1991 (9) TMI 328 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 19(1) of the Orissa Sales Tax Act, 1947 regarding liability in case of business transfer.

Detailed Analysis:
The judgment involves a reference by the Orissa Sales Tax Tribunal to the High Court regarding the application of section 19(1) of the Orissa Sales Tax Act, 1947 to three cases. The issue revolves around whether the Tribunal was correct in applying this section to the facts of the cases.

The background facts reveal that the assessee was assessed to sales tax for specific quarters, being treated as a transferee under section 19(1) of the Act. The assessing officer held the assessee liable to pay tax from the date of business commencement due to purchasing stock from a previous business operator. The assessee contended that only some stock was purchased, not the entire business, and thus, the liability under section 19(1) did not apply.

Upon appeal, the assessing officer's decision was partially overturned, leading to further appeals before the Tribunal. The Tribunal found that the assessee carried on business in the same premises and goods as the previous operator, thereby affirming the assessing officer's decision. The Tribunal rejected the assessee's application for reference under section 24(1) of the Act.

Subsequently, the assessee approached the High Court, arguing that liability under section 19(1) should not apply merely based on purchasing stock and carrying on similar business activities. The Revenue contended that liability depends on the circumstances of each case and the onus is on the assessee to prove non-transfer of the entire business.

The Court analyzed the legislative intent behind section 19(1) and the explanation attached to it, placing the initial burden on the assessee to demonstrate no transfer of the entire business. The Court emphasized that a transfer of business involves more than just stock acquisition, encompassing aspects like goodwill, rights, and liabilities. Referring to a previous case, the Court highlighted the need to show the absence of transfer of liabilities, assets, and goodwill to avoid liability under section 19(1).

In the present case, the Court found that there was no transfer of goodwill and other business benefits to the assessee, leading to the conclusion that the entire business was not transferred to attract liability under section 19(1). Consequently, the references were answered in favor of the assessee against the Revenue.

In a concurring opinion, the other judge agreed with the decision, and the reference was answered accordingly.