Case: Murarilal Mahabir Prasad &amp; Ors Vs. Shri B. R. Vad &amp; Ors

resourcefulness and ingenuity which go into well-timed dissolution of firms ought not to be allowed to be used as convenient instruments of tax evasion. As observed by Lord Dunedin in Whitney v. Commissioners of Inland Revenue [(1925) 10 Tax Cas. 88] : "A statute is designed to be workable, and the interpretation thereof by a court should be to secure that object, unless crucial omission or clear direction makes that end unattainable." Far from there being any crucial omission or a clear direction in the present case which would make the end unattainable, the various provisions to which we have drawn attention leave it in no doubt that a dissolved firm can be assessed on its pre-dissolution turnover.19. The Bombay Sales Tax Act, 1959, presents no difficulty as its provisions are even clearer than those of the 1953 Act. Section 2(11) of the 1959 Act defines a dealer to mean "any person who carries on the business of buying or selling goods ...." Under section 2(19), "person" includes, inter alia, a firm. There is therefore no doubt that a firm is a distinct assessable entity under the 1959 Act also.Section 19(3) of the 1959 Act puts the matter under inquiry beyond all doubt by providing :"Where a dealer, liable to pay tax under this Act, is a firm, and the firm is dissolved, then every person who was a partner shall be jointly and severally liable to pay to the extent to which he is liable under section 18, the tax (including any penalty) due from the firm under this Act or under any earlier law, up to the time of dissolution, whether such tax (including any penalty) has been assessed before such dissolution but has remained unpaid or is assessed after dissolution."20. This provision in terms envisages the assessment of a dissolved firm by providing that erstwhile partners of a dissolved firm shall be liable jointly and severally to pay the tax and penalty due from the firm whether the tax, including any penalty, has been assessed before or after the dissolution. The assessment which the sub-section speaks of is assessment of the firm as such because where the assessment is made on the partners themselves, it was unnecessary to provide that they shall be liable jointly and severally to pay the tax assessed on them. The joint and several liability of the partners in respect of taxes which the firm is liable to pay is provided by section 18. The purpose of section 19(3) is to make the partners jointly and severally liable even if the firm is assessed to sales tax after its dissolution. Section 19(3) would otherwise be otiose. Thus, section 19(3) of the 1959 Act makes explicit what was implicit in the Act of 1953.21. It is relevant, though we did not refer to this aspect while dealing with the provisions of the 1953 Act, that section 19(3) of the 1959 Act contains a clear indication that the legislature intended that a dissolved firm could be assessed under the 1953 Act also. Section 19(3) speaks of the liability of partners for the tax due from a dissolved firm and provides that they shall be jointly and severally liable to pay the tax due from the firm under the Act of 1959 or "under any earlier law", whether such tax has been assessed before or after dissolution. Section 2(12) of the 1959 Act defines "earlier law" to mean, inter alia, the Bombay Sales Tax Act, 1953. Thus, one of the postulates of section 19(3) at any rate is that a dissolved firm could be assessed under the 1953 Act. Such a postulate accords with the principle that if the legislature provided for a charge of sales tax, if could not have intended to render that charge ineffective by permitting the partners to dissolve the firm, an easy enough thing to do. Nothing, in fact, would be easier to evade a tax liability than to declare that the firm, admittedly liable to pay tax, has been dissolved. Section 19(3) of the 1959 Act not only makes clear what was necessarily implied in the 1953 Act, but it throws additional light on the true construction of the earlier law. But we though it advisable to keep section 19(3) of the 1959 Act apart while construing the 1953 Act because it is the courts, not the legislature, who have to construe the laws of the land authoritatively. As said in Craies on Statute Law, "expect as a parliamentary exposition, subsequent Acts are not to be relied on as an aid to the construction of prior unambiguous Acts" (6th Ed., p. 146). The limited use which may be made of the language of section 19(3) of the 1959 Act, though such a course is unnecessary, is for saying that it serves to throw some light on the Act of 1953, in case the argument is that the Act of 1953 is ambiguous.Section 19(3) being quite clear and explicit, it is unnecessary to dwell on the other provisions of the Act of 1959 in order to show that a dissolved firm can be assessed under it. We may only point out that the Act of 1959 contains provisions similar to those in sections 15, 15A and 35 of the Act of 1953 on which we have dwelt at some length. Those provisions can be found in sections 35, 35A and 62 of the Act.22. The view taken by a Full Bench of the Madras High Court in Sales Tax Officer (XIX), Enforcement Branch, Bombay v. K. M. S. Mari Chettiar [[1975] 35 S.T.C. 148] that a dissolved firm can be assessed under the Act of 1959 is, in our opinion, correct though it was wholly unnecessary to say that the words "is assessed after dissolution" occurring in section 19(3) should be read as "is assessed after dissolution as if the firm exists". Such an addition is superfluous and serves to make the meaning of the sub-section no clearer than it is.