- (1.) AT the instance of the Commissioner of Sales Tax, U.P., Lucknow, the Additional Judge (Revisions) Sales Tax, Agra, has submitted this statement of the case under section 11(3) of the U.P. Sales Tax Act for the opinion of this court on the following question of law :- "Whether in the circumstances of this case the arrears of sales tax for the years 1961-62 to 1964-65 on the dissolved firm Mangal Sen Sita Ram could not be recovered from the opposite party Sampat Ram, a partner of the same firm without first serving notice of demand separately upon him ?"
(2.) SRI Sampat Ram, the assessee in this case, was a partner of the firm which carried on business in the name and style of M/s. Mangal Sen Sita Ram. The firm was dissolved on 21st December, 1964. In respect of the assessment years 1961-62 to 1964-65 the firm was assessed to sales tax which was in arrears. Proceedings for the recovery of the arrears were initiated and tax was sought to be recovered from the assessee by serving upon him a warrant of arrest by the kurk-amin. The assessee made a representation to the Sales Tax officer to withdraw the recovery proceedings against him but this request of the assessee was refused. Thereupon the assessee filed a revision under section 10 and contended before the Judge (Revisions) that no recovery proceeding could be commenced against him without first serving a notice of demand in respect of the arrears and for this contention he relied upon section 3-C(1)(b) of the U.P. Sales Tax Act. This contention prevailed with the Judge (Revisions) who allowed the revision application and directed the Sales Tax Officer to follow the procedure as laid down in section 3(1) of the U.P. Sales Tax Act, before attempting to recover the arrears from the assessee. The Commissioner of Sales Tax applied for a reference under section 11(1) of the Act which has been allowed and this statement of the case has been submitted with the question of law quoted above. In Bishwanath Lohia v. The Collector, Aligarh and Others ([1970] 26 S.T.C. 84), decided by a Division Bench of which one of us (Gulati, J.) was a member, a similar contention raised on behalf of a partner of a firm was rejected. There it was held that the Sale Tax Officer was competent to recover the arrears of sales tax due from the firm from one of the partners without serving upon him a separate notice of demand. Learned counsel for the assessee seeks to distinguish that case on the ground that that was a case of a continuing firm whereas in the present case the firm has been dissolved. Section 3-C was introduced in 1957 in the U.P. Sales Tax Act which provided for the liability to tax of a dissolved firm etc. The relevant portion of this section as it stood at the material time reads as under : "Section 3-C. Liability to tax of a dissolved firm, etc. - (1) Where a dealer is a firm or association of persons or a joint Hindu family, and such firm, association or family has discontinued business - (a) tax including penalty, if any, payable under this Act by such firm, association or family upto the date of such discontinuance may be assessed and determined as if no such discontinuance had taken place; and (b) every person who was at the time of such discontinuance a partner of such firm or a member of such association or family shall, notwithstanding such discontinuance, be liable severally and jointly for the payment of the tax assessed and penalty imposed and payable by such firm, association or family whether such assessment is made or penalty is imposed prior to or after such discontinuance, and, subject as aforesaid, the provisions of this Act shall apply as if every such person or partner were himself a dealer : Provided ...................... Explanation. - The dissolution or reconstitution of a firm or association of persons or transfer by a dealer of his business or partition of a joint Hindu family shall be deemed to be discontinuance of business within the meaning of this section."
(3.) THE provision quoted above provides for the assessment of a dissolved firm and the liability of its partners in respect of the arrears of tax due against such a firm. In clause (a), a legal fiction has been created as a result of which the assessment against a dissolved firm can be made as if no dissolution had taken place. This means that the procedure for assessment applicable to a live firm would be applicable to a dissolved firm. In the case of a live firm an assessment can be made in the name of the firm and all notices including the notice of demand can be served upon any of the partners. In the case of a dissolved firm also a notice served upon any of the partners would be a sufficient notice upon the remaining partners. Under clause (b) of section 3-C every partner is jointly and severally liable for the payment of the tax due against the dissolved firm and in order to enforce that liability it has been provided that every partner shall be deemed to be a dealer.;