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TMI Blog1990 (6) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... extensive trade in oil. The extensive activities of the firm, reaching even the upper regions of the Indian Union are gatherable from a criminal judgment of this Court reported two decades back. [Vide Pareed Pillai v. State, (1969) ELT 155]. 3.. The dealings in oil, of that firm, naturally attracted tax liability, Central and State. The firm had been registered under the Partnership Act as evidenced by exhibit Al. That it was treated as a registered firm by the assessing authorities under the sales tax laws is a fact averred in the plaint and not disputed by the defendant and as such could be treated as established. 4.. The arrears of tax for the periods 1958-59 to 1962-63 remained unpaid. For reasons not easily discernible, recovery of the tax due was indeed slow. Sales tax (not payable by a dealer, but capable of being passed on to the purchaser and as such much different from income-tax) is levied as soon as the taxable event-the sale-takes place. Its assessment quantifies the liability. The demand notice which accompanies the assessment order stipulates the time for payment. If the demand is not honoured, recovery is permissible. The State is armed with weapons, sufficient, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no written statement on behalf of the State. None of its officers bothered themselves about this litigation wherein the Government had a stake of about Rs. 13 lakhs. 10.. The trial court nonsuited the plaintiff, the multiplicity of contentions notwithstanding. 11.. The appellate court took a different view. It emphasised the default of the State in filing a proper written statement. In the absence of a proper written statement, the allegations in the plaint could be treated as correct and acted upon as such. Pleas such as the non-maintainability of the suit either due to the existence of internal remedies in which the relief could be sought for and worked up, or the non-maintainability of the suit in the absence of a grant of leave under section 80(2), were turned down by the appellate court. It held that the tax due from the firm could not be recovered from the plaintiff or by proceedings against his personal properties. The appeal was thus allowed and the suit decreed. 12.. The second appeal by the State Government challenges the appellate judgment. The questions formulated contain almost exhaustively all aspects which could be discussed, debated upon and decided. 13.. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth as regards the recovery steps and about the correctional avenues for getting rid of the erroneous orders of the subordinate authorities, a party cannot bypass that statutory hierarchy-according to the State. Counsel for the plaintiff relied particularly on section 80(1) of the Revenue Recovery Act, which specifically keeps alive a remedy by way of suit for an aggrieved defaulter to proceed against under the Recovery Act. 17.. It is unnecessary to pronounce finally on these questions about the bar under the sales tax law and the Recovery Act in the light of the conclusion on other points. 18.. The question which involves the interpretation of section 80(2), Code of Civil Procedure, has to be considered more carefully. 19.. The relevant facts notable on this issue had been already indicated earlier. The evidence available establishes that recovery steps had been already initiated under the Revenue Recovery Act, and that an attachment of the property had been made by the competent authorities even in 1963. That is what has been referred to in the judgment of the trial court. The relevant portion reads: "The plaint schedule properties were attached in 1963. Till July 20, 1978 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to him or left at his office, stating the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims; and the plaint shall contain a statement that such notice has been so delivered or left. (2) A suit to obtain an urgent or immediate relief against the Government (including the Government of the State of Jammu and Kashmir) or any public officer in respect of any act purporting to be done by such public officer in his official capacity, may be instituted, with the leave of the Court, without serving any notice as required, by sub-section (1); but the Court shall not grant relief in the suit, whether interim or otherwise, except after giving to the Government or public officer, as the case may be, a reasonable opportunity of showing cause in respect of the relief prayed for in the suit: Provided that the Court shall, if it is satisfied, after hearing the parties, that no urgent or immediate relief need be granted in the suit, return the plaint for presentation to it after complying with the requirements of sub-section (1)." 21.. The background judicial discussions on section 80 of the Code of Civil Procedure prior to its ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rigour of these obligations in limited contingencies. 