- (1.) THESE four references made by the learned Member Shri G. B. K. Hooja raise the question whether a firm could be assessed to sales-tax after it was dissolved. As a common point of law is involved in all these references, they will be disposed of by this joint answer.
(2.) BRIEFLY the facts of the case are that the partnership firm started operating on 9. 11. 61. The business of the firm was subsequently dissolved on 23. 11. 63. The intimation of the dissolution of the firm was conveyed to the Sales Tax Department on 28. 11. 63. The Sales Tax Officer, however, issued notice for the purpose of assessment on 29. 11. 63, which was received by the assessee on 30. 11. 63. On 13. 2. 64 the petitioner submitted an application denying liability of assessment on the ground that the firm stood dissolved with effect from 23. 11. 63 and that the intimation of the dissolution of the firm under sec. 9 of the Rajasthan Sales Tax Act had been communicated to the Department on 28. 11. 63. The learned Sales Tax Officer, however, rejected the application of the petitioner vide his order dated 13. 2. 64 on the ground that under sec. 6 (6) of the Rajasthan Sales Tax Act, a dealer was liable to be assessed until his registration certificate was cancelled. As the assessee had failed to file the required returns or statements of sales and to produce any evidence in support of the sales effected during the period of assessment, the learned Sales Tax Officer proceeded to assess the assessee to the best of his judgment under sec. 10 (1) (b) of the Sales Tax Act on 19. 2. 64. The petitioner filed four revisions before the Board of Revenue in which the question whether a firm could be assessed to sales-tax after it was dissolved came up for adjudication which has been referred to us tor answer. The learned counsel for the firm mainly relied on the judgment of the Supreme Court of India in the case of State of Punjab vs. M/s Jullundur Vegetables Syndicate, Civil Appeal No. 588 of 1964 in which their lordships have held that the dissolved firm could not be assessed. His contention was that a firm under the Rajasthan bales lax Act was a separate assessable legal entity and that there was no machinery provided under the Act for making the assessment of a dissolved firm and the assessing authority had no power or jurisdiction to assess the firm after dissolution of the firm. His second contention is that even if it is presumed that sec. 9 of the Rajasthan bales Tax Act has been amended empowering the authorities to assess the dissolved firm with retrospective effect, no proceedings can be initiated in those cases which were closed prior to the coming into force of the amending Act. He has argued that the Rajasthan Taxation Laws Amendment Act came into force on 4th May, 1964 whereas their assessment was done by the assessing authority on 19. 2. 64, when the dissolved firm was not liable to assessment to sales-tax. He has cited Pt. Triveni Shyam vs. Board of Revenue (RRD 1964 p. 342) in which it was held by their lordships of the Rajasthan High Court that the proviso to sec. 42 of the Rajasthan Tenancy Act by sec. 4, Tenancy (Second Amendment) Act, 1956-"shall be deemed always to have been so added" is not retrospective and the transaction prior to amendment was not affected. Their lordships held that the deeming clause was violative of provisions of Art. 19 (1) (f) of Constitution. The learned Government Advocate has argued that firm was a separate assessable unit and the dissolution of a firm does not put an end to its liability for assessment till its registration certificate is cancelled by the appropriate authority. The second contention of the learned Government Advocate is that even if it is held that the firm was not liable to assessment to sales-tax after its dissolution, an assessment thereunder can be made on the group of partners who constituted the firm before it was dissolved. He has further argued that in the Punjab Sales Tax Act there was no provision expressly empowering the assessing authority to assess a dissolved firm in respect of its turnover after its dissolution, and such powder could not be gathered by necessary implication from the other provisions of the Punjab Sales Tax Act. But in the Rajasthan Sales Tax Act there was specific provision under sec. 9 (3) of Rajasthan bales lax Act for assessment of a dissolved firm. His contention is that sub-secs. (3) and (4) of sec. 9 were substituted by sec. 12 of the Rajasthan Taxation Laws Amendment Act with the necessary intendment that the substituted sub-sections shall be deemed always to have been substituted and as such a dissolved firm was liable to assessment under Rajasthan Sales Tax Act. He has cited 1965 S. T. C. page 494 Jaipur Brothers Ltd. vs. State of Uttar Pradesh, in which it was held that the amendment of a section during the pendency of the proceedings was retrospective from the date on which the principal Act came into operation. He has also cited Chotabhai Jethabhai Patel & Co. vs. The Union of India (AIR 1952 Nag. p. 139) in which their lordships of Nagpur High Court have held that it is within competence of legislature to enact taxing statute with retrospective effect. There is no prohibition in the Constitution to enact law retrospectively. He has further cited Kanhayyalal