P.V. Dixit, C.J.
1. By this application under Article 226 of the Constitution, the petitioners seek a writ of certiorari for quashing proceedings initiated by the opponent, the Sales Tax Officer-cum-Additional Tehsildar, Narsinghpur, for recovery from them as arrears of land revenue of sales tax amount due from a firm doing business under the name and style of 'Komalchand Bhupendrasingh' at Ramward in Kandeli town of Narsinghpur Tehsil. The said firm was registered as a 'dealer' under the Central Provinces and Berar Sales Tax Act, 1947 (hereinafter referred to as the 'Act of 1947') and held a certificate of registration bearing No. NPR-200.
2. The petitioners' case is that in 1947 a joint family consisting of themselves and three other sons of the petitioner-Mangalchand-was doing business in grains, oil-seeds, kirana, that it was registered as a. dealer under the Act of 1947 and a registration certificate bearing No. NPR-85 was issued to it; that in the application which the joint family firm made for registration, the principal place of business was mentioned as 'Mangalchand Bhikamchand, Gotegaon' and the additional place of business was stated to be 'Komalchand Bhupendrasingh, Ramward, Kandeli town (Narsinghpur Tehsil)'; that the additional place of business did not identify the business of 'Komalchand Bhupendrasingh' as business of the joint family firm ; that the firm of 'Komalchand Bhupendrasingh' had a separate existence by itself and was doing business under a separate registration certificate bearing No. NPR-200 ; that on or about 6th November, 1953, the joint family disrupted and the four petitioners thereafter formed a partnership by a deed dated the 26th February, 1954, and since then were doing business in the name of Mangalchand Bhikamchand; that the liability of this partnership firm was limited to their own dealings ; that they could not be made liable for any liability of any other person or persons in respect of any period ; and that the joint family firm or the partnership firm after its constitution did not do any business at the additional address. The petitioners further say that the firm Komalchand Bhupendrasingh wound up its business in or about 1955; that in respect of certain assessments of sales tax made against that firm the opponent is seeking to recover from them, that is the petitioners, as arrears of land revenue an amount of Rs. 8,467.44 P. purporting to do so under Section 23 of the Madhya Pradesh General Sales Tax Act, 1958 ; and that they are in no way liable to pay this amount due from the firm Komalchand Bhupendrasingh. The petitioners also complain that despite several protests and representations, the Sales Tax Officer-cum-Additional Tehsildar, Narsinghpur, is attempting to recover the amount from them acting mala fide and in a high-handed manner without giving them an opportunity to show that they are in no way liable for any dues recoverable from the firm Komalchand Bhupendrasingh and to contest the initial liability as also the details of transactions and quantification ; that the opponent was bound to inquire into judicially and adjudicate upon their objections and then to pass an order so as to enable them to challenge any adverse order before the appropriate higher authorities; and that the recovery proceedings initiated by the opponent are wholly without jurisdiction.
3. In the return filed by the opponent, it is not disputed that the firms Mangalchand Bhikamchand and Komalchand Bhupendrasingh were registered separately as dealers and that separate registration certificates bearing different numbers were issued to them. It is also admitted that an order assessing the firm Komalchand Bhupendrasingh to tax in the sum of Rs. 8,467.44 P. for the period from 10th February, 1948, to 2nd November, 1956, was passed on 18th February, 1960. In justification of the recovery proceedings commenced against the petitioners, it has been repeatedly stated in the return that there is ample material on record to show that during the assessment period in question the joint family of Mangalchand Bhikamchand had proprietary interest in the firm known as Komalchand Bhupendra-singh and was carrying on business in gold, silver and money-lending, in addition to the business of grains, oil-seeds and kirana. One of the circumstances stated in the return as showing that the business of Komalchand Bhupendrasingh was identical with the business of Mangalchand Bhikamchand and that the joint Hindu family was the owner of both the businesses is that in the application dated 3rd August, 1947, which the joint family made under Section 8 of the 1947 Act for registration of its business, it was stated that the petitioners as members of the joint family had interest in the firm Komalchand Bhupendrasingh and the additional place of business was shown to be 'Komalchand Bhupendrasingh, Ramward, Kandeli (Narsinghpur Tehsil)'; and that the registration certificate No. NPR-85, which was issued to the joint family, also permitted it to do business free of tax for purposes of manufacture for sale, for re-sale and for use in the execution of contracts, not only in grains and kirana but also in silver and gold, and the additional place of business was stated therein to be 'Komalchand Bhupendrasingh, Ramward in Kandeli town (Narsinghpur Tehsil)'. The opponent, while not disputing that the partnership deed was executed on 26th February, 1954, showing the four petitioners as partners, has made the following statement in the return with regard to the petitioners' partnership-
