TMI Blog2006 (2) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... kar Liladhar Company ( firm for short), a registered dealer under the Bombay Sales Tax Act, 1959 ( B.S.T. Act for short) was indebted to M/s. Hemal Traders for a sum of ₹ 10,00,000/-. With a view to secure the said amount, the petitioner was inducted as a partner of firm from 8/4/1978 as a sleeping partner by executing a deed of partnership on 8/4/1978. Under the said partnership deed the petitioner was entitled to share in the profits of the partnership at 34% which was the highest amongst all the partners. The petitioner claims that the fact of his joining the firm as a partner was not intimated to the sales tax authorities as the petitioner was only a formal partner and was not to participate in the business and was not to bear any liability of the firm. It is the case of the petitioner that by a notice dated 27/10/1978 he had sought to retire from the firm with effect from 1/11/1978 and the same was accepted by all the partners and the same was recorded in the deed of retirement executed on 27/6/1979. 3. In the meantime, the Sales Tax Officers from the Enforcement Branch had visited the office of the firm on 26/6/1979 and 2/7/1979 and had taken away the accounts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that there was sufficient corroborative evidence on record to hold that the petitioner who joined the firm as a partner in S.Y. 2034 continued to be a partner of the firm during S.Y. 2035. The demand confirmed for S.Y. 2035 (1-11-78 to 24-6-79) was ₹ 28,18,202/- under the B.S.T. Act and ₹ 44,577/- under the C.S.T. Act. It was further categorically recorded in the said assessment order that the petitioner as a partner was jointly and severally liable to pay the tax along with the firm for S.Y. 2035. 6. The petitioner filed appeals against the assessments for S.Y. 2034 and 2035 and the same were dismissed by the first appellate authority on 30/9/81. While upholding the assessment orders, the first appellate authority recorded a finding that the petitioner had issued several cheques to third parties during S.Y. 2035 as partner of the firm and, therefore, the assessing officer was justified in rejecting the contention of the petitioner that he was not a partner of the firm during S.Y. 2035. 7. Being aggrieved by the aforesaid orders, the petitioner filed Second Appeals before the Maharashtra Sales Tax Tribunal. 8. During the pendency of the above appeals, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n addressed to the Minister for Finance, Government of Maharashtra, Bombay, I have to draw your attention to the provision in Section 18 of the Bombay Sales Tax Act, 1959 which provides that the liability in the case of partnership firm is joint and several. The amount of tax assessed by the Sales Tax Officer (Enforcement) for the period 12.11.1977 to 31.10.1978 aggregates to ₹ 13,33,091/- under the Bombay Sales Tax Law and to ₹ 85,878/- under the Central Sales Tax Law. The Total coming to ₹ 14,18,969/-. Further, in respect of the period during which you were the partner in the firm, the tax amount aggregates to ₹ 12,52,163/- under the Bombay Sales Tax Law and ₹ 77,268/-under the Central Sales Tax Law out of which your share on the basis of the partnership deed comes to ₹ 4,25,735/- ₹ 26,271/-respectively. Further, in case you are able to show that some more sales have been to genuine licence holders and if the Deputy Commissioner is satisfied on this issue than the liability may still further come down. You are requested to apply accordingly. Yours faithfully, Sd/- Commissioner of Sales Tax, Maharashtra State, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/9/1985 denied that there was any settlement and further submitted that no decision has been taken to absolve the petitioner from the liability to pay for the dues of the firm for S.Y. 2034 and 2035. Thereupon, the petitioner made an application for production of the files to establish the settlement before the State Minister for Finance. However, the Tribunal by its order dated 4th February, 1989 rejected the application of the petitioner on the ground, that the issue before the Tribunal was, whether the liability of the firm for S.Y. 2034 and 2035 confirmed by the adjudicating authority as well as the first appellate authority was in accordance with law or not and that the Tribunal was not called upon to go into the question as to whether there was any settlement between the parties and whether the petitioner was relieved of his obligation. Accordingly, the application filed by the petitioner was dismissed by the Tribunal. Thereupon, the petitioner has filed the present petition. 13. Mr. Joshi, learned counsel appearing on behalf of the petitioner submits that in the present case, the petitioner had appeared before the then State Minister for Finance and after considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the then State Minister for Finance accepted the offer of settlement and accordingly, in the light of the above settlement the Commissioner of Sales Tax had issued a letter on 16/1/1984 quantifying the amount due and payable by the firm for the period 8/4/1978 to 31/10/1978 and on the basis of the partnership deed, quantified the amount payable by the petitioner for the said period. These facts could be easily verified on production of the relevant files. However, both the State Government as well as the Sales Tax department have deliberately held back the relevant files with ulterior motives and with fraudulent intentions. Accordingly, Mr. Joshi submitted that in view of the failure on the part of the respondents to produce the relevant files in spite of several orders passed by this Court, adverse inference must be drawn against the respondents and the Writ Petition filed by the petitioner be allowed with exemplary costs. 