Shivsahay Sharma vs. Dy. Commissioner of Sales Tax M. P. (1958 S. T. C. p. 503) according to which it was held that exemption from liability to tax is not a substantive right and immunity from taxation by a bar of limitation can be removed by retrospective legislation by a competent legislature. He has also cited AIR 1963 S. C. , p. 1667 (Rai Ramkrishna vs. State of Bihar) in which it was held that when the legislature, can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law. , but it can also provide for the retrospective operation of the said provisions. For better appreciation of the case we quote hereunder sec. 12 of the Rajasthan Taxation Laws Amendment Act: - "in sec. 9 of the Sales Tax Act (i) for the heading "tax payable for transferee of business" the following heading shall be, and shall be deemed always to have been substituted, namely: - "liability on transfer of business or on discontinuance or dissolution of business of a firm etc. (ii) for sub - sec. (3) & (4) the following sub-section shall be, and shall be deemed always to have been substituted, namely : - (3) Where any business carried on by a firm, a Hindu-undivided family or an association of persons, liable to pay the tax is dissolved or discontinued or where such Hindu undivided family is partitioned - (a) Such firm, family or association, as the case may be, shall be liable to pay the tax on the goods allotted to any partner or member thereof as if the goods had been sold to such partner or member unless he holds a certificate of registration or obtains it within the prescribed period ; (b) Every person who was at the time of such dissolution, discontinuance or partition partner or member of such firm, association or family and the legal representative of any such person who is deceased, shall in respect of the turnover of such firm, association or family, be jointly and severally liable to assessment and for the amount of tax, penalty or other sum payable, and all the provisions of this Act so far as may be, shall apply to any such assessment and liability for payment of tax or imposition of penalty or other sum. (4) When a dealer to whom a part of the business has been transferred, or who has obtained the whole or part of the stock relating to the business of a firm, an association of persons or a Hindu undivided family, which has been dissolved or discontinued or partitioned, as the case may be, obtains a certificate of registration, he shall be liable to pay the tax on the sale or purchase of goods made by him with effect from the date of such transfer, dissolution, discontinuance of the business or partnership, as the case may be. " The language of the above amending provisions is plain and simple. The deeming clause "shall be deemed always to have been substituted" clearly means that sub-sec. (3) and (4) of Sec. 9 have been substituted by sec. 12 of the amending Act in the principal Act as if they were enacted on coming into force of the principal Act. According to Sub-sec. (3) a dissolved firm is liable to pay the tax on the goods allotted to any partner or member thereof and according to sub-sec. (4) a dissolved firm shall be liable to pay the tax on the sale or purchase of goods made by him with effect from the date of such dissolution. The Rajasthan Sales Tax Act is distinguishable from the Punjab Sales Tax Act in the respect that in the Punjab Sales Tax Act there is no provision expressly empowering the assessing authority to assess a dissolved firm in respect of its turnover after its dissolution whereas such provision has expressly been made in the Rajasthan Sales Tax Act with retrospective effect. After going through the rulings cited by the learned Government Advocate, we are of the opinion, that the dissolved firm is liable to assessment for the turnover upto the date of its dissolution. However for the cases which were assessed and closed prior to coming into force of the amending Act, fresh notice shall have to be given to them according to law subject to limitation. We answer the references accordingly and send back the cases to the learned Member for proceeding according to law. Per Shri R. N. Madhok: I have had the benefit of going through the opinion recorded by my learned colleague Shri Balwantsingh in these four references. I regret that I cannot persuade myself to agree with him. The question before us is whether the firm known as Messrs Maluk Chand Nathulal of Abu Road is liable to assessment sales tax after its dissolution which took place on 23. 11. 1963. As provided in Sec. 2 (f) of the Rajasthan Sales Tax Act, 1954, the expression "dealer" includes a firm or association. In civil Appeal No. 588 of 1964 (The State of Punjab versus M/s Jullundur Vegetable Syndicate) their Lordships of the Supreme Court held that for the purposes of the East Punjab Sales Tax Act, a firm is a separate assessable entity. As in the case of Rajasthan Act, the term "dealer" in the Punjab Sales Tax law includes a firm. Their Lordships have further observed that on dissolution the firm ceases to be a legal entity, and thereafter there is no longer scope for assessing the firm which has ceased to have a legal existence, unless there is a statutory provision permitting assessment of a dissolved firm. It was stated before their Lordships on behalf of the State of Punjab that the amending law which sought to provide for the assessment of a dissolved firm did not have any retrospective effect. Under the Rajasthan Sales Tax Act as it stood untill 4. 