2010 (9) TMI 996 - HC - VAT and Sales Tax

Whether single judge was right in dismissing the appellant s writ petition? Held that - This court following the law laid down in State of Karnataka v. Shreyas Papers P. Ltd. 2006 (1) TMI 243 - SUPREME COURT which has full application to the undisputed facts of this case and when it is not disputed that what was transferred to the writ petitioner by the defaulting person through Rajasthan State Financial Corporation in auction held on March 21 1990 was only the fixed assets then by necessary corollary should allow the appeal by setting aside of the impugned order and in consequence allow the writ petition by issuing the necessary writ as claimed by the writ petitioner in their writ petition.

Summary

Issues:
1. Whether the single judge was right in dismissing the appellant's writ petition?

Analysis:
The judgment pertains to an intra court appeal filed against an order dismissing a writ petition by a single judge. The central issue revolves around the liability of a purchaser of assets from a defaulting person to pay outstanding dues, specifically sales tax. The Supreme Court's decision in State of Karnataka v. Shreyas Papers P. Ltd. and a subsequent decision by the High Court set the legal precedent. The key determination is whether the assets transferred constitute a "fixed assets" or a "running business." If only fixed assets are transferred, the transferee is not liable for the seller's outstanding dues. However, if a running business is transferred, the transferee becomes liable for the dues as if they were the defaulter.

The High Court analyzed the provisions of the Rajasthan Sales Tax Act in comparison to the Karnataka Sales Tax Act to determine the liability of the transferee. The court emphasized that the transfer of the entire business is essential to impose liability on the transferee for the seller's unpaid tax dues. The judgment highlighted the distinction between the transfer of fixed assets and a running business in establishing liability under the relevant tax laws.

In the specific case under consideration, the writ petitioner purchased fixed assets from a defaulting unit through an auction. The Industries Department subsequently demanded payment of outstanding dues from the defaulting entity, which the writ petitioner contested in the writ petition. The court concluded that since only fixed assets were transferred to the writ petitioner, following the legal precedents established in the aforementioned cases, the writ petitioner was not liable for the defaulting entity's dues.

The court's decision to allow the appeal and quash the demands made by the Industries Department was based on the application of established legal principles to the undisputed facts of the case. The court clarified that its ruling was influenced by the lack of distinguishable features in the case and the concession made by the counsels for both parties. Ultimately, the appeal was allowed, and the writ petition was granted in favor of the writ petitioner, setting aside the demands made by the Industries Department.