9911796707
TMI Blog2006 (2) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... ership Firm known as M/s. Joshi, Karanunashankar Liladhar & Company ('firm' for short), a registered dealer under the Bombay Sales Tax Act, 1959 ('B.S.T. Act' for short) was indebted to M/s. Hemal Traders for a sum of ₹ 10,00,000/-. With a view to secure the said amount, the petitioner was inducted as a partner of firm from 8/4/1978 as a sleeping partner by executing a deed of partnership on 8/4/1978. Under the said partnership deed the petitioner was entitled to share in the profits of the partnership at 34% which was the highest amongst all the partners. The petitioner claims that the fact of his joining the firm as a partner was not intimated to the sales tax authorities as the petitioner was only a formal partner and was not to participate in the business and was not to bear any liability of the firm. It is the case of the petitioner that by a notice dated 27/10/1978 he had sought to retire from the firm with effect from 1/11/1978 and the same was accepted by all the partners and the same was recorded in the deed of retirement executed on 27/6/1979. 3. In the meantime, the Sales Tax Officers from the Enforcement Branch had visited the office of the firm on 26/6/1979 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the demand and recording a finding that there was sufficient corroborative evidence on record to hold that the petitioner who joined the firm as a partner in S.Y. 2034 continued to be a partner of the firm during S.Y. 2035. The demand confirmed for S.Y. 2035 (1-11-78 to 24-6-79) was ₹ 28,18,202/- under the B.S.T. Act and ₹ 44,577/- under the C.S.T. Act. It was further categorically recorded in the said assessment order that the petitioner as a partner was jointly and severally liable to pay the tax along with the firm for S.Y. 2035. 6. The petitioner filed appeals against the assessments for S.Y. 2034 and 2035 and the same were dismissed by the first appellate authority on 30/9/81. While upholding the assessment orders, the first appellate authority recorded a finding that the petitioner had issued several cheques to third parties during S.Y. 2035 as partner of the firm and, therefore, the assessing officer was justified in rejecting the contention of the petitioner that he was not a partner of the firm during S.Y. 2035. 7. Being aggrieved by the aforesaid orders, the petitioner filed Second Appeals before the Maharashtra Sales Tax Tribunal. 8. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regates to ₹ 13,33,091/- under the Bombay Sales Tax Law and to ₹ 85,878/- under the Central Sales Tax Law. The Total coming to ₹ 14,18,969/-. Further, in respect of the period during which you were the partner in the firm, the tax amount aggregates to ₹ 12,52,163/- under the Bombay Sales Tax Law and ₹ 77,268/-under the Central Sales Tax Law out of which your share on the basis of the partnership deed comes to ₹ 4,25,735/- & ₹ 26,271/-respectively. Further, in case you are able to show that some more sales have been to genuine licence holders and if the Deputy Commissioner is satisfied on this issue than the liability may still further come down. You are requested to apply accordingly. Yours faithfully, Sd/- Commissioner of Sales Tax, Maharashtra State, Bombay. 10. In reply thereto, the petitioner addressed another letter on 25/1/1984 requesting the Commissioner of Sales Tax to scale down the quantified demand by 50% and in the alternate the petitioner be permitted to pay the quantified amount of ₹ 4,52,006/-(Rs. 4,25,735/- and ₹ 26,271/-) in installments. The petitioner received a letter dated 15th February, 1984 sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question as to whether there was any settlement between the parties and whether the petitioner was relieved of his obligation. Accordingly, the application filed by the petitioner was dismissed by the Tribunal. Thereupon, the petitioner has filed the present petition. 13. Mr. Joshi, learned counsel appearing on behalf of the petitioner submits that in the present case, the petitioner had appeared before the then State Minister for Finance and after considering the settlement application, as also the documents furnished by the petitioner, the State Minister for Finance had made necessary endorsement on the file and accordingly, the Commissioner of Sales Tax by his letter dated 16/1/1984 quantified the amount payable by the petitioner at ₹ 4,52,006/-. The petitioner wanted that the amount so quantified be further reduced by 50% or in the alternative the petitioner be given liberty to pay the quantified amount in installments. However, by a letter dated 15/2/1984 the request was rejected and the petitioner was called upon to pay the entire amount in one stroke. Accordingly, the petitioner was induced to pay ₹ 4,52,006/ and believing that on payment of the above amount t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce the relevant files in spite of several orders passed by this Court, adverse inference must be drawn against the respondents and the Writ Petition filed by the petitioner be allowed with exemplary costs. 15. Mr. Joshi further submitted that the plea of the petitioner that he was not a partner of the firm at any time, is now established by the decree passed in Suit No. 2168 of 1980 by the City Civil Court at Bombay on 16/10/1998. The said decree passed by a Competent Civil Court on 16/10/1998 to the effect that the petitioner was not a partner of the firm at any time is binding on the department. Thus, as per the aforesaid decree, the respondents cannot recover any amount from the petitioner in respect of the sales tax dues of the firm and even the amount recovered under the settlement is liable to be refunded to the petitioner. However, Mr. Joshi submitted that in all fairness the petitioner would stick to the settlement arrived at between the parties and accordingly prayed that the petitioner be allowed with costs. 