5. 1964 when it was amended by Act No. 13 of 1964, there was no provision for assessing a dissolved firm. The amended provisions are as follows: - "9 Liability on transfer of business or on discontinuance or dissolution of business of a firm, etc.- (3) Where any business carried on by a firm, a Hindu undivided family or an association of persons, liable to pay the tax, is dissolved or discontinued or where such Hindu undivided family is partitioned - (a) Such firm, family or association, as the case may be, shall be liable to pay the tax on the goods allotted to any partner or member thereof as if the goods had been sold to such partner or member unless he holds a certificate of registration or obtains it within the prescribed period; (b) every person who was at the time of such dissolution, discontinuance or partition, partner or member of such firm, association or family and the legal representative of any such person who is deceased, shall, in respect of the turnover of such firm, association of family, be jointly and severally liable to assessment and for the amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall apply any such assessment and liability for payment of tax or imposition of penalty or other sum. (4) Where a dealer to whom a part of the business has been transferred, or who has obtained the whole or part of the stock relating to the business of a firm, an association of persons or Hindu undivided family which has been dissolved or discontinued or partitioned, as the case may be, obtains a certificate of registration, he shall be liable to pay the tax on the sale or purchase of goods made by him with effect from the date of such transfer, dissolution, discontinuance of the business or partnership, as the case may be. " The amending law says that the above provisions shall be and shall be deemed to have always been substituted. This means that the amended provisions have to be read as if they were on the statute book when the principal Act was enacted. In AIR 1963 S. C. 1667 their Lordships held that the power conferred on the legislature could be exercised both prospectively and retrospectively. They upheld the retrospective amendment of the Bihar Finance Act, 1950. Therefore the retrospective effect of the amending law in the present case, viz. , Act No. 13 of 1964 cannot be questioned. But it remains to be seen whether the amended provisions of sec. (3) and (4), as they stand, permit the assessment of a dissolved firm. For a proper construction of these amended provisions, it is necessary to refer to sec. 44 (1) of the Indian Income Tax Act, which provided a machinery for the assessment of a dissolved firm to income tax. It runs as follows - "44 (1) - Where any business, profession or vocatied carried by a firm or other association of persons has been discontinued or where a firm or other association of persons is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm or other association of persons as such as if no such discontinuance or dissolution had taken place. " It is clear that sec. 44 (1) expressly and unambiguously provides for the assessment of a dissolved firm or other association of persons as if no dissolution had taken place and the Income Tax Officer is required to proceed with the assessment on the basis that there is no dissolution. Sec. 9 (3) (a) of the Rajas than Sales Tax Act as amended permits assessment to tax of the dissolved firm in respect of the goods allotted to every partner or member of a dissolved firm. Sec. 9 (3) (b) lays down that on the dissolution of a firm every partner or member of such firm shall, in respect of the turnover of such firm, be jointly and severally liable to assessment and for the amount of tax, penalty or other sum payable. These provisions do not say that the dissolved firm shall be assessed as if no dissolution had taken place. All that these provisions say is that every member or partner of a dissolved firm shall be jointly and severally liable to assessment and payment of tax or penalty of other partners or members of the dissolved firm are to be assessed and charged. In other words, after the dissolution of the firm it will not be the firm but the partners or members who shall be made parties to the assessment and charged jointly and severally. I would answer these references in the foregoing terms. Per Shri Gajenda Singh - This is a reference from the learned Member Shri G. B. K. Hooja sitting singly and arises out of sales tax revision petitions filed by Shri Nathoo Lal. The learned Member disagreed with the view taken by Shri Balwant Singh in the revision petition of State vs. Mahabir Printing Press in RRD 1964 p. 350 and came to the conclusion that a dissolved firm in view of the amending Act cannot escape from the liability of taxation.
