Successor Undertaking Liability barred for pre-nationalisation sales tax arrears; parallel assessments for the same liability were impermissible.

A special nationalisation statute with an overriding clause preserved pre-appointed-day tax liabilities against the erstwhile company, so the successor undertaking could not be proceeded against for sales tax arrears relating to transactions before the appointed day. The court further held that separate assessment orders for the same assessment year against both the erstwhile company and the successor undertaking were impermissible because the statutory scheme identified only one proper debtor for the same liability. The impugned recovery action and parallel assessments were therefore invalid.

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Issues: (i) Whether the petitioner-company, as the successor undertaking, could be fastened with sales tax liability for the period prior to the appointed day under the nationalisation statute; (ii) Whether simultaneous assessment orders for the same assessment year against both the erstwhile company and the petitioner-company were sustainable.

Issue (i): Whether the petitioner-company, as the successor undertaking, could be fastened with sales tax liability for the period prior to the appointed day under the nationalisation statute.

Analysis: The liability for periods prior to the appointed day was governed by the special takeover and nationalisation enactment, under which liabilities relating to transactions before the appointed day were to remain the liability of the concerned company and were not enforceable against the Central Government or the undertaking. The statute also contained an overriding clause giving it precedence over inconsistent provisions in other enactments. In that statutory framework, the tax authorities could not proceed against the petitioner-company for arrears referable to a period anterior to 1 April 1975.

Conclusion: The demand against the petitioner-company for pre-appointed-day sales tax liability was not sustainable and was held to be without jurisdiction.

Issue (ii): Whether simultaneous assessment orders for the same assessment year against both the erstwhile company and the petitioner-company were sustainable.

Analysis: The assessment machinery did not contemplate parallel assessments for the same assessment year and the same transactions against two different entities in respect of the same tax liability. Once the statutory scheme identified the proper debtor for the pre-appointed-day liability, proceeding against both entities by separate assessment orders for the same year was impermissible.

Conclusion: The parallel assessment orders were held to be illegal.

Final Conclusion: The writ petition succeeded, and the impugned recovery action could not be maintained against the petitioner-company.

Ratio Decidendi: Where a special nationalisation statute with an overriding clause preserves pre-appointed-day liabilities against the erstwhile company, the successor undertaking cannot be proceeded against for those prior liabilities, and parallel assessments for the same liability are impermissible.

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