16. Mr. Nair, learned counsel appearing on behalf of respondents, on the other hand, submitted that under the Sales Tax Act, apart from the power of remission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustainable in law, since the respondents have erroneously considered the petitioner to be a partner of the firm during S.Y. 2034 and S.Y. 2035 and the entire liability of the firm was sought to be recovered from the petitioner in spite of his retiring from the firm with effect from 1/11/78, the petitioner had approached the State Minister for Finance seeking settlement and the same was accepted as well as implemented and, therefore, the petitioner is absolved of all the liabilities confirmed against the firm for S.Y. 2034 and S.Y. 2035. Thus, in this petition we are not called upon to go into the validity of the liability confirmed against the firm for S.Y. 2034 and S.Y. 2035. The only issue required to be considered in this petition is that, assuming the liability confirmed against the firm is valid, having settled the claim qua the petitioner by quantifying the amount payable by him as a partner of the firm and the petitioner has paid the quantified amount in full and final settlement of the claim, is it open to the respondents to back out of the settlement and seek to recover the entire liability of the firm from the petitioner. 20. Before dealing with the question regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the files. Thirdly, if at all the settlement was genuine and the petitioner had paid the amount in full and final settlement then, immediately on payment of the amount quantified by the commissioner of Sales Tax, the petitioner would have withdrawn the appeals filed by him which were pending before the Sales Tax Tribunal as also the declaratory suit filed by him in the City Civil Court at Bombay. The petitioner, instead of withdrawing the appeals, waited till the appeals were taken up for hearing in the ordinary course and only thereafter, the petitioner sought to contend that there was settlement. Similarly, the petitioner pursued the declaratory suit filed in the City Civil Court at Bombay, instead of withdrawing it. Thus, we find that the above conduct of the petitioner itself raises doubt as to the genuineness of the settlement. Therefore, it is difficult to accept that the respondents are deliberately withholding the files. 22. Apart from the above, an adverse inference could be drawn only if it was established that there was an order of settlement passed by the State Minister of Finance. The petitioner has failed to establish that any order of settlement was passed by the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws attention of the petitioner to the provisions of Section 18 of the B.S.T. Act whereunder the liability of the partner in the case of partnership firm is joint and several. Thus, from the opening part of the letter dated 16/1/84, it is apparent that the Commissioner of Sales Tax wanted to inform the petitioner that although an application has been made to the State Minister for Finance seeking settlement, such a settlement is impermissible in view of the express provisions contained in Section 18 of the B.S.T. Act. 24. However, without assigning any reasons, the Commissioner of Sales Tax in the said letter dated 16/1/84 further quantifies the tax liability of the firm for the period from 8/4/78 to 31/10/78 at ₹ 12,52,163/-under the B.S.T. Act and ₹ 77,288/- under the C.S.T. Act and then referring to the partnership deed dated 8/4/78 wherein the petitioner was entitled to share of profits at 34% the Commissioner, determines the liability of the petitioner for the period from 8/4/1978 to 31/10/19778 at ₹ 4,25,735/- and ₹ 26,271/- respectively. Thus, the contents of the letter dated 16/1/84 written by the Commissioner of Sales Tax are mutually contradictory. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takes a completely contradictory stand by quantifying the liability of the petitioner at 34% by relying upon the partnership deed. It may be noted that the Commissioner of Sales Tax has written the said letter very cleverly and dishonestly, so as to enable the petitioner to argue before the lower authorities that the determination of liability done by the Commissioner of Sales Tax was binding on them and it will not be open to them to recover any further amount from the petitioner and if questioned by someone, then, the Commissioner could argue that he had not stated in the said letter that the amount quantified therein was in full and final settlement of the claim. Therefore, such a determination of the liability of the petitioner contained in the letter addressed by the Commissioner of Sales Tax which is ex-facie contrary to the express provisions contained in Section 18 of the B.S.T. Act, would not be binding on the department. 26. It is pertinent to note that the State Government knew far back in the year 1985, that the Commissioner of Sales Tax had addressed the letter dated 16/1/84 which was misleading and by no stretch of imagination it could be said that such a letter was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. 1854) and, therefore, the decree passed in the said suit will not be binding on the respondents. Secondly, the concept of 'formal partner' is foreign to the Partnership Act and unless the findings recorded by the adjudicating authority and confirmed by the first appellate authority to the effect that the petitioner was a partner of the firm are set aside by a competent authority, the sales tax authorities are bound to enforce the demand and recover the dues of the firm from the petitioner. Thirdly, the said decree passed in Suit No. 2168 of 1988 may at best bind the parties to the suit as they have accepted the decree passed in the above suit. Accordingly, we hold that the decree passed in Suit No. 2168 of 1980 shall not affect the rights of the respondents to recover from the petitioner the dues confirmed against the firm for the period during which he was a partner of the firm. In view of our finding that there was no settlement, it is not necessary to deal with several decisions relied upon Mr. Joshi on the issue relating to promissory estoppel. 29. For all the aforesaid reasons, we hold that the petitioner has failed to establish that there was any settlement or that he had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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