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1993 (4) TMI 287 - HC - VAT and Sales Tax
Issues:
Recovery of sales tax dues from a new firm due to the liabilities of an erstwhile firm. Analysis: The judgment by the Kerala High Court dealt with the issue of recovery of sales tax dues from a new firm, City Jewellery, due to the liabilities of the erstwhile firm of Vasudevan and Anto. The new firm, consisting of partners Vasudevan and Suresh, was registered under the Kerala General Sales Tax Act, 1963. The court noted that the amount sought to be recovered was due only from the partners of the erstwhile firm, including Vasudevan. The primary question addressed was whether the movable properties of the new firm could be attached and seized for the recovery of the dues of one of its partners. The court referenced the Supreme Court case of Addanki Narayanappa v. Bhaskara Krishnappa to establish that during the subsistence of a partnership, no partner can claim a specific share in any asset of the firm. Partners are co-owners of firm assets, and no partner can deal with any portion of the property as his own during the partnership. The judgment highlighted that specific property of a firm cannot be attached for the personal dues of one partner. The court emphasized that the proper procedure for realization of a partner's dues by proceeding against the property of a firm should follow the guidelines laid down in the Code of Civil Procedure or the Income-tax Act. Citing previous cases such as Mohamed Sulaiman & Co. v. State of Madras and Central Glass Factory (Madras) Firm v. Special Commercial Tax Officer, the court reiterated that specific assets of a firm are not liable for the personal dues of one partner. The judgment concluded that the seizure of the jewellery items from the new firm for the recovery of dues from Vasudevan as a partner of the erstwhile firm was illegal and improper. Consequently, the court allowed the original petition, quashed the seizure of movables, and ordered the return of the seized items to the firm City Jewellery. The respondents were permitted to proceed in a lawful manner for the realization of Vasudevan's dues.
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