IN-Abs/test-data/summary/2207.txt

By a registered instrument dated October 5, 1956, the respondent purchased the business carried on by a dealer as defined in the Madras General Sales Tax Act IX of 1939.
The dealer had been assessed to sales tax in respect of his turnover for the years 1948 49 and 1949 50 and had paid a part of the sales tax determined as due from him with the balance amount remaining in arrears.
The sales tax authorities attempted to recover the arrears from the respondent as the purchaser of the business and although he denied liability, his contention was overruled by the Deputy Commercial Tax Officer.
His appeal to the Board of Revenue was also dismissed and he thereafter filed a Writ Petition under article 226 of the Constitution, challenging the orders of the C.T.O. and the Board.
A Single Bench of the High Court dismissed the appeal but a Division Bench allowed a Letters Patent Appeal holding that Rule 21 A of the Sales Tax Rules under which the arrears were sought to be recovered from the respondent, was illegal and ultra vires the Act.
In the appeal to the Supreme Court it was contended, Inter alia, on behalf of the department (i) that Rule 21 A was valid having been made in exercise of the rule making power granted to the State Government under sections 19(1) and 19(2) (c) of the Act whereby it could make rules for the assessment to tax under the Act of businesses which were discontinued or the ownership of which had changed; (ii) that further more under section 10, the whole of the amount outstanding on the date of the default was charged on the property of the person liable to pay the tax; therefore, in the present case, the business which was transferred to the respondent was charged with the payment of sales tax and it was open to the sales tax authorities to proceed against the assets of the business for realising the amount of sales tax due; and (iii) that upon a true construction of the registered instrument dated October 5, 1956, the respondent undertook to pay all liabilities like sales tax imposed in regard to the business.
HELD: dismissing the appeal: (i) Rule 21 A was beyond the rule making power of the State Government either under section 19(1) or section 19(2)(c) and was therefore ultra vires the Act.
[666 E F] Although by the amending Act 1 of 1959, an express provision was inserted by which the transferee of the business was made liable for the arrears of sales tax due from the transferor, there was no Such provision in the Act during the period covered by the present case.
[664 D] it is manifest that the person who purchases a business as a 'dealer ' can be assessed to sales tax onlY in respect of his turnover and under the scheme of the charging provision of the Act, the purchaser of the busi 662 ness has nothing to do with the sales effected by the seller of the business, The turnover in respect of such sales remains.
therefore, the turnover of the transferor and not of the transferee.
[664 C] Although section 19(2)(c) deals with the assessment to tax of businesses which are discontinued or the ownership of which has changed, in the context and background of other sections of the Act, the word "assessment" used in para 19(2)(c) does not include the.
power of recovering tax assessed from a person other than the assessee.
[664 F G; 665 B C] Badridas Daga vs C.I.T., , 211; Chatturam vs C.I.7.
Bihar.
; and Whitney vs Commissioners of Inland Revenue, , relied on.
(ii) section 10 of the Act as amended and sought to be relied upon had not come into force until October 8, 1956; in the present case the registered instrument by which the business was transferred to the respondent was dated October 5, 1956 and the amended section therefore had no Application.
[666 F] (iii) It was not open to the State Government to rely on the instrument inter vivos between the transferor and the transferee and to contend that there was any contractual obligation between the transferee and the State Government who was not a party to the instrument.
[667 BC]