1986 (12) TMI 350 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 19 of the Orissa Sales Tax Act regarding the liability of a transferee in a business transfer.

Analysis:
The case involved a reference under section 24(1) of the Orissa Sales Tax Act regarding the interpretation of section 19 of the Act. The main question referred to the High Court was whether the Additional Sales Tax Tribunal was correct in not treating the assessee as an entire transferee of a business under section 19(1) of the Act. The dispute arose when the Sales Tax Officer held the opposite party liable for payment of sales tax as a transferee of the business of a registered dealer, M/s. Orissa Modern Emporium. The opposite party, who carried on business in the same line as the dealer, appealed the assessment, which was eventually set aside by the Additional Sales Tax Tribunal, leading to the references to the High Court.

The crux of the argument revolved around the interpretation of section 19 of the Act, which deals with the transfer of business ownership and the liability of the transferee. The Tribunal, in its decision, relied on precedents and held that for section 19 to apply, there must be an entire transfer of the business from the predecessor to the successor. Without evidence of the transfer of goodwill, assets, and liabilities, it was deemed that the opposite party was not a transferee of the entire business of M/s. Orissa Modern Emporium.

The provisions of section 19(1) of the Orissa Act were compared to similar provisions in other state Acts, emphasizing that the liability on the transferee arises only when the entire business is transferred. The Tribunal's decision was supported by legal precedents, including a Patna High Court case, which highlighted the need for a complete transfer of the running concern, including assets, goodwill, and properties, for section 19 to be applicable.

As a fact-finding authority, the Tribunal concluded that there was insufficient evidence to prove the complete transfer of the business, except for the sale of stock-in-trade. Therefore, the question of law was answered in favor of the opposite party, indicating that the liability did not extend to the transferee based on the available evidence.

Additionally, the High Court highlighted the requirement for any tax liability to remain unpaid at the time of transfer for the transferee to be held responsible. Since there was no evidence of unpaid taxes from M/s. Orissa Modern Emporium, and the assessment proceedings were initiated against the opposite party, the liability of the transferee was not established conclusively.

In conclusion, the High Court answered the reference in the affirmative, supporting the Tribunal's decision, and refrained from awarding costs for the references.