It is not clear from the deed of partnership as to what happened to the family business carried on under the name and style of Mangalchand Bhikamchand, Bhikamchand Sawaichand and Komalchand Bhupendrasingh and how the assets of these businesses were disposed off. It is also not stated anywhere as to how the so-called new partnership is allowed to carry on the business under the name and style of Mangalchand Bhikamchand, which was business name of the joint family business. It is not admitted that the so-called partnership is a genuine partnership. The respondents say on the facts already stated that the business is still of the joint family. In any case this business as the successors of the Hindu joint family business is liable for the arrears of taxes of the joint family business. At the time of assessment of the shop styled as Komalchand Bhupendrasingh proper notices were issued. The assertion that assessments made without notice to the petitioner and as such not binding on them is without substance. The petitioners' family was satisfied in disclosing the name of Komalchand as proprietor for the certificate purpose. Komalchand was therefore noticed. The whole family is bound by the orders served in those proceedings.
It has not been stated in the return that the petitioners were given notices when assessment against the firm Komalchand Bhupedra-singh was being made. On the other hand, it has been averred that ' a notice was given to Komalchand alone and that was sufficient, and that there was no question of giving a fresh notice of assessment and quantification to the present petitioners. The opponent has also added in the return that as the recovery is being made under the provisions of the M.P. Land Revenue Code, 1959, the petitioners can deposit the tax amount under protest and then file a civil suit for refund of the same claiming that they were in no way liable to pay the tax amount due from the firm Komalchand Bhupendrasingh.
4. In our judgment, the recovery proceedings started by the opponent against the petitioners without passing any order holding them liable for the payment of tax due from the firm Komalchand Bhupendrasingh, without adjudicating upon the objections raised by the petitioners and without giving them any hearing are wholly illegal and must be quashed. It is manifest from the return filed by the opponent that the petitioners were not given any hearing and their objections to the recovery of the amount in question from them were never decided by the opponent. No order holding that the petitioners were liable to pay the amount as dealers or otherwise was even recorded by the Sales Tax Officer. In stating at various places in the return that there is enough material to justify the recovery of the amount from the applicants, the Sales Tax Officer had only exhibited the obscurity and confusion in his mind about his functions as Sales Tax Officer and as Tehsildar. A Tehsildar, before whom proceedings for the recovery of tax amount as arrears of land revenue have been initiated in accordance with law, no doubt cannot entertain any objection of the person, from whom the amount is sought to be recovered, that he is not liable to pay the amount. But before any such proceedings can be started, there must be a valid authorisation for it, and that consists in an order of the competent authority, here the Sales Tax Officer, holding the person liable for the payment of the amount on some legal basis and finding default in the payment of the amount by the person held so liable. At the stage when the liability of a person for payment of an amount is under determination, the Sales Tax Officer is bound under the provisions of the Act of 1947, as also under the Act of 1958 and even on principles of natural justice, to give to the person intended to be made liable an opportunity of hearing and then to pass an order in conformity with law making him liable for, or absolving from, the payment of any amount. The objections which the petitioners preferred to, and the hearing they wanted by, the opponent was in his capacity as Sales Tax Officer and not as Additional Tehsildar empowered to recover the tax amount as arrears of land revenue on default of the person held liable for the payment of the amount. The opponent Sales Tax Officer was, therefore, not justified in initiating recovery proceedings against the petitioners in the manner that he did. The repeated reference in the return to the existence of ample material to indicate the liability of the petitioners to repay the amount due from the firm Komalchand Bhupendrasingh is meaningless and of no avail. What was essential to support the recovery proceedings was an order of the Sales Tax Officer, embodying his decision on the basis of the material before him and passed after deciding upon the objections of the petitioners, that the applicants were liable for payment of the amount assessed on the firm Komalchand Bhupendrasingh. Such an order was also necessary to enable the petitioners, in the event of it being adverse to them, to challenge its legality and correctness before the appropriate appellate or revisional authority. In saying that the petitioners have the remedy of paying the tax amount and then filing a suit for its refund, the Sales Tax Officer obviously lost sight of Section 21 of the Act of 1947 and Section 37 of the Act of 1958 barring a suit calling into question an assessment order or determination of any liability to pay any tax or the recovery of any tax under the Act concerned or the rules made thereunder.