15. Mr. Joshi further submitted that the plea of the petitioner that he was not a partner of the firm at any time, is now established by the decree passed in Suit No. 2168 of 1980 by the City Civil Court at Bombay on 16/10/1998. The said decree passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the dues of the firm is joint and several. He submitted that although the Commissioner had quantified the share of the petitioner in respect of the liability of the firm for the period from 8/4/78 to 31/10/78 based on the partnership deed, nowhere in the said letter it is stated that there is any order of settlement or any representation that on payment of the amount quantified therein the petitioner will be absolved of all the obligations under the B.S.T. Act. Accordingly, Mr. Nair submitted that there is no merit in the petition and the same is liable to be dismissed. 19. We have carefully considered the rival submissions. The case of the petitioner is that although the liability fastened upon the firm itself is unsustainable in law, since the respondents have erroneously considered the petitioner to be a partner of the firm during S.Y. 2034 and S.Y. 2035 and the entire liability of the firm was sought to be recovered from the petitioner in spite of his retiring from the firm with effect from 1/11/78, the petitioner had approached the State Minister for Finance seeking settlement and the same was accepted as well as implemented and, therefore, the petitioner is abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Sales Tax. It is contended on behalf of the petitioner that the respondents are deliberately withholding the files and, therefore, adverse inference should be drawn against the respondents. We find it difficult to accept this contention because, firstly, as rightly contended by Mr. Nair, if an order for settlement was passed by the State Minister for Finance then, in the ordinary course a copy of the said order would have been forwarded to the petitioner. The petitioner has not produced any order to that effect. Secondly, if at all there was a settlement ordered by the State Government in accordance with law and implemented by the Sales Tax department, then, there is no reason as to why both the authorities would hold back the files. Thirdly, if at all the settlement was genuine and the petitioner had paid the amount in full and final settlement then, immediately on payment of the amount quantified by the commissioner of Sales Tax, the petitioner would have withdrawn the appeals filed by him which were pending before the Sales Tax Tribunal as also the declaratory suit filed by him in the City Civil Court at Bombay. The petitioner, instead of withdrawing the appeals, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire case of the petitioner regarding the settlement is based on the letters dated 16/1/1984 and 15/2/1984 issued from the office of the Commissioner of Sales Tax. Therefore, it is necessary to have a close look at those two letters. At the outset, it may be noted that in none of the above letters there is any reference to the alleged settlement. In the letter dated 16/1/1984, the Commissioner of Sales Tax has referred to the settlement application made to the State Minister for Finance, but it is not stated as to whether any order has been passed by the State Minister for Finance approving the settlement. On the contrary, immediately after referring to the settlement application made by the petitioner, the Commissioner of Sales Tax draws attention of the petitioner to the provisions of Section 18 of the B.S.T. Act whereunder the liability of the partner in the case of partnership firm is joint and several. Thus, from the opening part of the letter dated 16/1/84, it is apparent that the Commissioner of Sales Tax wanted to inform the petitioner that although an application has been made to the State Minister for Finance seeking settlement, such a settlement is impermissible in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31/10/78, whereas the adjudicating authority as well as the first appellate authority had held that the petitioner was partner of the firm for the period from 8/4/78 to 24/6/79. Moreover, the joint and several liability of the petitioner for the said period from 8/4/78 to 24/6/79 was nearly 42 lakhs of rupees whereas the Commissioner of Sales Tax has quantified the liability of the petitioner at ₹ 4,52,006/-. Thus, it is clear that quantification of the liability of the petitioner was done with an intention to facilitate the evil designs of the petitioner in defrauding the revenue. The Commissioner knew that the liability of the petitioner was joint and several and in fact, refers to it in the said letter dated 16/1/84 and thereafter takes a completely contradictory stand by quantifying the liability of the petitioner at 34% by relying upon the partnership deed. It may be noted that the Commissioner of Sales Tax has written the said letter very cleverly and dishonestly, so as to enable the petitioner to argue before the lower authorities that the determination of liability done by the Commissioner of Sales Tax was binding on them and it will not be open to them to recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntend that he has made the payment under the bonafide belief that on such payment, he will be absolved of his liability to pay for the dues payable by the firm. Consequently, the question of refunding the amount paid pursuant to the letter dated 16/1/84 does not arise at all. 28. The contention of the petitioner that the sales tax dues of the firm cannot be recovered from the petitioner, in view of the decree passed in Suit No. 2168 of 1988 by the City Civil Court at Bombay on 16/10/1998 to the effect that the petitioner was not a partner of the firm at any time is also without any merit. It cannot be said that the above decree binds the respondents, because, firstly the respondents were not parties to the Suit No. 2168 of 1988 (see A.I.R. 1970 S.C. 1854) and, therefore, the decree passed in the said suit will not be binding on the respondents. Secondly, the concept of formal partner is foreign to the Partnership Act and unless the findings recorded by the adjudicating authority and confirmed by the first appellate authority to the effect that the petitioner was a partner of the firm are set aside by a competent authority, the sales tax authorities are bound to enforce the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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