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. It is plausible that a distinction ought to be made between the death of an individual and the dissolution of a firm. Human beings, as assessees, are not generally known to court death to evade taxes. Death, normally, is not volitional and it is understandable that on the death of an individual, his liability to be assessed to tax should come to an end unless the statute provides to the contrary. With firms it is different, because a firm which incurs during its existence a liability to pay sales tax may, with a little ingenuity, evade its liability by the voluntary act of dissolution. The dissolution of a firm could therefore be viewed differently from the death of an individual and the partners could be denied the advantage of their own wrong. But we do not want to strike this new path because the Jullundur case [[1966] 17 S.T.C. 326 (S.C.); [1966] 2 S.C.R. 457] and the two cases which follow it have likened the dissolution of a firm to the death of an individual. Let us therefore proceed to examine the other provisions of the 1953 Act.This provision leaves no doubt that the dissolution of a firm cannot operate as a bar to a fresh assessment of the turnover which had escaped assessment, provided that the action contemplated therein is taken within the specified period. In substance, section 15(1) provides that if the Collector is satisfied that any turnover has escaped assessment or has beenor assessed at a lower rate or any deductions have been wrongly made therefrom, he can after serving a notice on the assessee proceed to assess or reassess the amount of the tax due from him. It is a clear and necessary implication of section 15(1) that even a dissolved firm can be assessed or reassessed within the period mentioned therein. The dissolution cannot operate as a bar to the exercise by the Collector of his power to reopen an assessment and indeed it is difficult to conceive that in matters as vital to the administration of sales tax as the assessment of suppressed turnovers, the legislature could have contemplated that the liability to reassessment could be avoided by the erring firm by the simple expedient of winding up its affairs.14. Section 15(1) contains an important clause that action thereunder can be taken by the Collector after giving a notice to the assessee under section 14(3) of the Act within the prescribed period. Once such a notice is given, the Collector gets the jurisdiction to assess or reassess the amount of tax due from the dealer and all the provisions of the Act "shall apply accordingly as if the notice were a notice served under" section 14(3). Section 14(3) speaks of the power of the Collector to assess the amount of tax due from the dealer after giving notice to him, if the Collector is not satisfied that the returns furnished are correct and complete. The jurisdiction to assess or reassess which is conferred by section 15(1) is thus equated with the original jurisdiction to assess the dealer under section 14. By this method, the continuity of the legal personality of the assessee is maintained in order to enable the assessment of turnover which has escaped assessment. It is no answer to a notice under section 15 that the partners having dissolved the firm, the assessment cannot be reopened. It puts a premium on ones credulity to accept that having created a special jurisdiction to assess or reassess an escaped turnover, the legislature permitted that salutary jurisdiction to be defeated by the device of dissolution. The argument of the appellants really comes to this : suppress the turnover, evade the sales tax, dissolve the firm and earn your freedom from taxation.Importantly, the notice dated November 21, 1963, for reopening the assessment for the period April 1, 1957, to March 31, 1958, was served on the firm under section 15. On reassessment, the firm was assessed to a sales tax of Rs. 1, 95, 582.47 on sales suppressed during thatsection contains a compelling implication that evident errors can be corrected no matter whether the firm is in existence or is dissolved. Dissolution is not a panacea for liability to pay sales tax. A difficulty was raised on behalf of the appellants that on the dissolution of the firm the principle of agency would cease to apply as amongst the partners and therefore no partner would have the right to represent either the firm or any of the other partners in the proceeding under section 15, commenced or continued after the dissolution of the firm. This question does not bear on the liability of a dissolved firm to be assessed or the power of the Collector to assess a dissolved firm under section 15. It may perhaps be that in the assessment of a dissolved firm, each of the erstwhile partners may have a right to be heard because each of them would be interested in warding off a liability which may fall on them jointly and severally. But that is more a matter of procedure which the assessing authority must