Local purchase and agency evidence determined sales tax liability, exemption claims failed, and partnership arrears survived dissolution.

Local purchases made at Mangalore by a partner for the firm, followed by despatch of goods and dealings with State tile factories, were treated as sales within Madras and therefore taxable under the Madras General Sales Tax Act. The firm could not establish that it was merely a non-resident dealer or commission agent, so the claimed exemption failed and assessment was not confined to an in-State agent. The Court also noted that sales tax arrears remained a valid partnership liability after dissolution and could be recovered from partnership assets, with partners exposed where legally permissible.

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Issues: (i) whether the transactions in question were outside sales or sales within the State liable to tax under the Madras General Sales Tax Act; (ii) whether the firm could be treated as a non-resident dealer so that assessment had to be made only on its agent in the State, or as a commission agent entitled to exemption; and (iii) whether tax arrears remained recoverable from the dissolved firm and its partners.

Issue (i): Whether the transactions in question were outside sales or sales within the State liable to tax under the Madras General Sales Tax Act.

Analysis: The purchases were made at Mangalore by the partner acting for the firm, the goods were despatched from there, and the dealings were with local tile factories in the State. On those facts, the transactions did not amount to inter-State or outside sales, and the place of sale was within the State of Madras.

Conclusion: The transactions were sales within the State and were taxable under the Madras General Sales Tax Act.

Issue (ii): Whether the firm could be treated as a non-resident dealer so that assessment had to be made only on its agent in the State, or as a commission agent entitled to exemption.

Analysis: The firm had a branch at Mangalore and a head office at Ratnagiri, but the evidence showed that the partner at Mangalore was purchasing and issuing invoices for the firm itself. No material was produced to establish that the firm was merely a commission agent or that it fell within the claimed exemption. The burden of proving exemption was not discharged, and the statutory scheme did not support the contention that assessment could be confined only to an agent under section 14-A.

Conclusion: The firm was not proved to be a non-resident dealer or exempt commission agent, and the assessment was not invalid on that ground.

Issue (iii): Whether tax arrears remained recoverable from the dissolved firm and its partners.

Analysis: The consequences of dissolution under the Partnership Act permit partnership liabilities to be worked out against partnership assets and, where appropriate, against the partners. The State debt represented by the sales tax arrears remained a valid liability of the firm, and the magistrate's order directing recovery of the arrears was held to be legally valid. The challenge to the assessment could not succeed in criminal proceedings in view of the statutory bar discussed by the Court.

Conclusion: The tax arrears were recoverable from the firm and the order fastened on the firm was upheld.

Final Conclusion: The revision failed because the sales were taxable within the State, the claimed non-resident or agency character was not proved, and the partnership liability for arrears survived dissolution.

Ratio Decidendi: Where the evidence shows local purchase and dealing by a partner on behalf of the firm, the sale is within the taxing State; a person claiming exemption as a non-resident dealer or commission agent must prove the exemption; and partnership tax liabilities remain enforceable against partnership assets after dissolution.

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