 321 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of the transferee for the assessed dues of the transferor under section 18(1) of the Bombay Sales Tax Act, 1953.
2. Interpretation of the assignment dated 16th October, 1952, regarding the transfer of the entire business under section 26(1) of the Bombay Sales Tax Act, 1953.

Detailed Analysis:

Issue 1: Liability of the Transferee for Assessed Dues
Facts and Background:
The case involves the transfer of business from Sunderdas Dharamsi to his wife Valibai Morarji. Sunderdas executed a deed of assignment on 16th October, 1952, transferring his business to Valibai. Neither party informed the Sales Tax Officer about this transfer. Subsequently, five assessment orders were passed against the registered dealer, Sunderdas Dharamsi.

Relevant Provisions:
- Section 18(1) of the Bombay Sales Tax Act, 1946: States that when the ownership of a business is entirely transferred, any unpaid tax at the time of transfer is payable by the transferee.
- Section 26(1) of the Bombay Sales Tax Act, 1953: States that the transferor and transferee are jointly and severally liable for any tax and penalty payable in respect of the business and remaining unpaid at the time of transfer.

Tribunal's Findings:
The Tribunal concluded that the entire business was transferred to Valibai but set aside the order for recovery of dues from her due to lack of notice before the assessment orders were passed.

Court's Analysis:
The Court noted that principles of natural justice require compliance before imposing liability. However, if the assessee's wrongful conduct (failure to notify the transfer) makes it impossible to give notice, the assessment orders should not be invalidated for lack of notice.

Extent of Liability:
- First Assessment Period (1st April, 1949 to 31st March, 1951): Liability for tax dues (Rs. 9,859-12-0) can be enforced against Valibai. Penalty (Rs. 1,754-8-3) cannot be enforced as it was imposed after the transfer.
- Second Assessment Period (1st April, 1951 to 16th October, 1952): Liability for tax can be enforced only for the period up to 16th October, 1952.
- Remaining Periods (Post 16th October, 1952): Assessment orders cannot be enforced against Valibai as the transferee under section 18(1) of the 1946 Act and section 26(1) of the 1953 Act.

Conclusion:
The Court reframed question (i) and answered it as follows:
- (i)(a): Negative and in favor of the Revenue.
- (i)(b), (i)(c), and (i)(d): Affirmative and against the Revenue.

Issue 2: Interpretation of the Assignment Dated 16th October, 1952
Facts and Background:
The deed of assignment transferred the business, including stock-in-trade, furniture, fittings, fixtures, and goodwill, but retained the right to recover outstanding dues and the liability to pay debts and taxes.

Tribunal's Findings:
The Tribunal held that the entire business was transferred to Valibai.

Court's Analysis:
- Relevant Provisions:
- Section 26(1) of the Bombay Sales Tax Act, 1953: Liability arises only if the entire business is transferred.
- Court's Interpretation:
- The transfer of the entire business as a running concern is essential. The retention of the right to recover outstandings and liability to pay debts does not impair the running of the business.
- The decision in Commissioner of Sales Tax v. K. Tajkhanji Co. supports that the transfer must be of the entire business as a running concern, without keeping back any essential part.

Conclusion:
The Court answered question (ii) in the affirmative and against the assessee.

Final Judgment:
- Question (i)(a): Negative and in favor of the Revenue.
- Questions (i)(b), (i)(c), and (i)(d): Affirmative and against the Revenue.
- Question (ii): Affirmative and against the assessee.

Additional Notes:
The Court expressed gratitude to Mr. Joshi for assisting as amicus curiae and concluded with no order as to the costs of the reference.

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