23.. There was, initially a proposal for the omission of section 80 from the Code of Civil Procedure. The Committee deliberated over it. Its ultimate decision and recommendation have been expressed thus: "The Committee feels that the omission of section 80 of the Code, as proposed in the Bill, will not be in the public interest. It might prompt people to file suits against the Government to prevent it from undertaking any measure for the benefit of the society and this might also hinder the pace of developmental activities. The Committee is, therefore, of the view that provisions contained in section 80 should be retained subject to modifications indicated hereafter. The Committee, however, feels that relaxation of the provisions of section 80 of the Code is necessary so that a person may not be deprived of the opportunity of obtaining an urgent or immediate relief, where such relief is essential." (Emphasis* supplied) Section 80(2) has to be understood in that background: No doubt, in limited contingencies, a suit can be filed without a notice under section 80. But the contingencies therefor have to be established before r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute the suit under section 80(2) of the Code of Civil Procedure. That is a reference to the sale proposed on August 3, 1978, and the absence of "time to issue a notice". The State opposed the application. According to it, the properties had been placed under attachment even in the year 1963. Recovery process was then sought to be stalled by the plaintiffs mother filing a suit O.S. 103 of 1972 claiming the properties as her individual assets on the basis of a gift from the husband, set up by her. That suit had been dismissed and the appeal therefrom had been rejected. According to the State, the plaintiff was aware of the recovery steps even earlier through the demand notice and the attachment of the properties. The notice dated June 29, 1978 in form No. 16 was the only further step contemplated under section 49(2) of the Revenue Recovery Act. 26.. The contention of the State is forceful. The sale of a property of a defaulter is not fixed all on a sudden. The scheme of the Revenue Recovery Act is elaborate regarding the steps starting from the service of notice under that Act. The issue of the first notice under rule 3, read with section 7, is the earliest indication of an inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed and a person becomes the successful purchaser, he cannot, in the present case, straightway reduce the property to his possession; for, the interest sold is only a share of the partner in the property. A further, and necessarily tedious step also has to be undergone before actual possession could be got at as regards a portion of the property. A suit for partition has to be instituted; it should be decreed; and a final decree will have to be obtained. And ultimately the delivery of the property as provided under the final decree will have to be effected. Needless to reiterate, all these proceedings entail considerable time. From that view also, it cannot be said that the case is one where any institution of a suit immediately on the intimation of the sale proclamation was necessary to obtain urgent relief. There was no urgency-such as will not brook a delay of 2 months contemplated under section 80(1) of the Code of Civil Procedure, in the matter, for the plaintiff to obtain a relief without compliance with section 80(1). 29.. The plaintiff, though alerted by that order, did nothing in relation to his further obligation as regards the suit. It would have been perfectly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm, there was a distinct step in the year 1963 in the form of an attachment of his properties. Are his individual properties liable for the dues from the firm of which he is a partner? 33.. The General Sales Tax Act, 1125, had been repealed by the Kerala General Sales Tax Act, 1963, effective from April 1, 1963. Broadly speaking, all tax proceedings initiated under the Act of 1125 could be continued under the 1963 enactment. Section 61 of the 1963 Act contains specific provisions about the repeal of the old Act, the consequences thereof and also about the recovery of outstanding dues. 34.. The plaintiff contended that recovery proceedings were impermissible as against the assets of the individual partner, when the assessment was on the firm and the quantified liability also was that of the firm. Under the General Sales Tax Act, 1125, the firm is an assessable entity being enumerated as one under section 2(d) of the Act. The tax is demanded under the Act from the firm. If payment is not forthcoming, it is the firm, that is the defaulter. Recovery proceedings are permissible but only against defaulter. No assessment order or demand notice had been served on the individual partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads: "Provided that such repeal shall not affect the previous operation of the said Act or any right, title, obligation or liability already acquired, accrued or incurred thereunder, and subject thereto, anything done or any action taken, including any appointment, notification, notice, order, rule, form, regulation, certificate, licence or permit, in the exercise of any power conferred by or under the said Act, shall be deemed to have been done or taken in the exercise of the powers conferred by or under this Act, as if this Act were in force on the date on which such thing was done or action was taken, and all arrears of tax and other amounts due at the commencement of this Act may be recovered as if they had accrued under this Act." 37.. The first sub-section brings about the repeal of the old Act. There is a general declaration