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Mahadeo Ram Ram Jatan Vs. Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberMisc. S.T.R. No. 454 of 1969
Judge
Reported in[1970]26STC186(All)
AppellantMahadeo Ram Ram Jatan
RespondentCommissioner of Sales Tax
Appellant AdvocateShyam Narain and ;T.N. Parwar, Advs.
Respondent AdvocateStanding Counsel
Excerpt:
- - the assessment itself had to be made in the name of the firm in the like manner in which it would have been made had the firm not been dissolved......this is a reference under section 11(1) of the u.p. sales tax act read with section 9(3) of the central sales tax act submitted by the additional revising authority, sales tax, varanasi, for the opinion of this court on the following two questions of law :-(1) whether the applicant-firm is entitled to obtain 'c' forms even when the firm has ceased to exist for their old purchases ?(2) whether this firm is authorised for the issuance of 'c' forms for supplying them to the various parties having its old registration number ?2. it appears that a partnership firm carried on business in kairana at ballia. it was registered under the central sales tax act. on 6th december, 1967, one of its partners died and the firm was reconstituted by the remaining partners which continued the business in.....
Judgment:

R.L. Gulati, J.

1. This is a reference under Section 11(1) of the U.P. Sales Tax Act read with Section 9(3) of the Central Sales Tax Act submitted by the Additional Revising Authority, Sales Tax, Varanasi, for the opinion of this court on the following two questions of law :-

(1) Whether the applicant-firm is entitled to obtain 'C' forms even when the firm has ceased to exist for their old purchases ?

(2) Whether this firm is authorised for the issuance of 'C' forms for supplying them to the various parties having its old registration number ?

2. It appears that a partnership firm carried on business in kairana at Ballia. It was registered under the Central Sales Tax Act. On 6th December, 1967, one of its partners died and the firm was reconstituted by the remaining partners which continued the business in the firm name of M/s. Mahadeo Ram Ram Jatan Ram. At the time of the reconstitution of the firm the registration certificate in the name of the old firm as also the 'C' forms obtained in the name of the old firm which were lying unused were surrendered to the Sales Tax Officer. Later on, however, it was discovered that in respect of certain purchases already made by the old firm, 'C' forms had notv been sent to the parties from whom the goods were purchased and as such 'C' forms were demanded by the parties concerned. Thereupon the partners of the old firm made an application to the Sales Tax Officer to reissue the requisite number of 'C' forms out of the forms which had been surrendered. This request was turned down by the Sales Tax Officer and the Judge (Revisions) also, before whom the matter came up in revision, found himself unable to accede to the request. The Judge (Revisions) stated that hardship would be caused to the partners of the old firm but there is no provision under the Central Sales Tax Act which authorises the issuance of 'C' forms in the circumstances of the case. At the instance of the assessee the present reference has been made to this court.

3. Under Sub-section (1) of Section 8 of the Central Sales Tax Act, tax is payable on inter-State sales at a concessional rate when such sales are made to a registered dealer, who furnishes to the selling dealer a declaration in accordance with Sub-section (4) of Section 8. In the absence of a declaration, the rate of sales tax is 10 per cent. The certificate contemplated by Sub-section (4) of Section 8 is to be filed in a prescribed form which under the rules is called form 'C'. It is clear that the old firm in the instant case which was a registered dealer had purchased certain goods from dealers in other States on the basis of its registration certificate, but had not supplied the requisite 'C' forms to the sellers. Had the firm not been reconstituted such 'C' forms would have been furnished in due course. Even after the reconstitution of the firm, 'C' forms which had previously been issued in the name of the old firm could have been furnished to the selling dealers. There would have been no difficulty in that procedure. The difficulty has arisen because the 'C' forms issued in the name of the old firm were surrendered. The sales tax authorities formed the opinion that the 'C' forms could be issued to a registered dealer and inasmuch as the old firm had been dissloved, 'C' forms could not be issued in the name of the dissolved firm.

