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TMI Blog1962 (4) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... mited transferred the business as a going concern to Messrs Parimal Brothers, the respondent to all these 8 references, and since then, it appears that they have been running the business, On 26th April, 1955, notices under section 14 were issued by the Assistant Collector of Sales Tax to Mrs. Kusum Mody, Mr. K.M. Shroff of Messrs Sunways (India) Private Limited, and Messrs Parimal Brothers, calling upon them to show cause why they should not be assessed to sales tax in respect of the following five periods: (1) 1st January, 1953, to 31st March, 1953; (2) 1st April, 1953, to 25th November, 1953; (3) 26th November, 1953, to 31st March, 1954; (4) 1st April, 1954, to 6th May, 1954; and (5) 7th May, 1954. to 1st June, 1954. After hearing them, the Assistant Collector of Sales Tax on 1st June, 1955, passed 8 orders assessing the respondent to tax. For the first three periods, two orders for each period were passed one relating to the general tax and the other relating to the special tax; and for the last two periods. one composite order for each period was passed in respect of both the taxes. The respondent has been assessed to tax under section 26 of the Act. In due course, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be made for recovery of the tax from such a dealer. Therefore the decisions under the Indian Income-tax Act are of little assistance. On the other hand, Mr. Ganatra contends that the expression "tax payable and remaining unpaid" could only mean tax which has been assessed, and which after demand notice in respect thereof having been issued, has remained unpaid till the expiry of the period mentioned in the notice of demand. Quality of chargeability to tax is entirely different from the quality of payability of tax. A dealer may become liable to pay tax under section 5, but no tax is payable by him unless he is assessed to tax under section 14 of the Act, and payment of the tax is demanded from him under section 16. The payment which a registered dealer makes at the time of filing of the return is not of a tax, but it is only a payment towards the tax. Even when a registered dealer has duly filed a return and paid tax in advance, sub-section (1) of section 14 contemplates making an order of assessment. The Legislature could never have intended to expose an innocent transferee to the peril of being made to shoulder the liability of his transferor, the extent of which he c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made liable to pay tax in respect of the transferred business as if he is the dealer liable to pay tax. The liability fastened on a transferee is made coextensive with the liability of the transferor to pay tax in respect of such business. That liability arises when the following three conditions are fulfilled: (1) the transfer is of the entire business, (2) the transferor was a dealer liable to pay tax in respect of that business, and (3) the tax payable by the transferor in respect of that business has remained unpaid at the date of the transfer. The section does not say that the transferee shall pay the tax payable by the transferror, but, on the other hand, it says that the transferee shall pay the tax payable by the transferor liable to pay the tax. Now, the tax payable by a dealer, liable to pay tax would, in our opinion, include his obligation to pay tax as contradistinguished from a tax debt payable by such a dealer. In our opinion, therefore, the tax payable would mean obligation of a dealer to pay the tax. It is well settled principle that liability to pay a tax arises by virtue of the charging section, and it is not dependent on assessment. Dealing with the char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax becomes payable by a dealer. Briefly stated, the scheme of the Act is: Sales tax is levied on the taxable turnover of a dealer, i.e., a person who carries on the business of selling goods in the State of Bombay, at the rates specified in section 6. Under section 5, the liability to pay tax arises when the turnover of the dealer exceeds the limit specified in the Act. The dealer, liable to pay tax, is required by the Act to apply and get himself registered as a dealer under the Act. Sub-section(1) of section 9 provides that no dealer shall, while being liable to pay tax, carry on business as a dealer unless he has applied for registration within the prescribed period. In the event the registered dealer transfers his business, or the turnover of his business does not exceed the specified limit, he is entitled to apply for cancellation of registration. Section 13 enjoins a duty on the registered dealer to furnish returns of his turnover in the prescribed manner to the prescribed authority, and according to the rules the intervals at which the returns are to be furnished by a registered dealer are monthly returns or the quarterly returns. Section 16 deals with payment and recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) a dealer duly gets himself registered, files a true return, but fails to pay the amount of tax or part thereof at the time of filing the return [section 16(5) (i)(a)]; (2) a registered dealer files a return, pays the tax according to his return, but fails to satisfy the Collector about the correctness of his return and/or the amount of tax payable by him [section 14(3) and (4) read with section 16(5)(i)(b)]; (3) a dealer after getting himself registered, fails to file a return [section 14(5) read with section 16(5)(i)(b)]; (4) a dealer liable to pay tax, fails to get himself registered either unwittingly or wilfully [section 14(6) read with section 16(5)(i)(b)]. The various provisions discussed above would show that the obligation to pay tax is incurred by a dealer when is turnover exceeds the specified limit and the tax becomes payable by him at that point of time. A duty is enjoined on a dealer to discharge that obligation at the point of time prescribed for filing returns. Sections 14 and 16 only come into play when a dealer fails to carry out his obligations under the Act. The provisions relating to making of an assessment and issuing of a demand notice only relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Ganatra's contention, but in our view, reading those observations in the context of the facts of those cases, they can hardly be stated to be of any assistance to Mr. Ganatra. In both those cases, the question which was being considered was at what point of time the sales tax can be said to be a debt due and payable within the meaning of section 230(1)(a) of the Indian Companies Act, 1913, as it then stood. That section provided that in "a winding up there shall be paid in priority to all other debts-(a) all revenues, taxes, cesses and rates, whether payable to the State or to a local authority, due from the company at the date hereinafter mentioned and having become due and payable within the twelve months next before that date". The date "hereinafter mentioned" was the date of winding up order (vide sub-section (5) of section 230 of the Indian Companies Act). The dates on which the assessment orders were made fell within one year preceding the winding up order, but the dates on which the returns should have been filed and tax paid were beyond that period. The learned Judges were considering the question of priority as between the debt due by the company to the State in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Sales Tax, Orissa v. Sri J. Mohanty[1961] 12 S.T.C. 706. It is next contended that the respondent is not liable to pay any tax prior to 26th November, 1953, the date on which the Sunways (India) Private Ltd., purchased the business from Mrs. Mody. In other words, it is the contention of Mr. Ganatra that the respondent is not liable to pay tax relating to the business conducted by Mrs. Mody. It is the argument of Mr. Ganatra that under section 26 the liability fastened on the transferee is confined only in respect of the business conducted by his transferor, and not in respect of the business conducted by any person other than his transferor. There was no privity of contract between the respondent and Mrs. Mody. The respondent is not therefore liable for the tax due for the period during which Mrs. Mody conducted the business. Reliance is placed on the decision in Rambali Bhuleshwar v. Sales Tax Officer, Recovery 1, Bombay(1). We are unable to accept this contention of Mr. Ganatra. In our view, on the terms of sub-section (1) of section 26, the liability that is fastened on the transferee of a business is the liability of the transferor in respect of the business transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended, but that does not mean that any of the provisions of the Act, by reason of the amendments, had been repealed. Prior to the amendment, the taxes imposed were only two taxes, namely, general tax and special tax. After the amendment, the taxes imposed also include one more tax, namely, the purchase tax. No liability in respect of the purchase tax has been fastened on the respondent for the period 1st April, 1953 to 31st March, 1954, and therefore, it cannot be said that the respondent had in any manner been wrongfully taxed. Lastly, it is contended that section 26 has no application at all inasmuch as the transfer by the Sunways (India) Private Limited in favour of the transferee was not of the entire business, but was only of a part of the business. This contention is purely one of fact, and it had not been raised at any time before any of the Sales Tax Authorities or the Tribunal. It cannot, therefore, be said that it arises out of an order of the Tribunal. We have therefore not allowed Mr. Ganatra to advance any argument in support of this contention. For the reasons stated above, the answer to the question referred to us will be in the negative so far as the period 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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