5. The petitioners have averred that the opponent issued a warrant for recovery of the tax amount from the petitioners' firm purporting to do so under Section 23 of the Madhya Pradesh General Sales Tax Act, 1958. This section provides for a special mode of recovery of dues under the Act. Shortly stated, this section lays down that a person from whom any amount is due or may become due to a dealer or who holds, or may subsequently hold, money for or on account of a dealer, may be required to pay so such money as is sufficient to pay the amount due from the dealer or the whole of the money if it is equal to or less than the amount due. The section also prescribes the procedure that must be followed before such a person can be called upon to pay the amount. It also provides in Sub-section (5) thereof that if the person on whom a notice has been served under Sub-section (1) proves to the satisfaction of the officer issuing the notice that the sum demanded or any part thereof was not due to the dealer or that he did not hold any money for or on account of the dealer at the time when the notice was served on him, then nothing contained in Section 23 shall be deemed to require him to pay any amount. Sub-section (5) thus contemplates hearing of objections of the person from whom the tax amount is demanded under Section 23. It is noteworthy that though the petitioners' averment about the recovery purporting to be one under Section 23 of the Act of 1958 has been admitted in the return of the respondent by making the statement: 'it is admitted that this respondent has issued warrant of recovery for the amount of Rs. 8,467-44 P. as alleged', not a word has been said in the return showing the applicability of the provisions of Section 23 for the recovery of the amount from the petitioners. Assuming that the recovery is being made from the petitioners as persons from whom any amount was due to the firm Komalchand Bhupendrasingh or who held any money for or on account of the said firm, still as provided by Sub-section (5) of Section 23 the petitioners were entitled to prefer objections to the recovery, and the Sales Tax Officer was bound to decide those objections and then to pass an order about the recovery.
6. In the return, the justification for the recovery of the amount from the applicants is made to rest on the basis that the businesses at Gotegaon and Ramward (Kandeli town, Narsinghpur Tehsil) were joint family businesses and the owner of both the businesses was the same joint Hindu family consisting of the petitioner Mangalchand and his sons and that the partnership formed by a deed dated the 26th February, 1954, was not genuine and that in any case even if there was a disruption of the joint family and a partnership was formed by the petitioners, still the applicants' firm as successor to the joint family business was liable for arrears of taxes of the joint family business. Whether the liability for payment of tax was sought to be fastened on the petitioners because the joint Hindu family of the petitioners was the owner of both the Gotegaon and Ramward businesses and there was no disruption of the joint family and no genuine partnership was formed by the petitioners thereafter, or because the joint family owned the two businesses and the petitioners' partnership firm after disruption 'succeeded to the joint family business', in either case, as will be shown presently, an order assessing the petitioners or making them liable for payment of the amount due from the firm Komalchand Bhupendrasingh after hearing their objections should have been passed by the Sales Tax Officer before commencing to recover any amount from the petitioners. The recovery cannot be started just because in the opinion of the Sales Tax Officer there is enough material to support it, without deciding the several questions that would naturally arise for making the petitioners liable for payment of the amount under an assessment made on the firm Komalchand Bhupendrasingh.
