Sales tax assessment after partnership dissolution upheld, but recovery had first to proceed against partnership assets.

A registered partnership dealer remained liable to sales tax assessment for the relevant periods despite later dissolution, because no intimation of the change in business status was given to the prescribed authority under section 17 of the C.P. and Berar Sales Tax Act, 1947; the assessments were treated as made against the firm and were upheld. However, arrears assessed against the firm had first to be recovered from partnership assets, and direct personal recovery from the partners was premature while those assets remained available or had not been exhausted. The challenge to the assessments failed, but recovery was confined initially to the partnership property.

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Issues: (i) Whether sales tax assessments made after dissolution of the partnership were invalid; and (ii) whether the tax arrears could be recovered personally from the partners before first proceeding against the partnership assets.

Issue (i): Whether sales tax assessments made after dissolution of the partnership were invalid.

Analysis: The firm was a registered dealer under the C.P. and Berar Sales Tax Act, 1947 and remained liable to assessment for the relevant periods while it carried on business as a partnership. The subsequent dissolution did not by itself defeat assessment, because no intimation of the change in the nature of the business was given to the prescribed authority under section 17. The assessments were in substance against the firm, though the petitioner was described as a partner.

Conclusion: The assessments were valid and the challenge to them failed.

Issue (ii): Whether the tax arrears could be recovered personally from the partners before first proceeding against the partnership assets.

Analysis: Since the liability assessed was that of the firm, the arrears had first to be realised from the assets of the partnership. Direct recovery from the partners personally was premature so long as the partnership assets were available or had not been exhausted. The question of any personal liability for any remaining balance was left open.

Conclusion: Recovery had first to be made from the partnership assets, and personal recovery from the partners was not immediately permissible.

Final Conclusion: The petition failed as to the validity of the assessments, but the tax authorities were directed to proceed first against the partnership assets for recovery of the arrears.

Ratio Decidendi: A registered dealer remains liable to assessment until a change in the business or its status is duly intimated to the prescribed authority, and tax assessed on a partnership must first be recovered from partnership assets before personal recovery from partners is attempted.

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