1961 (3) TMI 79 - HC - VAT and Sales Tax

Transferee's Tax Liability Clarified by Orissa High Court: Key Distinctions and Precedents

Commissioner of Sales Tax, Orissa Versus Sri Jagatbandhu Mohanty

The Orissa High Court clarified that a transferee is liable for unpaid tax by the transferor up to the date of transfer but cannot be assessed for periods ... - Issues:1. Liability of transferee for tax assessment prior to business transfer.2. Determination of liability of transferee under the Orissa Sales Tax Act.Analysis:Issue 1: Liability of transferee for tax assessment prior to business transferThe case involved a reference to the Orissa High Court regarding the liability of a transferee of a business from a registered dealer for tax assessment and payment in periods prior to the transfer. The Tribunal held that the transferee, though liable for unpaid tax by the transferor up to the date of transfer, cannot be assessed under section 19(1) of the Act for periods before the transfer. The Court explained the scheme of the Act, emphasizing the charging section (section 4), return filing requirements, assessment procedures, and tax payment provisions. It clarified that a transferee's liability is determined under section 19(1) for registered dealers and section 19(2) for unregistered dealers. The Court referred to a Patna High Court case to support its interpretation of the relevant provisions and highlighted the immediate liability for sales tax upon each transaction. The judgment affirmed that a transferee is liable to pay admitted tax if the transferor had filed a return, subject to certain conditions.Issue 2: Determination of liability of transferee under the Orissa Sales Tax ActRegarding the determination of the liability of a transferee under the Orissa Sales Tax Act, the Court answered in the affirmative to question No. 2. It clarified that assessment should be made under sub-section (5) of section 12 for unregistered dealers, not under sub-section (4) which pertains to registered dealers. The judgment emphasized the distinction between the provisions applicable to registered and unregistered dealers under the Act. The Court provided detailed reasoning based on precedents and the Act's provisions to support its conclusion. The judgment accepted the reference without costs, with both judges concurring on the decision.In conclusion, the Orissa High Court provided a comprehensive analysis of the liability of a transferee for tax assessment and payment under the Orissa Sales Tax Act, clarifying the applicable provisions for registered and unregistered dealers and emphasizing the immediate liability for sales tax upon each transaction.