(3.) THIS case was heard at length. I had the benefit of reading the two judgments given by the learned Members. Shri Balwant Singh has taken the view that the dissolved firm is liable to assessment for the turn over upto the date of its dissolution, but under the amended Rajasthan Sales Tax Act the dissolved firm cannot escape liability to assessment of sales tax in view of the fact that the law applied retrospectively. He was however of the view that fresh notice will have to be given to the firm. The other learned Member Shri Madhok in a separate judgment, however, came to a different conclusion that the dissolved firm ceases to be a legal entity and as such is not liable to assessment to sales tax, but in view of the amendment of the Rajasthan Sales Tax Act by Act No. 13 of 1964 and the provision therein contained, the dissolved firm cannot be assessed but the partners or members of such dissolved firms are jointly and severally liable to assessment for the amount of tax, penalty, or other sum payable. Thus as far as the liability of a dissolved firm to taxation is concerned, there is no difference of opinion between the two Members. A dissolved firm ceases to be a legal entity and as such is not liable to taxation. The law laid down by their lordships of the Supreme Court in the Civil Appeal No. 588 of 1964 in the State of Punjab vs. M/s. Jullunder Vegetable Syndicate is therefore the law of the land. This judgment of the Supreme Court was based on the simple assumption that the dissolved firm ceases to be a legal entity and as such it cannot be assessed for want of legal existence, unless there was a statutory provision permitting assessment of a dissolved firm. In the Punjab Sales Tax Act there was no such provision enabling the assessment of a dissolved firm. The only difference of opinion between the two learned Members is that Shri Balwant Singh thinks that under the amended Sales Tax Act of Rajasthan a dissolved firm can be taxed by issue of a fresh notice, whereas Shri Madhok rightly, holds that a dissolved firm cannot be assessed to Sales tax, but the members of such firm could however be jointly and severally liable to assessment. In view of the clear provision of sec. 9 of the amending Sales Tax Act of 1964, this amending provision of Rajasthan Sales Tax Act which has been extensively quoted in the previous judgment and need not be reproduced here. There is a deeming clause, that the above provision shall be deemed to have always been substituted. This clause gives a retrospective effect to this fiscal law, in view of the express provision of such a clause in the Act. The vires of such an Act therefore cannot be questioned. Numerous authorities have been cited by Shri Balwant Singh to show that there was no prohibition in the Constitution to give retrospective effect to the taxing laws. In the Punjab Sales Tax Act there was no provision to assess a dissolved firm. Similarly in the Rajasthan Sales Tax Amending Act of 1964 a dissolved firm cannot be assessed to sales tax but sec. 9 sub-sec. (b) clearly provides as follows - " (h) every person who was at the time of such dissolution, discontinuance or partition, a partner or member of such firm, association or family and the legal representative of any such person who is deceased, shall, in respect of the turnover of such firm, association or family, be jointly and severally liable to assessment and for the amount of tax, penalty or other sum payable. . . . . . . . . " Thus it is clear that the law as stated before the amendment did not provide for the assessment of a dissolved firm. Similarly, the amending Act 13 of 1964 of the Rajasthan Sales Tax Act did not provide for assessment of a dissolved firm, but laid down that the partners or members of such dissolved firm or the legal representatives would be jointly and severally liable in respect of the turn over of such firm for the amount of tax, penalty or other sum payable. It further laid down that in the case of dissolution of a firm the goods allotted by any partner to another member should be considered as a statutory sale unless he holds a certificate of registration or obtains one within the prescribed period, meaning thereby that such allottee partner of goods would be liable to assessment of sales tax. It also provides that if a person obtains such a certificate of registration would be liable to pay tax on the sale or purchase of goods made by him with effect from the date of such transfer or dissolution of such firm. Thus it is clear from the plain reading of the above section of the Amending Act of 1964 that the dissolved firm cannot be assessed to sales tax but the members of the firm are liable to taxation or the partner to whom the goods are transferred has to account for its turn over. It is rightly pointed out by Mr. Madhok that if there was any intention of the legislature to tax a dissolved firm it was open for it to have enacted a cluase in the Sales Tax Act, in the manner in which it is provided in sec. 44 sub-sec. (1) of Indian Income Tax Act whereby in the event of dissolution of a firm the Income Tax Officer has the duty to make assessment of the total income of the firm, as if no such dissolution had taken place. There is no such provision in the Rajasthan Sales Tax Act. Consequently it is not open for the Sales Tax Officer to assess a dissolved firm. I, therefore, agree with the learned Member Shri Madhok in answering the reference to the effect that the dissolved firm as the Rajasthan Sales Tax Act stands is not capable of being assessed but the partners and members of such firms are to be assessed jointly and severally. . ;