4. It is true that the rules contemplated the issuance of 'C' forms to an existing registered dealer, but the difficulty which has arisen in the instant case is not unsurmountable. In the first place, the request which the partners of the erstwhile firm made was not for the issuance of fresh 'C' forms but only for the reissuance of the forms which had already been issued in the name of the old firm and which by mistake had been surrendered. There is no prohibition in the Act or in the Rules against re-issuance of forms which have been surrendered by mistake. Secondly, there is in the U.P. Sales Tax Act a provision in Section 3-C which deals with the liability to tax of a dissolved firm. This section provides that where a dealer is a firm and such firm has discontinued business, tax including penalty, if any, payable under this Act by such firm up to the date of discontinuance may be assessed and taxed as if no discontinuance had taken place and further that every person, who was, at the time of such discontinuance, a partner of such firm shall, notwithstanding such discontinuance, be liable severally and jointly for the payment of the tax assessed and penalty imposed and payable by such firm whether such assessment is made or penalty is imposed prior to or after such discontinuance and the provisions of the Act shall apply as if every such person or partner were himself a dealer. According to the explanation occurring at the end of this section, the dissolution or reconstitution of a firm shall be deemed to be discontinuance of the business within the meaning of this section. The effect of this section is that by a legal fiction a firm which has discontinued business or which has been dissolved shall be deemed to be an existing firm for the purposes of assessment of tax and penalty in respect of its turnover prior to the date of dissolution or discontinuance of business. When the assessment of such a firm takes place, the firm in fact ceases to exist, but as a result of the legal fiction enacted in this provision, the firm is deemed to be in existence and its dissolution has to be ignored. It follows, therefore, that a dissolved firm can also ask for the issuance of 'C' forms on the basis of its registration certificate and even can ask for registration, if it had not been previously registered. The assessment itself had to be made in the name of the firm in the like manner in which it would have been made had the firm not been dissolved.

5. In C.A. Abraham v. Income-tax Officer, Kottayam [1961] 41 I.T.R. 425, the Supreme Court had to interpret Section 44 of the Income-tax Act of 1922 which at the material time stood as follows :

Where any business... carried on by a firm...has been discontinued...every person who was at the time of such discontinuance...a partner of such firm shall in respect of the income, profits and gains of the firm be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment.

6. It was argued on behalf of the assessee in that case that Section 44 provided for the assessment of tax on a dissolved firm, but it did not provide for the levy of penalty. The Supreme Court repelled this contention and held that penalty was nothing but additional tax and 'in effect, the Legislature has enacted by Section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assessment under Chapter IV.

7. It is not disputed that by virtue of the provisions contained in Section 9(3) of the Central Sales Tax Act, Section 3-C of the U.P. Sales Tax Act would be applicable to the proceedings under the Central Sales Tax Act. Therefore, for purposes of the Central sales tax also the erstwhile firm shall be deemed to be in existence. It is true that non-supply of form 'C' by a registered dealer to the selling dealer affects theassessment of the selling dealer who shall have to be taxed at a higher rate and in that sense it is possible to say that the furnishing of 'C' forms by a purchasing dealer does not affect his assessment and as such Section 3-C may not be applicable. But that is not true because in the first instance the purchasing dealer shall have to pay more tax to the selling dealer, in case he fails to supply 'C' forms to the latter and secondly he may render himself liable to penalty under Section 10 of the Central Sales Tax Act in case he is unable to produce the registration certificate in respect of the goods which he had purchased on the representation that the goods purchased by him are covered by his certificate of registration and that he is a registered dealer. In the instant case, the registration certificate having been surrendered, the old firm may be treated to be an unregistered firm at the time of assessment and the goods purchased by it on the basis of its registration certificate may be said to have been purchased in an unauthorised manner for purposes of the Central Sales Tax Act. Section 3-C of the U.P. Sales Tax Act unlike Section 44 of the Indian Income-tax Act specifically provides that the tax shall include penalty. Therefore, the non-supply of 'C' forms shall make the firm liable to penalty and would thus affect its assessment. For purposes of a proper assessment, it would be necessary for the firm to comply with the requirements of Section 8(4) of the Central Sales Tax Act, namely, to supply 'C' forms to the selling dealers in respect of the purchases it had already made on the representation that it is a registered dealer. In view of the provisions of Section 3-C of the U.P. Sales Tax Act, the firm is to be treated as if no dissolution had taken place and as such it would be entitled to obtain 'C' forms which it had already surrendered and its registration certificate, even though surrendered, shall be deemed to be intact and valid.

8. For the reasons stated above, we answer both the questions in the affirmative, in favour of the assessee and against the Commissioner of Sales Tax. The assessee is entitled to the costs of this reference which we assess at Rs. 100. The fee of the counsel is also assessed at the same figure.


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