1998 (2) TMI 578 - AT - VAT and Sales Tax

Issues Involved:
1. Whether the transfer of the sales and marketing units of Lakme Ltd. to Lakme Lever Ltd. constituted an absolute transfer under section 99 of the West Bengal Sales Tax Act, 1994.
2. Whether Lakme Lever Ltd. carried on the business in its own name or any other name post-transfer, satisfying the conditions of section 99.
3. Whether the registration certificate of Lakme Ltd. should be amended in favor of Lakme Lever Ltd. with effect from January 1, 1996.

Issue-wise Detailed Analysis:

1. Absolute Transfer under Section 99:
The applicants challenged the authorities' finding that the transfer did not amount to an absolute transfer under section 99 of the West Bengal Sales Tax Act, 1994. The applicants argued that the entire sales and marketing unit of Lakme Ltd. was transferred to Lakme Lever Ltd. as a going concern, including goodwill, net movable tangible assets, and net current assets, making Lakme Lever Ltd. the full and beneficial owner from January 1, 1996. The respondents contended that the transfer was not absolute since Lakme Ltd. continued to act as a trustee for Lakme Lever Ltd. until June 6, 1996, importing and selling goods in its own name.

2. Carrying on Business Post-Transfer:
The respondents argued that section 99 requires the transferee to carry on the business in its own name or any other name, which Lakme Lever Ltd. did not do until June 7, 1996. They maintained that Lakme Ltd. continued to carry on the business as a trustee and hence was the dealer during the interim period. The applicants countered that Lakme Ltd. acted only as a trustee during the interim period, and thus, the business operations were effectively those of Lakme Lever Ltd.

3. Amendment of Registration Certificate:
The applicants sought the amendment of Lakme Ltd.'s registration certificate in favor of Lakme Lever Ltd. from January 1, 1996. The respondents rejected this, arguing that the transfer was not absolute and that Lakme Lever Ltd. did not carry on the business during the interim period. The applicants cited the Bombay High Court decision in Commissioner of Income-tax v. Swastik Rubber Products Ltd. to support their claim that the business should be deemed to have been carried on by Lakme Lever Ltd. from January 1, 1996.

Judgment:
The Tribunal found that the transfer of Lakme Ltd.'s sales and marketing unit to Lakme Lever Ltd. was indeed an absolute transfer under section 99. The Tribunal noted that the entire business of the registered dealer in West Bengal, which was exclusively a selling unit, was transferred. The Tribunal rejected the respondents' argument that the transfer was partial due to the interim trustee arrangement, stating that the conditions of the agreement indicated an absolute transfer of the business.

Regarding the carrying on of the business post-transfer, the Tribunal held that Lakme Lever Ltd. did carry on the business through the agency of Lakme Ltd., which acted as a trustee. The Tribunal emphasized that the principal (Lakme Lever Ltd.) carrying on its business through an agent (Lakme Ltd.) still constituted carrying on the business under section 99.

Consequently, the Tribunal directed the amendment of the registration certificate of Lakme Ltd. in favor of Lakme Lever Ltd. with effect from January 1, 1996, setting aside the orders of the Assistant Commissioner and the Deputy Commissioner.

Conclusion:
The Tribunal allowed the application, recognizing the transfer as absolute and confirming that Lakme Lever Ltd. carried on the business through Lakme Ltd. as a trustee during the interim period. The registration certificate of Lakme Ltd. was ordered to be amended in favor of Lakme Lever Ltd. from January 1, 1996.

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