2006 (2) TMI 693 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Settlement of Sales Tax Dues
2. Partner's Liability for Sales Tax
3. Validity of Ex Parte Assessment Orders
4. Non-Production of Relevant Files
5. Binding Nature of Civil Court Decree

Detailed Analysis:

1. Settlement of Sales Tax Dues
The petitioner claimed that a settlement with the State Minister for Finance absolved him of all sales tax dues for Samvat years 2034 and 2035. He argued that the Commissioner of Sales Tax quantified his liability at Rs. 4,52,006, which he paid, believing it to be a full and final settlement. However, the court found no evidence of a formal settlement order from the State Minister for Finance. The letters from the Commissioner did not indicate any such settlement, and the petitioner failed to produce any official settlement order. The court concluded that the petitioner could not rely on the alleged settlement to escape liability.

2. Partner's Liability for Sales Tax
The petitioner was held liable for the firm's sales tax dues as a partner. Despite his claims of being a "formal partner" and retiring from the firm, the court upheld the joint and several liability provisions under Section 18 of the Bombay Sales Tax Act (B.S.T. Act). The court emphasized that the liability of a partner is joint and several, and there was no provision in the B.S.T. Act allowing for the settlement of an individual partner's liability. The Commissioner of Sales Tax's quantification of liability based on the partnership deed was found to be contrary to the express provisions of the Act and not binding on the department.

3. Validity of Ex Parte Assessment Orders
The petitioner contested the ex parte assessment orders for Samvat years 2034 and 2035, arguing that he was not given adequate opportunity to present his case. The court noted that the petitioner had sought adjournments and delayed the proceedings, leading to the ex parte orders. The assessment orders confirmed significant tax demands, and the first appellate authority upheld these orders, rejecting the petitioner's claims of not being a partner. The court found no merit in the petitioner's challenge to the validity of the assessment orders.

4. Non-Production of Relevant Files
The petitioner argued that the non-production of relevant files by the respondents indicated deliberate withholding of evidence. The court, however, did not accept this contention. It noted that the respondents had consistently maintained that the files were untraceable, and there was no reason for the authorities to withhold files if a genuine settlement had been reached. The court found the petitioner's conduct, including not withdrawing pending appeals and suits, inconsistent with his claims of a settlement, further casting doubt on the genuineness of the alleged settlement.

5. Binding Nature of Civil Court Decree
The petitioner relied on a decree from the City Civil Court at Bombay, which declared that he was not a partner of the firm at any time. The court held that this decree did not bind the sales tax authorities, as they were not parties to the suit. The court emphasized that the concept of a "formal partner" is foreign to the Partnership Act, and the findings of the adjudicating authority and the first appellate authority regarding the petitioner's partnership status remained binding.

Conclusion:
The court dismissed the petition, ruling that the petitioner failed to establish any settlement absolving him of liability. The petitioner's liability as a partner for the firm's sales tax dues was upheld, and the ex parte assessment orders were found valid. The non-production of files did not warrant an adverse inference against the respondents, and the civil court decree did not affect the sales tax authorities' rights to recover dues from the petitioner. The petition was dismissed with no order as to costs.