Summary
The three respondents who were the three partners of a registered Partnership doing the business of sale of bidis did not file any sales tax return. They did not get the firm registered under the Madhya Pradesh General Sales Tax Act 1958. Treating the firm as an unregistered dealer a best judgment assessment was made by the sales tax officer and demand notices were accordingly issued. Even so the firm failed to pay the tax. Thereupon the Commissioner of Sales Tax accorded sanction under section 46(1)(c) of the Madhya Pradesh General Sales Tax Act 1958 for criminal prosecution of the three respondents.
Their writ petition for quashing the order for criminal prosecution was granted by the High Court.On the questions ( 1 ) whether the three partners can be held liable for the tax assessed against the firm and (2) whether the sanction given by the Commissioner for Prosecution under sec(ion 46(1)(c) is sustainable in law.Dismissing the appeal the Court,^HELD: 1. (a) In the absence of a specific provision in the Act, the partners of the firm cannot be held liable for the tax assessed on the firm. [38C](b) A firm in a partnership and a Hindu undivided family are recognised as legal entities and as such proceedings can only be taken against the firm or undivided family as the case may be. Neither the partners of the firm nor the members of the Hindu undivided family will be liable for the tax accessed against the firm or the undivided Hindu family. [37H-38A]State of Punjab v. M/s Jullundur Vegetables Syndicate,[1966] 2 S.C.R. 457; Kapur Chand Shrimal v. Tax Recovery Officer, Hyderabad and Ors., [1969] l S.C.R. 691: relied on.(c) The definition of "dealer" in clause 2(d) of the Act makes it clear that a firm is a separate entity and is a dealer for the purposes of the Act. A firm under section 7(2) of the Act is deemed to be a registered dealer. Section 18 provides that the amount of tax due from a registered dealer shall 34be assessed separately for each year. Accordingly the dealer, which is a firm in this case, was assessed and notice given to the firm [37A-C](d) In the absence of a specific provision (such as the one found in S. 18 of the Bombay Sales Tax Act 1959) that where a firm is liable to pay tax under the Act, the firm and each of its partners shall be jointly and severally liable for such payment, the partners of a firm cannot be held liable for the tax assessed on the firm. [38C]2. (a) The provisions of the Act conferring different procedures for collection of tax cannot be held to be invalid. [44B](b) When power is conferred on high and responsible officers, they are expected to act with caution and impartiality while discharging their duties and the circumstances under which they will choose either of the remedies available should be left to them. The vesting of discretionary power in the State or public authorities or an officer of high standing is treated as a guarantee that the power will be used fairly and with a sense of responsibility. [42G](c) The guidance will have to be inferred from the policy of the law itself, that is, if on particular facts of a case the Commissioner in exercise of his discretion comes to the conclusion that a more drastic remedy should be taken, the exercise of that option cannot be termed unconstitutional. Courts will be justified in giving a liberal interpretation to the section in order to avoid constitutional invalidity and reading down the sections if it becomes necessary to uphold its validity. [43B, D](d ) In the present case before a prosecution can be launched under section 46, it is necessary that the assessee should have failed to pay the tax due within the time allowed without reasonable cause. The duty of the Commissioner is, therefore, to be satisfied that the assessee has failed without reasonable cause and without recourse to prosecution under section 46(1)(c), the tax due cannot be collected' The provisions of section 22(4-A) can be read as being applicable to cases in which the stringent step of prosecution is considered not necessary. The option is with the Commissioner and if he thinks levy of penalty would achieve the purpose of collection of the tax he can have recourse to the provisions of section 22 (4-A) . Before levying a penalty under section 22(4-A), the Commissioner shall give reasonable opportunity of being heard as to why the penalty should not be levied. Reading the two provisions harmoniously, discretion is given to the Commissioner to resort to one of the two remedies as the facts of the case may require. In graver cases he will be justified in taking the drastic remedy and resorting to prosecution in the criminal court if he is satisfied that such a course is necessary for the collection of the tax expeditiously. If the discretion is not properly exercised the Court may be justified in interfering in such cases but the law cannot be held to be invalid. The present case is a grave case of failure to pay the tax as repeated reminders went unheeded.The Commissioner on the facts, was fully justified in coming to the conclusion that resort to prosecution was necessary.[43E-44A](e) Taking into account the scheme of the Act, it can be inferred that a more drastic remedy is to be taken when such a step is found necessary on the facts of a case. Thus construed the validity of the section cannot be 35questioned, but if the facts of a case do not warrant taking of the graver step and no adequate reasons are found that order in such circumstances may be found to be invalid.[44B-C]Maganlal Chaganlal (P) Ltd. v. Municipal Corporation of Greater Bombay and Ors., [1974] 2 S.C.C. 402, State of Kerala and Ors. v. C. M. Francis & Co. & Ors., [1961]12 S.T.C. 119, Shanti Prasad Jain v. 7 The Director of Enforcement, [1963] 2 S.C.R. 297, Rayale Corporation (P) Ltd. & Ors. v. Director of Enforcement, New Delhi[1970] 1 SCR 639; Ram Swarup v. Union of India, A.I.R.1965 SC 247, Province of Bombay v. Bombay Municipal Corporation, 73 I.A. 271, R. S. Joshi, S.T.O. Gujarat etc. v. Ajit Mills Ltd., Ahmedabad & Anr. etc., [1978]1 SCR 338; referred to.See the full content of this document
Extract
Commissioner Of Sales Tax, M.P. Indore And Ors. VS. Radhakrishan And Ors.
PETITIONER: COMMISSIONER OF SALES TAX, M.P. INDORE AND ORS.Vs.RESPONDENT: RADHAKRISHAN AND ORS.DATE OF JUDGMENT06/10/1978BENCH: KAILASAM, P.S.BENCH: KAILASAM, P.S.SINGH, JASWANTKOSHAL, A.D.CITATION: 1979 AIR 1588 1979 SCC (2) 249CITATOR INFO : R 1979 SC1803 (12)RF 1991 SC 101 (22,45,205)ACT: Madhya Pradesh General Sales Tax Act 1958-Whether partners can be held liable for the tax assessed against the firm.Sec. 22(4-A) and Sec. 46(1) (c)-Two different procedures for enforcing and realizing the assessment- Whether valid-vesting of discretionary power in the State or public authorities or an officer of high standing is treated as a guarantee that the powers will be used fairly and with a sense of responsibility.JUDGMENT: CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.78 of 1972.From the Judgment and order dated 16-3-1971 of the Madhya Pradesh High Court in Misc. Petition No. 85/69.S.K. Gambhir for the Appellant.H. W. Dhabe and A. G. Ratnaparkhi for Respondents Nos.1-3.The Judgment of the Court was delivered byKAILASAM, J.-This appeal is by Commissioner of Sales Tax, M.P., Indore and three others by certificate of fitness granted by the high Court of Madhya Pradesh from the judgment and order dated 16th March, 1971 in Miscellaneous Petition No. 85 o...
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