DEPUTY COMMERCIAL TAX OFFICER & ANR. versus SHA SUKHRAJ PEERAJEE

Citation: [1967] 3 S.C.R. 661 · Decided: 17-04-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
DEPUTY COMMERCIAL TAX OFFICER & ANR. 
B 
c 
D 
E 
F 
G 
H 
v. 
SHA SUKHRAJ PEERAJEE 
April 17, 1967 
[J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ.] 
Madras General Sales Tax Act IX of 1939---<1. 19(1), (2) (c)-Whe-
ther purchaser of business of 'dealer' liable for arrears of sales-tax due 
from dealer prior to ·amending Act I of 1959. 
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 8'8les 
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 re-
cover 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 Art. 226 
of the Constitutlon1 challenging the orders of· the C.T.O. and the Board. 
A Single Bench or 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 vlres the Act. 
In the appeal to the Supreme Court it was contended, Inter a/ia, 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 ss. 19(1) and 19(2)(c) of the Act whereby it could make rules 
for the assessment to tax under the Act of businesses which were discon-
tinued or the ownership of which had changed; (ii) that further more 
under s. 10, the whole of the amount outstanding on the date of the de-
fault 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 a!l'lets of the business 
for realillng the amount of sales tax due; and (iii) that upon a true cons-
truction of the registered Instrument dated October S, 1956, the respon-
dent lll!dertoOk to pay all liabilities like sales tax Imposed in regard to 
the business. 
HELD : dismissing ihe appeal : 
(i) Rule 21-A was beyond the rule making power of the State Gov-
ernment either under s. 19(1) or s. 19(2)(c) and was therefore ultra 
vires the Act. [666 E-F] 
Although by the amending Act I of 1959, an express provision was 
inserted by which the transfer.ee 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 DJ 
It is manifest that the person who purchases a business as a 'dealer' 
.can be ~essed 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-
SUPREME COURT REPORTS 
[1967) 3 s.c.R. 
ness has nothing to do with the sales effected by the seller of the busi-
ness. 
The turnover in respect of such sales remains. therefore, the turn .. 
over of the transferor and not of the transferee. 
[664 CJ 
Although s. 19(2) (c) 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 "assess-
ment" used in para 19(2) (c) does not include the. power of recovering 
tax assessed from a person other than the assessee. 
[664 F-0; 66S B.Cl 
Blldridus Duga v. CJ.,T., [1949] J.T.R. 209, 211; Chatluram v. C.l.T. 
Biluir. 119471 F.C.R. 116; and Whitney v. Commi.isio11ers of Inland Reve-
nue, 11926] A.C. 37, relied on. 
(ii) S. JO 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 regis-
tered instrument by which the business was transferred to the respondent 
was dated October S, 1956 and the amended section therefore had no 
application. 
[666 Fl 
(iii) It was not open to the State Government to rely on the lnstru-
mcn.t Inter v/vo.1· between the transferor and the transferee and to con-
tend that there was any contractual 
obligation between tho transferee 
and the State Government who was not a party to tho instrumen

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