Sales tax recovery from mortgaged assets fails absent complete transfer of business ownership under section 17

Arrears of sales tax could not be enforced against mortgaged property where there was no complete transfer of the business or its ownership. The equity of redemption continued to vest in the company, and the mortgagee's possession arose from the mortgage and court-sanctioned arrangements, so the mortgagee or lessee could not be treated as a transferee of the registered dealer's business. On those facts, section 17 of the Punjab General Sales Tax Act, 1948 was not attracted, and recovery from the mortgaged assets in the manner attempted by the authorities was impermissible.

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Issues: Whether the arrears of sales tax could be recovered by attachment and sale of the mortgaged properties or the equity of redemption in the hands of the mortgagee or lessee, and whether section 17 of the Punjab General Sales Tax Act, 1948 applied on the facts.

Analysis: The right asserted by the tax authorities depended on showing that the ownership of the business had been entirely transferred so as to attract section 17. The material facts showed no complete transfer of the business or its ownership: the equity of redemption continued to vest in the company, and the mortgagee's possession arose from the mortgage and the court-sanctioned arrangements. On that footing, the authorities could not proceed against the mortgagee or lessee as if they were transferees of the registered dealer's business. The earlier finding that only the equity of redemption could be reached also negatived the further contention founded on section 17.

Conclusion: Section 17 of the Punjab General Sales Tax Act, 1948 did not apply, and the arrears of sales tax could not be recovered from the mortgaged assets in the manner attempted by the authorities.

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