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TMI Blog1959 (10) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... In the first place, he challenges the right of the respondent to assess a dissolved firm. His contention is that when the firm was dissolved on 18th May, 1956, it ceased to exist as an entity for assessment and that there is no provision under the Hyderabad General Sales Tax Act (XIV of 1950) which provides for the assessment of a dissolved firm. He says that even the service of notice on him with reference to the business of a firm that ceased to exist is bad because he no longer represents the dissolved firm. He also contends that the attempted assessment is barred by time, that the goods in which the firm dealt were not liable to sales tax and that the rules under which the notice purports to be given are ultra vires. The grounds on which the several contentions are based will be mentioned later. In order to consider the soundness of these contentions, it is necessary first to summarise briefly some of the provisions of the Hyderabad General Sales Tax Act. By clause (e) of section 2 of the Act, a "dealer" is defined as meaning "any person......................firm ......................or any association or associations of persons engaged in the business of buying, selling or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch notice. Sub-section (2) of that section provides for the imposition of a penalty. Section 26 enables the Government to make rules "to carry out the purposes of this Act", and in particular and without prejudice to the generality of that power, such rules may provide, inter alia, by clause (c) for "the assessment to tax under this Act of businesses which are discontinued or the ownership of which has changed"; by clause (f) "the assessment to tax under this Act of any turnover which has escaped assessment, and the period within which such assessment may be made, provided that such period shall not exceed three years from the end of the year for which the turnover was assessable"; and by clause (k) "generally regulating the procedure to be followed and the forms to be adopted in proceedings under this Act." By sub-section (5) of this section, "all rules made under this section shall be published in the Jareeda and upon such publication shall have effect as if enacted in this Act." Now under rule 34 of the Hyderabad General Sales Tax Rules, 1950, "If a dealer or licensee enters into partnership in regard to his business, he shall report the fact to the licensing, registering and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities, no assessment on the basis of its business can be made even for the period during which it was in existence seems to me unsustainable. It cannot escape the liability by failing to discharge the duty imposed on it by the statutory rules. The assessing authority can proceed on the basis that there was no dissolution. If the firm can be assessed then notice can be issued to the petitioner on the basis that he is a partner of that firm and represents that firm. The position might have been different, if the department had been notified of the dissolution. The next point urged on behalf of the petitioner is that the assessments for the years 1954-55 and 1955-56 are in the nature of escaped assessments within the meaning of rule 32 of the rules and that no assessment can be made after 31st March, 1956, with respect to the first year and after 31st March, 1957, with respect to the second year. It is necessary to read the material portion of clause (1) of rule 32 in order to consider this argument. It reads thus: "32. (1) If for any reason the whole or any part of the turnover of business of a dealer or licensee has escaped assessment to the tax in any year or if the licence fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded on 19th September, 1956, was in these terms: "286. (3) No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent." This interdiction on the power of the State clearly applied only to laws passed by the Legislature of a State after the Constitution came into effect, because the words "Legislature of a State" and "Parliament" clearly refer to legislative bodies which came into existence under the Constitution. The limitation, therefore, imposed by this clause did not affect previous laws in force. The position was that under the Hyderabad General Sales Tax Act, the tax was payable only on goods other than exempted goods and "exempted goods" are defined by clause (f) of section 2 as meaning "goods specified in Schedule 1." Item 1 of Schedule 1 which was in force from 1st May, 1950, to 30th September, 1954, comprised all cereals and pulses. A Schedule was inserted by the Hyderabad General Sales Tax (Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of the goods was repugnant to the section. Their Lordships pointed out that section 3 of that Act corresponding to section 4 of the present Act envisaged the levy of the tax on the turnover, that the definition of "turnover" included a transaction of purchase, that the determination of the turnover was left to be provided for by the rules and that the rule so made was not repugnant to the main Act. Their Lordships referred to the decision of the Supreme Court in Konduri Buchirajalingam v. The State of Hyderabad[1958] 9 S.T.C. 397. and extracted a passage therefrom which clearly indicated that under the Hyderabad Act tax was leviable on the aggregate amount for which goods are either bought or sold. There is no substance therefore in the contention that the notification is repugnant to the provisions of the Act. Another argument urged is that the delegation by the Act to the Government to fix the point at which tax is to be levied is bad as a delegation of legislative power. I am unable to see any substance in this submission. The Legislature has enacted that the tax is leviable in respect of every point of the series of sales. But by section 6(ii) in the case of good ..... X X X X Extracts X X X X X X X X Extracts X X X X
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