Transferee liability for unpaid business tax follows the transferred business without prior assessment or demand notice.

Section 26 of the Bombay Sales Tax Act treats the transferee of an entire business as liable for unpaid tax where the transferor's tax obligation had accrued and remained unpaid at the date of transfer; prior assessment or demand notice is not a condition precedent, because tax liability arises from the charging scheme and not from recovery machinery. The provision also fastens liability to the business as transferred by the immediate transferor, so unpaid tax burden that had already attached to the business in an earlier transfer follows the business on a subsequent transfer. Liability was upheld for the accumulated unpaid burden, except for the period covered by the pre-Act ordinance regime.

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Issues: (i) Whether, under section 26 of the Bombay Sales Tax Act, 1953, the expression "tax payable and remaining unpaid" requires prior assessment and demand notice, or whether the transferee becomes liable once the transferor's tax obligation has accrued and remained unpaid at the time of transfer; (ii) whether the transferee's liability under section 26 extends to tax liabilities attached to the transferred business for periods during which the business had earlier been carried on by a prior transferor, where such liability became part of the tax burden of the immediate transferor by reason of an earlier transfer.

Issue (i): Whether, under section 26 of the Bombay Sales Tax Act, 1953, the expression "tax payable and remaining unpaid" requires prior assessment and demand notice, or whether the transferee becomes liable once the transferor's tax obligation has accrued and remained unpaid at the time of transfer.

Analysis: Section 26 creates a legal fiction by which the transferee of the entire business is treated as the dealer liable to pay the tax in respect of the transferred business. The liability is coextensive with the transferor's obligation and arises when the transferor was a dealer liable to pay tax, the transfer was of the whole business, and the tax obligation had remained unpaid at the date of transfer. The expression "tax payable" was held to mean the dealer's obligation to pay tax, and not merely an assessed and quantified tax debt. Assessment and demand are relevant to recovery of a defaulted amount as arrears, but they do not constitute the source of liability to pay tax under the charging scheme of the Act. Sections 14 and 16 were construed as machinery provisions for defaulting dealers and not as conditions precedent to the existence of tax liability.

Conclusion: Prior assessment and demand notice are not necessary for section 26 to apply, and the transferee is liable once the transferor's tax obligation had accrued and remained unpaid at the time of transfer.

Issue (ii): Whether the transferee's liability under section 26 extends to tax liabilities attached to the transferred business for periods during which the business had earlier been carried on by a prior transferor, where such liability became part of the tax burden of the immediate transferor by reason of an earlier transfer.

Analysis: The liability fastened by section 26 is the liability attached to the business transferred by the immediate transferor, and not merely taxes attributable to that transferor's own period of conduct of the business. When the business passed from the earlier transferor to the intermediate transferee, the tax burden attached to the business became part of the liability of the intermediate transferee. On the subsequent transfer to the respondent, that entire unpaid tax obligation followed the business and became enforceable against the respondent under section 26. The section was therefore applied to the accumulated liability standing against the business in the hands of the immediate transferor.

Conclusion: The transferee is liable for the unpaid tax burden that had attached to the transferred business in the hands of the immediate transferor, including liabilities originating in an earlier period of transfer of that same business.

Final Conclusion: The reference was answered partly against the assessee and partly in favour of the Revenue, with liability upheld for all periods except the period covered by the pre-Act ordinance regime.

Ratio Decidendi: Under a provision imposing transferee liability for unpaid tax on transfer of a business, the decisive question is whether the tax obligation had accrued and remained unpaid at the time of transfer, not whether it had already been assessed or demanded; the liability runs with the transferred business to the extent the statute so provides.

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