LexMURARILAL MAHABIR PRASAD & ORS. versus SHRI B. R. VAD & ORS.
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689
MURARILAL MAHABIR PRASAD & ORS.
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SHRI B. R. V AD & ORS .
September 5, 1975
[Y. V. CllANDRACHUD, R. S. SARKARIA AND A. C. ()UPTA, JJ.]
Bombay Sales Tax Act, 1953, Sections 2(6), 5, 11(5), 14(3), 15, 15A,
24, 26(3) (i), 26{3) (ii) and 35 and Bombay Sales Tax Act, 1959,
Sections
2(11), 2(19), 19(3), 35, 35A and 62 and Bombay G•neral Clauses Act, 1904,
Section 3(35)-Assessment and re-assessment to sal.es tax of pre-dissolution
turnover of the dissolved firm-Assessment .and re-assessment, if without ju1is-
diction.
The first appellant was a partnership finn constituted under a deed of part•
nersbip dated December 3, 1953. The· firm was registered as a dealer under
the Bombay Sales Tax Acts of 1953. and 1959. The finn consi.sted of five
partners appellan1s two to five and one other who died in 1965. The finn used
to carry on business at Bombay as importers and commission agents and also
as wholesale dealers in chemicals. dyes and various other goods.
It had been
assessed by the Sales Tax authorities for the· period from July, 1953 to ·March
31, 1958 on the basis of the returns filed by it. Qn Nowmber 10, 1960, the
Sales Tax Officer seized ·a number of documents from the office of the firm.
On May 20, 1962, the firm was dissolved. On June 26, 1962 the Sales Tax
Officer cancelled the firm's registration certfficate under the· Central Sales Tax
Act as well as the registration certificate, authorisation and licence under the,
Bombay Sales Tax Act which the· partners of tho firm had surrendered. On
November 20, 1963, the Sales Tax Officer issued two notices to the firm, one
asking for elucidation of certain itenlS in the books of accounts seized, and
the other underi sec. 15 of the 1953 Act calling; upon 'the firm to show cause why
the assessment already made for the period April 1, 1957 to March 31, 19i58
should not be opened. On August 31, 1965. the Sales Tax Officer passed five
orders, all against the dissolved. firm : the first ·was a re-assessment order for
the year April 1, 1957 to· March 31, 1958 on the ground that certain s::,i.les and
purchases during that period
had been concealed and the other four were
assessment orders for subsequent years covering the· period from April 1. 1958
to March, 1961. On these five· orders a total sum of Rs. 6,561365 /47p. was
found ·due from the firm. On October 22, 1965, the demand notices is.sued
upon these assessment orders. all in the· name of the dissolved firm, were
affixed to the· premises in which the firm had its office before it was dissolved.
On November 24, 1965, the appellants filed a writ petition in the High
Court of Bombay cha11enging the orders of re-assessment and assessment on
various Q"ounds. In view of the fact that the appeals filed by the firm before
the Assistant Commissioner of Sales. Tax were Pending, the High Court did
not decide the question whether the procedure prescribed by Jaw was followed
in the assessment proceedings and whether the orders were justified on merits.
The Dnly -question which tire· High Court considered was whether the impugned
orders were without jurisdiction as having been passed against a dissolved
firm. By its judgment dated December 8, 1969, the High Court rejected the
contention of the firm' and held that in view of the provisions contained in
the Bombay Sales Tax Acts of 19'53 and 1959, it was permissible to assess
a dissolved firm,
Dismissing the appeal by special leave,
HEW : (per Chandrachud and Sarkaria, JJ.)
(i) In Jul/under Vegetables Syndicate case, [1966] 2 S.C.R. 457 this Court·
held: (1) A dissolved firm cannot be assessed to sales. tax unless the statUte
under which the assessment is rriade authorises the a~S&inent either expressly or
by necessary implicatfon; (2) If, -by definition, a firm is a dealer under an Act,
it beoomes a legal entity or an indeP'~ndent assessable unit for the purposes
of that Act. If that be so, the firm ceases to be a legal entity Qn dissolution
690
SUPREME COURT REPORTS
[1976] I S.C.R.
and thereafter, on principle it cannot be assessed to sales tax unless the statute
so a.u!horises express!¥ or by necessary implication; (3) Neither a provision
requiring a dealer to inform the authorities if it discontinues its business nor
a provision in1posing a joint and several liabilitv on the dealer and its pa;tners
for the payment of tax, penalty or any other an1ount due under the· Actr or
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