PERIYAR & PAREEKANNI RUBBERS LTD. versus STATE OF KERALA

Citation: [2008] 4 S.C.R. 540 · Decided: 07-03-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

[2008} 4 S.C.R. 540 
A 
PERIYAR & PAREEKANNI RUBBERS L TO. 
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V. 
STATE OF KERALA 
(Civil Appeal Nos.1804-1807 of 2008) 
8 
MARCH 7, 2008 
(S.B. SINHA AND HARJIT SINGH BEDI, JJ.) 
Kerala General Sales Tax Act, 1963; S. 19(c)/Central 
t 
Sales Tax Act, Kerala General Sales Tax Rules, rr. 33(A)(3)1 
c Central Sales Tax (Kerala) Rules, 1957; r.11(6): 
,. 
Liability to pay sales tax -Appellant company leased 
out factory in favour of another company- Allowing lessee to 
use sales tax registration number and Forms 'C' and (D' allotted 
to it- Notice for recovery of sales tax from appellant -
D Challenge to - Recovery proceedings quashed by Single 
Judge of High Court directing the assessing authority to 
complete the final assessment by issuing notice to both the 
appellant as a/so the lessee - Assessing authority holding 
both the parties liable to pay sales tax jointly and severally -
E Appellate authority directing recovery of the tax from lessee 
only - Appeal filed thereagainst by Revenue allowed by 
Tribunal - Revision Petition dismissed by High Court -
Correctness of- Held: Correct- In terms of r. 33A(3) of Kerala 
General Sales Tax Rules rlw r.11 (6) of Central Sales Tax Rules, 
F appellant was duty bound to surrender the registration number 
on its ceasing to be an assessee but he did not surrender the 
same and allowed lessee to continue to use it and a/so Forms 
'C' & (D' -High Court held the appellant liable to pay the sales 
tax jointly and severally with the lessee - Though, it preferred 
G an appeal thereagainst but it did not implead Jessee as a party 
- Hence, it was impermissible for the appellate authority to 
hold the Jessee alone liable for payment of the tax - For all 
intent and purport, appe/fant was serving as an agent of the 
Jessee -· Though, at the relevant time there did not exist any 
H 
540 
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PERIYAR & PAREEKANNI RUBBERS L.,..D. v. STATE 
541 
OF KERALA 
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provision to assess two persons by fastening joint and several A 
liability, but Revenue could recover the tax if permissible 
otherwise -- However, it would not be appropriate for the 
Supreme Court to interfere with the irrpugned judgment in 
exercise of power u/ Article 136 of the Constitution -Constitution 
of India, 1950-Article 136 -Scope of. 
B 
Doctrines: 
Doctrine of 'Crown Debt' and 'purposive construction'-
Applicability of. 
Appellant is a registered company running a distillery. c 
It obtained a licence for manufacture of liquor under the 
Kerala Abkari Act. The appellant allegedly leased out the 
factory in favour of another company, wherefor requisite 
approval was granted by the Government. The 'lessee' 
applied for registration under the Kerala General Sales D 
Tax Act. Since the process for registration having been 
delayed, the appellant allowed the lessee to use the 
registration number allotted to it and also Forms 'C' & 'D'. 
The 'lessee' did not deposit the amount of sales tax 
collected by it. The authorities issued a notice to the E 
appellant for recovery of Sales Tax for the assessment 
Years 1984-85, 1986-87 and 1987-88. Questioning the 
legality and validity of the notice for recovery of the tax, 
appellant filed a writ petition. However, the appellant did 
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not press its liability in regard to the payment of the tax F 
for the year 1984-85. Single Judge of the High Court 
directed the assessing authority to complete the final 
assessment in terms of provisions under 1963 Act for the 
assessment years 1986-87 and 1987-88. The assessing 
authority held both the appellant as also 'the lessee' jointly G 
and severally liable for payment of the tax. Appeals 
preferred thereagainst were allowed by the appellate 
authority in so far as the appellant was concerned and 
directed recovery of the tax only from 'the lessee'. The 
Revenue preferred second appeal before the Tribunal, 
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542 
SUPREME COURT REPORTS 
[2008] 4 S.C.R. 
A which was allowed by the Tribunal. Revision applications 
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filed thereagainst by the appellant before the High Court 
were dismissed by the High Court. Hence the present 
appeals. 
B 
AppeHant-Company contended that the assessing 
authority being aware of the fact that the distillery was 
being run by 'the lessee', no liability in respect thereof 
could have been fastened on it; that even assuming that 
it effected sales of the manufactured goods under the 
registered number allotted to it, it was liable for payment 
c of Sales Tax only for the period from 7th November,

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