seen in all such repealing statutes or provisions by which pre-existing rights and liabilities are preserved and protected. Even without any further provision, the rights of the State and of the plaintiff would appear to be preserved thereunder. The State had a right under the repealed enactment to get at the tax already assessed. That right is pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had a right (or if a better word could be adopted, immunity) accrued under the General Sales Tax Act, 1125, that itself could be subject-matter of a further change by the Legislature. The fact that some rights are already accrued under an enactment, does not preclude the Parliament or the Legislature, from making a specific and special provision for a special treatment of such an immunity obtained by citizen, or a disability incurred by the State. Does section 61 purport to impair any such right which had already accrued to the assessee? Reliance was rightly placed by counsel for the plaintiff on the first part of the proviso and in particular, to the words "subject to". The contention is that the repeal of the 1125 Act in 1963 does not expressly disturb any of the antecedent rights or liabilities. That crucial contention requires more careful examination. 39.. The proviso, as noted earlier, covers two ideas: (1) the preservation of antecedent rights and liabilities, (2) the equation of the outstanding under the 1125 Act as liability under the new Act. It is difficult to understand the proviso otherwise than having two such distinct ideas. If it were a question of merely facilitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled principles of law. 41.. It only remains now to indicate how the various decisions on which counsel for the respondent-plaintiff relied on, could be easily distinguished as inapplicable on the facts. 42.. As regards the decisions under the Income-tax Act, many are the distinguishing features. It is unnecessary to discuss them in greater detail in this context. Those decisions only declare that under the scheme of the Income-tax Act, recovery is unavailable against an individual partner for the tax dues from a firm. The decision of the Full Bench in Income-tax Officer v. C.V. George [1976] 105 ITR 144 (Ker); 1976 KLT 333 which dealt with the situation under Income-tax Act, cannot, therefore, have any application to a case under Kerala General Sales Tax Act, in the light of the wide range of difference between the two enactments. As for example, the observation at (page 149 in [1976] 105 ITR 144 (Ker) [FB]; page 335 in 1976 ELT 333 [FB]) (Income-tax Officer v. C.V. George), gives the emphasis of the separate assessments that have to be made under Income-tax Act on the firm as well as on the partner of the firm. The scheme of the Sales Tax Act does not envisage any assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, who, under section 45, is, jointly and severally, liable along with the firm, for the dues from the firm. The State to whom tax is due, is yet another creditor. If at all, the State is in a better position, having regard to the character of the liability of the firm towards the State. Why should disadvantages and differential consequences be visited upon the State? The Full Bench of the Kerala High Court was, therefore, at pains to analyse the scheme of the income-tax enactment and to hold that that scheme did not tolerate the enforcement of the general provisions contained in section 45 of the Partnership Act. That may be a plausible view. 45.. Can such a view, however, be imported in a wholesale manner into a State enactment like the Sales Tax Act with materially different statutory scheme in relation to the assessability of the firm and partners in relation to the self-same taxable event? No doubt, by virtue of the legal fiction, a firm, which has otherwise legal entity under the general law, becomes an assessable entity with a distinct legal personality. Merely because a legal personality is so infused on the firm, does it shed all other characteristics, rights, liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence to safeguard the interest of the State and to assist the court in the determination of the complicated issues, grievously defaulted in their duties. The default is grave. The defaulters should not be allowed to survive in service without accountability. Even if some or more of such persons have retired from service (they must be in receipt of pension), the State should not hesitate to have a meaningful probe to fix the responsibility. 47.. Another distressing experience for the court was the difficulty confronted by the Government Pleader. There was no arrangement for an effective defence of such an important case, with such huge stakes. The orders passed on June 4, 1990 and June 6, 1990 (which have been directed to be forwarded to the Government) say some portion of the sordid story; but not all. It is time that those who run the department spare some time to attend to these grievously malfunctioning areas of the department. The Government Pleader who had been compelled by circumstances, to argue the case, and without as much of preparation as is desirable, was not furnished with copies of the documents nor even a certified copy of the deposition of the only witness examin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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