2006 (12) TMI 467 - HC - VAT and Sales Tax

Summary

Issues involved:
Challenging notice and summons for recovery of arrears of land revenue from partners of a firm.
Disputed recovery pertaining to sales made in the course of export outside India.
Alleged dissolution of the firm and subsequent transfer of assets by one partner.
Dispute over liability for tax dues and transfer of firm's assets.
Validity of transfers made by a partner during pending recovery proceedings.

Analysis:
The petitioners challenged a notice and summons seeking to recover arrears of land revenue from the partners of a firm. The firm, constituted in 1987, raised a loan for a rice sheller, repaid it, and availed benefits under tax laws. A dissolution deed in 1997 transferred assets to one partner. The dispute arose over sales tax dues for 1995-96 and 1996-97 related to exports. Respondents argued that the dissolution deed was not furnished and partners were liable when dues were incurred. The court noted the land contribution by a partner, mortgage for the loan, and subsequent asset transfers by the same partner.

The court found that while the dissolution of the firm was disputed, the partner continued the business for two years post-dissolution. The property belonged to the firm, and transfers made by the partner during pending recovery proceedings raised concerns under the Act. The court highlighted the provision on transfers to defraud revenue and emphasized the need for proper consideration of such transfers. The court quashed the notice, remitting the case for lawful recovery proceedings after hearing all concerned parties and addressing objections raised.

In conclusion, the court disposed of the writ petition without costs, directing authorities to proceed for recovery in accordance with the law after considering all relevant parties and objections. The judgment emphasized the importance of proper procedures in recovering dues and addressing asset transfers during pending proceedings to prevent fraud against revenue.