1. Ibrahim Saifuddin & Co., a firm of partnership, was assessed to sales tax for the years 1953 to 1956 in the sums of Rs. 2,000-19 nP., Rs. 3,287-78 nP., and Rs. 1,485 by orders dated 13th February, 1955, 6th July, 1955, and 28th March, 1957, respectively. The demands are said to have been served on one of the partners or erstwhile partners on 9th July, 1959, 28th March, 1957, and 6th April, 1957. The petitioner alleges that the firm was dissolved with effect from 2nd July, 1956, and that by a deed of settlement dated 1st October, 1956, executed by her husband she became the transferee of the goodwill of the business and the leasehold right in No. 5, Sembu-doss Street, G.T. Madras. She further alleges that without serving a ' demand on her the Revenue has taken proceedings against her under Section 24(2)(b) of the Madras General Sales Tax Act, 1959, and sought to distrain her movables. Her contention is that the arrears of sales tax due from the erstwhile firm could only be collected from her to the value of the assets she had obtained by transfer. But nevertheless, the Revenue has sought to recover the tax by coercive process through the criminal court by distraining articles or assets other than those she had obtained by transfer. On these facts she has applied to this Court under Article 226 of the Constitution to quash the proceedings taken against her.
2. There can be no doubt that arrears of sales tax due from the transferor can be recovered from the transferee only to the value of the assets he or she had obtained by transfer. So much is clear from the proviso to Section 27 of the said Act. The proviso states :
Provided that the recovery from the transferee of the arrears of taxes due for the period prior to the date of the transfer shall be limited to the value of the assets he obtained by transfer.
3. Any coercive process to recover tax arrears Under Section 24(2)(b) will necessarily be subject to the limits prescribed by the proviso. It follows, therefore, that if the coercive process under that provision is directed against assets which the petitioner did not get by transfer, the proceedings would be illegal.
4. What is contended by the learned Additional Government Pleader is that in spite of opportunities given to the petitioner, she has failed to produce any material to show assets which she got by transfer under the deed of settlement executed by her husband, and that in those circumstances, the department proceeded against the petitioner Under Section 24(2) (b) of the Act. But as far as records go it does not appear that any notice of demand was served on the petitioner herself after the transfer. If that had been done, it would have given an opportunity to the petitioner to show cause against the proceeding taken and she would have shown perhaps the assets which she had obtained by transfer.
5. In the circumstances, I think the proceedings taken against the petitioner Under Section 24(2) (b) do not appear to be proper. The right thing for the department to do would be to serve a demand notice on the petitioner and call upon her to satisfy them as to what were the assets of the erstwhile firm that stood transferred to her by the deed dated 1st October, 1956, and why they should not be proceeded against for the recovery of the arrears.
6. Though the petitioner asked for quashing the proceedings, I think the appropriate direction to be given by this Court should be a rule prohibiting the department from proceeding with the recovery until they have served such a demand on the petitioner asking her to specify the assets which she had got by transfer from the erstwhile firm and to show cause why they should not be proceeded against. There will be an order accordingly. The petitions are allowed in those terms but with no costs.