Appeal No 696 of 1966
Appeal by special leave from the judgment and order dated September 13 1963 of the Madras High Court in Writ Appeal No IO of 1962
P Ram Reddy and A V Rangam for the appellant
R Ganapathy Iyer for the respondent
The Judgment of the Court was delivered by Ramaswami J
The question of law involved in this appeal is whether the purchaser of business carried on by a dealer as defined in the Madras General Sales Tax Act 1939 Madras Act No IX of 1939 hereinafter called the Act  can be made liable for arrears of sales tax due from the dealer in respect of transactions of sale which took place before the transfer of the business under Rule 21 A of the Rules framed in exercise of the powers conferred on the State Government by section 19 of the Act
The respondent purchased by a registered instrument dated October 5 1956 the business carried on by one Purushottam Raju under the name All India Trading Company
Purushottam Raju was the sole proprietor of the business and had been assessed to sales tax in respect of his turnover for the years 1948 49 and 1949 50
The assessee paid some amounts towards sales tax thus determined but there remained some arrears of sales tax ie Rs 3836 4 0 for 1948 49 and Rs 1218 1 9 for 1949 50
The Sales tax authorities attempted to recover the arrears of tax from the respondent as the purchaser of the business
The respondent 6 63 denied liability to pay sales tax but his contention was over ruled by the Deputy Commercial Tax Officer
The respondent appealed to the Commercial Tax Officer as well as to the Board of Revenue but the appeals were dismissed
The respondent thereafter moved the Madras High Court under article 226 of the Constitution for the issue of a writ in the nature of certiorari to quash the orders of the Commercial Tax Officer and the Board of Revenue
Ganapatia Pillai J who heard the petition dismissed it
The respondent took the matter in appeal under the Letters Patent
The Division Bench consisting of section Ramachandra Iyer CJ and Ramakrishnan J reversed the judgment of the Single Judge holding that Rule 21 A of the Sales Tax Rules was illegal and ultra vires and the respondent was not liable to pay the sales tax due from his predecessor in title Purushottam Raju
This appeal is brought by special leave from the judgment of the Division Bench of the Madras High Court dated September 13 1963 in Writ Appeal No 10 of 1962
Rule 21 A was framed by the State Government under the rule making power granted to it under section 191 and 2 of the Act
Rule 21 A reads as follows  When the ownership of the business of a dealer liable to pay the tax under the Act is entirely transferred any tax payable in respect of such business and remaining unpaid at the time of the transfer shall be recoverable from the transferor or the transferee as if they were the dealers liable to pay such tax provided that the recovery from the transferee of the arrears of taxes due prior to the date of the transfer shall be only to the extent of the value of the business he obtained by transfer
The trans feree shall also be liable to pay tax under the Act on the sales of goods effected by him with effect from the date of such transfer and shall within thirty days of the transfer apply for registration or licence as the case may be unless he already holds a certificate of registration or licence as the case may be
 Section 19  1  and 1 9 2 c are to the following effect 19
1 The State Government may make rules to carry out the purposes of this Act
2 In particular and without prejudice to the generality of the foregoing power such rules may provide for c the assessment to tax under this Act of businesses which are discontinued or the ownership of which has changed 664 The first question to be considered in this appeal is whether Rule 21 A is intra vires of the power of the State Government under sections 191 and 2 of the Act
Section 31 of the Act is the charging section
It imposes a liability to pay sales tax on every dealer for each year and the tax is to be calculated on his total turnover for that year
Section 2b of the Act defines a dealer as a person who carries on the business of buying selling 
goods
The word turnover is defined in section 2i of the Act to mean the aggregate amount for which goods are either bought or sold by a dealer whether for cash or for deferred payment or other valuable consideration 
It is manifest that a 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 business 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
By the amending Act of 1959 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
But there is no such provision in the Act for the period with which we are concerned in the present case
The question is whether the State Government has authority under its rule making power under section 19 of the Act to create a legal fiction by which the transferee of the business is constituted as the dealer liable to pay the tax in respect of the turnover of the transferor
On behalf of the appellants Mr Ram Reddy suggested that the State Government has power under section 191 and 192 c of the Act to frame the impugned rule
We are unable to accept this argument as correct
Section 191 of the Act empowers the State Government to make rules to carry out the purposes of the Act but the section cannot be utilised to enlarge the scope of section 10 regarding recovery and payment of tax from some other person other than a dealer under the Act
We also consider that the State Government has no authority under section 192c of the Act to enact the rule
Section 192c deals with the assessment to tax of businesses which are discontinued or the ownership of which has changed
It is true that the word assessment in the scheme of sales tax and income tax legislation is a term of varying import
The word is used sometimes to mean the computation of income sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Income tax Act for imposing liability on the tax payer
As the Judicial Committee however said in Badridas Daga vs CIT 1 the words assess  and assessment  refer primarily to the computation of the amount