7. In his return, the Sales Tax Officer has said that the petitioners are liable to pay the amount due under the assessment made against the firm Komalchand Bhupendrasingh as in the application for registration, which was made by the petitioners' joint family, the additional place of business of the joint family was stated to be Ramward (Kandeli town) and that the certificate of registration issued to the joint family distinctly mentioned this place as an additional place of business, and also referred to the fact that the joint family was doing business in silver and gold. If the business done by the firm Komalchand Bhupendrasingh was really the business of the joint family and the certificate of registration issued to the joint family mentioned this, then one would have expected the turnover of the firm Komalchand Bhupendrasingh included in the turnover of the joint family for purposes of assessment. But nothing has been said in the return to show whether the joint family submitted a consolidated return for all the places of its business and whether in the assessment made against the joint family its turnover of any business done in gold and silver at Ramward was or was not included. If on account of some mistake or oversight the turnover of the firm Komalchand Bhupendrasingh, which is now said to be really the turnover of the transactions effected by the joint family, was not included in the turnover of the business of the joint family, then the question would ciearly arise whether the joint family could be made liable for the business done at Ramward by the firm Komalchand Bhupendrasingh by making an assessment against that firm without notice to the petitioners and whether so to make liable the joint family would not amount to 'escaped assessment' in relation to the joint family disregarding the provisions of the Sales Tax Act. The question would also arise whether any proceedings for escaped assessment against the joint family firm could be initiated at all without quashing the assessment made on the firm Komalchand Bhupendrasingh, and whether the turnover of the firm Komalchand Bhupendrasingh could at all be said to be the turnover of the joint family firm when the two firms had separate registration certificates as dealers. All these questions required consideration at the hands of the Sales Tax Officer before passing any order determining the liability of the joint family for the turnover of the firm Komalchand Bhupendrasingh assessed to tax in the sum of Rs. 8,467.44 P. and before proceeding to recover the amount of tax from the petitioners. Again, even if the Sales Tax Officer had been inclined to accept the petitioners' version that there was a disruption of the joint family and a firm of some coparceners, namely, the four petitioners, was brought into existence by a partnership deed dated the 26th February, 1954, then he could not have initiated any recovery proceedings against the applicants in the absence of any assessment against the joint family in respect of the turnover of the transactions done by the joint family at Ramward (Kandeli) and in the absence of a finding that the joint family had transferred its business to the partnership firm consisting of the petitioners. This is abundantly plain from the provisions of Section 33(4) of the Act of 1958. According to Sub-section (4) of Section 33, if a joint family has discontinued any business, then the family can be assessed as if there was no discontinuance, and it is only after an assessment is made that every member of the family is liable severally and jointly for the payment of the tax assessed as payable by the family as if he were himself a dealer. If the tax amount cannot be recovered from the member and if the joint family business has been transferred to a firm or association, then the tax payable by a member of the joint family can be recovered from the transferee as laid down in the first proviso to Sub-section (4).
8. From what has been stated above, it is plain that an order of assessment against the joint family making it liable in the sum of Rs. 8,467.44 P. in respect of the transactions effected at Ramward in the name of the firm Komalchand Bhupendrasingh was necessary before any proceedings for recovery of the amount could be initiated against the petitioners, whether as members of the joint family or as partners of the firm to whom the joint family business had been transferred. In the absence of any such valid assessment order, the recovery proceedings initiated by the opponent against the petitioners cannot be sustained.
9. For the foregoing reasons, our conclusion is that the recovery proceedings started by the opponent-Sales Tax Officer against the petitioners are wholly illegal and without jurisdiction and must be quashed by the issue of a writ of certiorari.
10. Before parting with this case, we must say that the present case is a typical instance of the arbitrary manner in which some Sales Tax Officers proceed in their zeal to recover sales tax from dealers in utter disregard of the provisions of the Sales Tax Act. In this case the Sales Tax Officer followed a procedure which, if it be the practice in the Sales Tax Department, has to be strongly condemned. This Court desires it to be understood that it deprecates and strongly disapproves of any Sales Tax Officer acting in the manner that the Sales Tax Officer did in the present case for compelling dealers to pay sales tax without first determining whether in law they are liable for the payment of tax-amount.
11. In the result, this petition is allowed and the recovery proceedings initiated by the Sales Tax Officer against the petitioners are quashed. The applicants shall have costs of this application. Counsel's fee is fixed at Rs. 200. The outstanding amount of security deposit shall be refunded to the petitioners.