adopt in the assessment proceedings in order to give efficacy to the order which may eventually be passed in the proceedings. Who, in the assessment proceedings against a dissolved firm, has the right to be heard will not determine whether a dissolved firm can be assessed under the Act of(3)(i) and (3)(ii) of section 26 provide that when a firm liable to pay the tax is dissolved, it shall be liable to pay the tax on the goods allotted to any partner "as if" the goods had been sold to such partner, unless he holds a certificate of registration or obtains it within the prescribed period. This provision in terms envisages the assessment of a dissolved firm, though only to the limited extent and for the limited purpose that the goods allotted to a partner at the time of dissolution shall be deemed to have been sold to that partner. By the use of the words "as if", section 26(3)(ii) creates a fiction that the allotment of goods to a partner on dissolution of the firm shall be deemed to be a sale made by the dissolved firm to that partner. The fiction cannot be extended further than thewarrants but there is no fiction in regard to the liability of the dissolved firm to be assessed to sales tax in respect of the goods thus deemed to be sold. The imposition of such a liability is in keeping with the general scheme of the Act, the various provisions of which show that the assessment of a dissolved firm is within the clear intendment of the statute.This provision in terms envisages the assessment of a dissolved firm by providing that erstwhile partners of a dissolved firm shall be liable jointly and severally to pay the tax and penalty due from the firm whether the tax, including any penalty, has been assessed before or after the dissolution. The assessment which thespeaks of is assessment of the firm as such because where the assessment is made on the partners themselves, it was unnecessary to provide that they shall be liable jointly and severally to pay the tax assessed on them. The joint and several liability of the partners in respect of taxes which the firm is liable to pay is provided by section 18. The purpose of section 19(3) is to make the partners jointly and severally liable even if the firm is assessed to sales tax after its dissolution. Section 19(3) would otherwise be otiose. Thus, section 19(3) of the 1959 Act makes explicit what was implicit in the Act of 1953.21. It is relevant, though we did not refer to this aspect while dealing with the provisions of the 1953 Act, that section 19(3) of the 1959 Act contains a clear indication that the legislature intended that a dissolved firm could be assessed under the 1953 Act also. Section 19(3) speaks of the liability of partners for the tax due from a dissolved firm and provides that they shall be jointly and severally liable to pay the tax due from the firm under the Act of 1959 or "under any earlier law", whether such tax has been assessed before or after dissolution. Section 2(12) of the 1959 Act defines "earlier law" to mean, inter alia, the Bombay Sales Tax Act, 1953. Thus, one of the postulates of section 19(3) at any rate is that a dissolved firm could be assessed under the 1953 Act. Such a postulate accords with the principle that if the legislature provided for a charge of sales tax, if could not have intended to render that charge ineffective by permitting the partners to dissolve the firm, an easy enough thing to do. Nothing, in fact, would be easier to evade a tax liability than to declare that the firm, admittedly liable to pay tax, has been dissolved. Section 19(3) of the 1959 Act not only makes clear what was necessarily implied in the 1953 Act, but it throws additional light on the true construction of the earlier law. But we though it advisable to keep section 19(3) of the 1959 Act apart while construing the 1953 Act because it is the courts, not the legislature, who have to construe the laws of the land authoritatively. As said in Craies on Statute Law, "expect as a parliamentary exposition, subsequent Acts are not to be relied on as an aid to the construction of prior unambiguous Acts" (6th Ed., p. 146). The limited use which may be made of the language of section 19(3) of the 1959 Act, though such a course is unnecessary, is for saying that it serves to throw some light on the Act of 1953, in case the argument is that the Act of 1953 is ambiguous.Section 19(3) being quite clear and explicit, it is unnecessary to dwell on the other provisions of the Act of 1959 in order to show that a dissolved firm can be assessed under it. We may only point out that the Act of 1959 contains provisions similar to those in sections 15, 15A and 35 of the Act of 1953 on which we have dwelt at some length. Those provisions can be found in sections 35, 35A and 62 of the Act.22. The view taken by a Full Bench of the Madras High Court in Sales Tax Officer (XIX), Enforcement Branch, Bombay v. K. M. S. Mari Chettiar [[1975] 35 S.T.C. 148] that a dissolved firm can be assessed under the Act of 1959 is, in our opinion, correct though it was wholly unnecessary to say that the words "is assessed after dissolution" occurring in section 19(3) should be read as "is assessed after dissolution as if the firm exists". Such an addition is superfluous and serves to make the meaning of theno clearer than it is.