TMI Blog1968 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... the first petitioner-firm, M/s. Kailas Oil Mills had already stopped their business and had already disposed of their stock of groundnut and groundnut oil, as well as other furniture and fixtures and thereafter on 8th November, 1960, the machinery was sold by M/s. Kailas Oil Mills to the first petitioner-firm. According to the averments in the petition, the machinery was not in a working condition and the petitioners had to repair and oil the machinery in order to put it in a working condition. M/s. Kailas Oil Mills was being run in the premises taken on lease from one Haji Musa Ismail. After purchasing the machinery, the first petitioner-firm negotiated with the landlord of the premises for the lease of the land on which the machinery of Kailas Oil Mills was installed. The said landlord agreed to lease out the premises to the first petitioner-firm at the rent of Rs. 200 p.m.; and after purchasing the necessary raw materials and employing the technicians and workers, the first petitionerfirm started the manufacturing process after about a month's time from the date of the purchase. After purchasing the machinery, the petitioners applied for a licence under the Central Excises and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers or recovering the amount of tax as per the impugned assessment order. It may be mentioned at this stage that the petitioner had at one stage contemplated going in appeal against the order of the respondent and actually had filed an appeal but since the appeal could not be entertained without, payment of at least half of the assessment dues, viz., Rs. 15,000 and odd, the aggregate amount of dues being Rs. 30,000 and odd, they withdrew the appeal; it is the contention of the petitioners that since this amount had to be deposited, there was no other equally efficacious remedy; and hence the petitioners have withdrawn the appeal and thereafter have filed this special civil application. In this affidavit-in-reply in para. 6, the respondent states that the facts stated in para. 4 of the petition are substantially correct, viz., that M/s. Kailas Oil Mills were being run in the leasehold premises of Haji Musa Ismail and that the landlord of the said premises had created a new lease in favour of the petitioners and that the petitioners were tenants of Haji Musa Ismail and were occupying the premises of Haji Musa Ismail as tenants on a monthly rent of Rs. 200 p.m.; and these statements r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the date of the transfer, what is essential is that there must be either a transfer or any other disposition of the business by the transferor, who must be a dealer, and such transfer or other disposition may be either in whole or in part or even if there is any transfer or disposition of any business, since any change of the ownership either of the whole or of the part might be effected by the transferor or the dealer, then the consequence of such change in the ownership, whole or in part, is that the previous owner has been succeeded in the business or part of the business by any other person. The transferor and the transferee both are jointly and severally liable to pay the tax, including any penalty due from the previous owner in respect of the period up to the time of such transfer, disposition or change. It is clear from this analysis of the section that either the whole or a part of the business as such must be transferred and, secondly, if there is any change in the ownership of the business, then as a consequence of that change in the ownership, the previous owner must be succeeded in the business or part thereof by the transferee. The tests for determining whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 975 of the Reports: "The tests of change of ownership, integrity, identity and continuity of a business have to be satisfied before it can be said that a person 'succeeded' to the business of another." In para. 4 of the Reports, quoting from Simon's Income-Tax, Subba Rao, J., observed: "In particular, argument from decided cases has resulted in the acquisition by the word 'succession' of a somewhat artificial meaning ..... In order to constitute a succession there must be, broadly speaking, a taking over of the whole of the business concerned ... But if a business is taken over as a whole, the fact that minor assets of the business are omitted from the transfer will not prevent there being a succession. The fact that the purchaser already has a similar business is not a material fact in establishing succession. The purchase of a business with a view to closing down would not appear to constitute succession. Other questions which have been used as tests are: (1) whether a similar trade has been carried on after the transfer; (2) whether goodwill or other intangible assets are included in the transfer; (3) whether staff is taken over; (4) the treatment on transfer of the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para. 4 of the petition that after the purchase of the machinery from Kailas Oil Mills, the petitioners negotiated with the landlord of the premises and have become direct tenants of that landlord at the monthly rent of Rs. 200; and in para. 6 of the affidavit-in-reply, the respondent has admitted this statement in para. 4 of the petition to be substantially correct. The learned Assistant Government Pleader, on behalf of the respondent, urged before us, that even if a part of the business is transferred by the previous owner, the liability of the transferee for the sales tax dues of the transferor in respect of the period prior to the date of the transfer is provided for under section 19(4) of the Act. It is to be borne in mind that even though section 19(4) speaks of a transfer or other disposal or change in the ownership of a part of the business, what is contemplated by section 19(4) is that it must be a transfer, disposal or change of business and not merely of the assets of the business. There is a wide distinction between the assets of a business and a part of the business. When the assets of any particular business, viz., machinery, are sold or disposed or transferred, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of 8th November, 1960, bearing stamp No. 1251, there would have been some scope for this argument urged before us on behalf of the respondent; but in view of the reference to the sale deed dated 8th November, 1960, it is clear that the petitioners were stating before the Sales Tax Officer that a purchase had been effected in accordance with the terms of that document of 8th November, 1960. If in law the petitioners had not purchased the business or any part of the business of Kailas Oil Mills, by the mere statement referred to above in annexure B to the petition, it cannot be said that they had succeeded to the business of Kailas Oil Mills or were transferees of the business or any part of the business of Kailas Oil Mills. In our opinion, therefore, the respondent was in error when he treated the first petitioner-firm as the transferee of the business of Kailas Oil Mills and sought to recover the sales tax dues of Kailas Oil Mills in respect of the period prior to the date of the sale of the machinery, viz., prior to 8th November, 1960, from the first petitioner-firm. The liability of the first petitioner-firm could have arisen only if there was a transfer of the business or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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