of income
In Chatturam vs CIT Bihar1 the Federal Court pointed out relying upon the decision of the House of Lords in 1  21 1
2  665 Whitney vs Commissioners of Inland Revenue that the liability to tax does not depend upon assessment
The liability is definitely created by sections 3 and 4 of the Income tax Act which are the charging sections and the assessment order under section 23 only quantifies the liability which has already been definitely and finally created by the charging sections and the provision in regard to assessment relates only to the machinery of taxation
In our opinion the principle of these decisions applies to the interpretation of the Act in the present case
We consider that in the context and background of other sections of the Act the word assessment  used in section 192c does not include the power of recovering tax assessed from a person other than the assessee
It follows therefore that Rule 21 A is beyond the rule making power of the State Government either under section 191 or section 192c of the Act
It was then submitted by Mr Ram Reddy that Rule 21 A may be supported by the language of section 101 of the Act which states 10
Payment and recovery of tax 1 The tax assessed under this Act shall be paid in such manner and in such instalments if any and within such time as may be specified in the notice of assessment not being less than fifteen days from the date of service of the notice
If default is made in paying according to the notice of assessment the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax under this Act
 It was contended that under this section the whole of the amount outstanding on the date of default is charged on the property of the person liable to pay the tax
In the present case the business which was transferred to the respondent was hence charged with the payment of sales tax and it was open to sales tax authorities to proceed against the assets of the business for realising the amount of sales tax due
In our opinion there is no justification for this argument
Section 10 of the Act as it stood before the Madras General Sales tax 3rd amendment Act 1956 Act No XV of 1956 read as follows The tax assessed under this Act shall be paid in such manner and in such instalments if any and within such time as may be specified in the notice of assessment not being less than fifteen days from the date of service of the notice
In default of such payment the whole of the amount then remaining due may be recovered as if it were an arrear of land revenue
 This section was amended by section 8 of the Madras General Sales tax 3rd amendment Act 1956 which reads as follows 1 666 Substitution of new section for section 10 in Madras Act IX of 1939
For section 10 of the principal Act the following section shall be substituted namely 10
Payment and recovery of tax 1 The tax assessed under this Act shall be paid in such manner and in such instalments if any and within such time as may be specified in the notice of assessment not being less than fifteen days from the date of service of the notice
If default is made in paying according to the notice of assessment the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax under this Act  
The 3rd Amendment Act 1956 received the assent of the President on October 1 1956 but it was published in the Madras Gazette on October 8 1956
Section 5 of the Madras General Clauses Act Madras Act No 1 of 1891 provides as follows 5
1 Where any Act to which this Chapter applies is not expressed to come into operation on a particular day then it shall come into operation on the day on which the assent thereto of the Governor the Gover nor General or the President as the case may require is first published in the Official Gazette
 In the present case the Act is not expressed to come into operation on any particular date but as it was published in the Madras Gazette on October 8 1956 the Act came into operation on that date and not before
In the present case the registered instrument by which the business was transferred to the respondent is dated October 5 1956 and the amending Act has therefore no application
We accordingly reject the argument of the appellants on this aspect of the case and hold that Rule 21 A is ultra vires of the rule making power of the State Government under the Act
It was next argued on behalf of the appellants that upon a true construction of the registered instrument dated October 5 1956 the respondent undertook to pay not only Sch
I liabilities but also other liabilities like sales tax imposed in regard to the business
It was however disputed by Mr Ganapathy Iyer on behalf of the respondent that there was any undertaking on the part of the respondent to discharge the liabilities in regard to arrears of sales tax
But even on the assumption that the respondent undertook to pay the arrears of sales tax due by the transferor it does not follow 66 7 that there is a liability created inter se between the State Government on the one hand and the transferee on the other hand
To put it differently it is not open to the State Government to rely on the instrument inter vivos between the transferor and the transferee and to contend that there is any contractual obligation between the transferee and the State Government who is not a party to the instrument
We accordingly reject the argument of the appellants on this aspect of the case also
For these reasons we hold that the judgment of the Division Bench of the High Court dated September 13 1963 is correct and this appeal must be dismissed with costs
RKPS Appeal dismissed


Summary:
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 CTO 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 191 and 192 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 191 or section 192c 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 192c 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 192c 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 CIT  211 Chatturam vs CI7
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