IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 25TH OCTOBER 2011 / 3RD KARTHIKA 1933 WP(C).No. 22249 of 2003(W) --------------------------------------- PETITIONER(S): ---------------------- M.J.SIBI JOHN, MELEPARAMBIL HOUSE, VADUTHALA (P.O), COCHIN – 23. BY ADV. SRI.V.P.SUKUMAR RESPONDENT(S): ------------------------- 1. THE SALES TAX OFFICER, IIND CIRCLE, ERNAKULAM. 2. THE DEPUTY TAHSILDAR (RR), KANAYANNOOR TALUK, ERNAKULAM. 3. BINU GEORGE, HOUSE NO.38/2073, ELAMKULAM ROAD, KALOOR (P.O), COCHIN – 17. R1 & R2 BY SR.GOVT. PLEADER SRI.S.SUDHISH KUMAR THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25/10/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: AV WPC.NO.22249/2003 APPENDIX PETITIONER'S EXHIBITS : EXT.P1 : COPY OF THE PARTNERSHIP DEED DATED 06.06.1997. EXT.P2 : COPY OF THE RE-CONSTITUTED DEED OF PARTNERSHIP DATED 20.06.1998. EXT.93 : COPY OF THE RR NOTICE DATED 26.06.2003 ISSUED TO THE PETITIONER BY THE 2ND RESPONDANT. RESPONDENT'S EXHIBITS : NIL /TRUE COPY/ P.A TO JUDGE AV P.R.RAMACHANDRA MENON, J. ----------------------------------------------------------- W.P.(C) No. 22249 of 2003 – W ----------------------------------------------------------- Dated this the 25th day of October, 2011 J U D G M E N T The petitioner is challenging Ext.P3 notice issued under the Revenue Recovery Act demanding a sum of Rs.2,08,535/- under various heads in respect of sales tax liability for the assessment year 1998-1999 contending that, he, though was a partner of the firm in question, had retired from the firm much earlier and hence is not liable to be proceeded against. 2. The petitioner entered into a partnership with the third respondent, agreeing to the specific terms as borne by Ext.P1 dated 06.6.1997 and was doing business accordingly. Shortly thereafter, there arose some difference of opinion between the petitioner and the third respondent and in such circumstances, the petitioner sought to retire from the firm and the firm was reconstituted with the third respondent, and his wife as partners. The reconstituted partnership commenced business with effect from 20th of June, 1998 as discernible from Ext.P2. The case of the petitioner is that, after 20th of June, 1998, there is no liability for the 2 W.P.(C) No.22249/2003 petitioner to satisfy any demand in respect of the firm as he was having absolutely no connection whatsoever with the said firm. It is in such circumstances, that the petitioner has sought to challenge Ext.P3 disputing the liability. 3. The first respondent has filed a counter affidavit stating that at no point of time, had the petitioner intimated the concerned respondent as to the retirement or as to the reconstitution of the firm. It is specifically averred in paragraph 3 of the said affidavit that no declaration in Form No.3 was filed by any of the partners with a copy of the deed of retirement, despite the mandate under Rule 5 (8) (b) of KGST Rules. 1963 The respondents have also asserted in the counter affidavit that, in spite of service of notice in connection with the assessment, nobody had turned up and the assessment was finalised in the year 1998-1999 on 31.12.2002. A copy of the order was sent by registered post, which was returned unserved with endorsement that the addressee had left. In the said circumstances, alternate mode was adopted and service was completed by affixture at the business place. It is also stated that the petitioner as well as the third respondent had 3 W.P.(C) No.22249/2003 applied for a certified copy of the assessment order as aforesaid, as per the request on 9.7.2003 and 22.7.2003 respectively and the same was served to them . 4. The learned counsel for the petitioner submits that in spite of completion of service of notice to the third respondent, he has not turned up before this Court and that the notice has been returned unclaimed. The factum of retirement from the firm is not disputed by the third respondent. The liability being of the assessment year 1999-1998, the petitioner is stated as not liable to satisfy the same, having retired from the partnership firm w.e.f. 20.6.1998 and on reconstitution of the firm on the same day. The learned Government Pleader appearing on behalf of the respondents 1 and 2 submits that the idea of understanding the petitioner as to the liability is wrong and misconceived. The liability of a firm is specifically dealt with under S.21 of the K.G.S.T. Act. It reads as follows: “Liability of firms:-(1) Where any firm is liable to pay any tax, fee or other amount under this Act, the firm and each of the partners of the firm shall be jointly and 4 W.P.(C) No.22249/2003 severally liable for such payment. (2) Where a partner of a firm liable to pay any tax, fee or other amount under this Act retires, he shall, notwithstanding any contract to the contrary, be liable to pay the tax, fee or other amount remaining unpaid at the time of his retirement and any tax, fee or other amount due up to the date of retirement, though unassessed”. Reference is also made to Rule 5(8)(b) of the KGST Rules, which is extracted below: “If a partner retires without the partnership being dissolved thereby, he shall send to the registering authority a declaration in Form 3 within thirty days of his retirement, along with a copy of the deed of retirement.” 6. The Learned Government Pleader submits that the very scope of the rule as above was considered by a Division Bench of this Court in the decision reported in Nazeer v. State of Kerala [2000(2) KLT S.N. 98 (page 92)] holding that the Rule is mandatory in nature and merely for the reason that the person has retired from the partnership, it will not absolve 5 W.P.(C) No.22249/2003 him from the liability and that he will be liable in respect of the liability till the date of retirement as above. The learned Government Pleader also points out that since there is no case for the petitioner that he had communicated the retirement to the Department in compliance with the rule i.e. Rule 5(8) (b), the Department cannot be blamed. In view of the dictum laid down by this Court, it has to be presumed that the petitioner was continuing with the business and is answerable. Reference is also made to the observations made by the Division Bench as to the mandatory nature of the rule, holding that, when the rule prescribes a particular procedure to be followed, it has to be followed in the particular manner and in no other manner. 7. Coming to the case in hand, in the light of the law declared by this Court as above and also the rule position discussed hereinbefore, the fact remains that the petitioner chose to retire from the firm only in June 1998. The reconstituted partnership as borne by Ext.P2 came into existence only with effect from 20th of June, 1998. The liability covered by Ext.P3 is in respect of the assessment year 6 W.P.(C) No.22249/2003 1998-1999. To put in short, the petitioner was continuing as a partner and doing the business during the months of April, May and admittedly upto 20th June, 1998. As such, the liability of the petitioner, to this extent, at least, cannot be disputed in any manner. What was the transaction that was being performed in respect of the above period is not discernible. The specific averment of respondents 1 and 2 in the counter affidavit that copies of the assessment orders were served to the petitioner on request is not rebutted by the petitioner by filing any reply affidavit. If petitioner was aggrieved in any manner, it was open for the petitioner to have pursued the matter either by way filing an appeal or by resorting to other appropriate steps, or else could have opted to settle the matter, availing the benefit under Amnesty Scheme. In the above circumstance, this Court does not find it as a fit case to call for interference invoking the discretion of power under Article 226 of the Constitution of India. Interference is declined and the writ petition is dismissed. It is made clear that this will not stand in the way of the petitioner's availing the benefit, if any under the 'Amnesty 7 W.P.(C) No.22249/2003 Scheme' or to proceed against the third respondent or the firms in respect of the disputed extent. If any portion of the liability has already been cleared, the steps for recovery, if any, shall stand confined only to the balance portion. P.R.RAMACHANDRA MENON, JUDGE. rka