ORDER
K.B. Navadgi, J.
1. These revision petitions are under section 13(4) of the Karnataka Sales Tax Act, 1957 ('the Act' for short). Since, the parties in both the matters are the same and the question to be determined is the same, these revision petitions are disposed of by this common order. The original order shall be kept in the record of Criminal Revision Petition No. 301 of 1989 and the attested copy thereof shall be retained in the record of Criminal Revision Petition No. 283 of 1989.
2. The record of Criminal Revision Petition No. 301 of 1989 and the record and proceedings in Crl. Misc. No. 4 of 1989 in the Court of the Judicial Magistrate First Class, Siddapur, District Uttara Kannada, and the record in Criminal Revision Petition No. 283 of 1989 and the record and proceedings in Crl. Misc. No. 3 of 1989 in the Court of the Judicial Magistrate First Class, Siddapur, District Uttara Kannada, are examined and perused.
3. The learned counsel representing the petitioners in both the petitions and the learned High Court Government Pleader for the Assistant Commissioner of Commercial Taxes, Dharwad-respondent No. 1; and the State of Karnataka-respondent No. 2, in both the criminal revision petitions, are heard. The learned counsel for respondent No. 3 in Criminal Revision Petition No. 301 of 1989 did not make his submissions.
3. In Criminal Revision No. 301 of 1989, respondent No. 3 is represented and notice to respondent No. 4 has been dispensed with, whereas in Criminal Revision Petition No. 283 of 1989, notice to respondent Nos. 3 and 4 therein has been dispensed with on the submissions made by the learned counsel representing the petitioners therein.
4. The facts in Crl. Misc. No. 4 of 1989 in the Court of the Judicial Magistrate First Class, Siddapur, out of which Criminal Revision Petition No. 301 of 1989 arises, are these :
M/s. Shriram Adike Stores, Siddapur, is a partnership firm ('the firm' for short) that came into existence on 11th January, 1975, as a result of contract of partnership entered into between Basavaraj C. Patil-respondent No. 3, and Sudhabai S. Gokarn-respondent No. 4 in the criminal revision petition. Sudharshan, son of Digambar Bhatkalkar (petitioner No. 1) and Sunil, son of Digambar Bhatkalkar (petitioner No. 2), the brothers, who were minors on 11th January 1975, were admitted to the benefits of the partnership.
The firm is a dealer, registered in Registration Certificate No. 4310328.5. The turnover of the business of the firm for the period from 1st October, 1979 to 18th October, 1980, was assessed and the firm was found due in a sum of Rs. 1,07,403.45 towards sales tax. The demand notice was served on 28th July, 1988, to pay the sales tax assessed. The due date for payment was 19th August 1988. Since the amount due towards sales tax was not paid, the Assistant Commissioner of Commercial Taxes (Asst.), Dharwad, made an application before the Court of Judicial Magistrate First Class, Siddapur, under section 13(3)(b) of the Act to effect the recovery of the amount due towards tax and the sum of Rs. 7,518.23 due in respect of the penalty levied under section 13(2) of the Act, due from the firm. This application was filed on 28th November, 1988, against the firm and its partners-petitioner Nos. 1 and 2 and respondent Nos. 3 and 4. The application was registered in Crl. Misc. No. 4 of 1989 and the learned Judicial Magistrate First Class issued notice to the firm and its partners. Respondent No. 3 filed his objections resisting the application and denying the liability. Among other things, he contended while admitting that he was one of the partners of the firm, that the books of accounts of the firm for the years 1979-80 and 1980-81 had been seized by the Siddapur Police in connection with an enquiry; that therefore, the books of accounts were not produced before the sales tax authorities; and that the sales tax authorities, in the absence of the books of accounts, had assessed the tax according to their whims and fancies. He also contended that the sales tax authorities had launched two prosecutions in respect of the subject-matter of the application in C.C. Nos. 344 of 1983 and 346 of 1983 in the Court of Judicial Magistrate First Class, Siddapur, and that orders had been passed in the said two criminal cases. On the basis of the aforesaid objections, respondent No. 3 sought the dismissal of the application.
Petitioner Nos. 1 and 2 and respondent No. 4 filed a joint statement of objections, contesting the prayer made in the application. They too denied their liability to pay the tax and penalty sought to be recovered. While admitting the existence of the firm, respondent No. 4 contended that she was a sleeping partner of the firm; that both the petitioners were minors at the time of assessment; and that, therefore, they were not liable to pay the amount stated to be due from the firm. They also contended that the assessment made was defective and the firm was not in due to the Government on the count of sales tax. Alternatively, they pleaded, that even if it was held that the amount claimed in the application as due from the firm, that could be recovered only from respondent No. 3 and not from them.
5. The learned Magistrate heard both the sides and by the order dated 15th July 1989, negatived the objections and directed issuance of a warrant for the levy of the amount by attachment and sale of any movable property belonging to petitioner Nos. 1 and 2 and respondent Nos. 3 and 4 under section 421(1)(a) of the Code of Criminal Procedure ('the Code' for short if and when necessary).
6. It is this order that is assailed by the petitioners in Criminal Revision Petition No. 301 of 1989. The petitioners have sought the setting aside of the order in this revision petition.
7. The facts in Crl. Misc. No. 3 of 1989 in the Court of the Judicial Magistrate First Class, Siddapur, out of which Criminal Revision Petition No. 283 of 1989 arises, are these :
The turnover of the business of the firm for the period from 19th October, 1980 to 7th October, 1981, was assessed and the firm was found liable to pay a sum of Rs. 1,54,050 towards sales tax assessed. The demand notice was served on 28th July, 1988. The due date for payment was 19th August, 1988. Since the amount demanded was not paid on or before the due date for payment, the Assistant Commissioner of Commercial Taxes (Asst.), Dharwad, made an application before the Court of Judicial Magistrate First Class, Siddapur, under section 13(3)(b) of the Act to recover a sum of Rs. 1,54,050 the amount due towards the sales tax and a sum of Rs. 10,783.50, the amount of penalty levied under section 13(2) of the Act. This application was taken on file by the learned Judicial Magistrate First Class on 10th January, 1989, in Crl. Misc. No. 3 of 1989. The application was filed against the firm and its partners - petitioner Nos. 1 and 2 and respondent Nos. 3 and 4. The learned Judicial Magistrate First Class issued notice to the firm and its partners.
Respondent No. 3 filed his objections resisting the application, taking the contentions almost identical with the contentions raised by him in Crl. Misc. No. 4 of 1989. Respondent No. 4 and petitioner Nos. 1 and 2 filed their joint statement of objections, adopting and adhering to the contentions raised by them in Crl. Misc. No. 4 of 1989. The Assistant Commissioner of Commercial Taxes filed his written briefs.
8. The learned Magistrate heard both the sides and by the order dated 15th July, 1989, rejected the contentions raised by respondent No. 3 and respondent No. 4 and petitioner Nos. 1 and 2. He directed issuance of warrant for levy of the amount by attachment and sale of any movable property belonging to petitioner Nos. 1 and 2 and respondent Nos. 3 and 4, under section 421(1)(a) of the Code.
9. It is this order that is challenged by the petitioners in Criminal Revision Petition No. 283 of 1989. The petitioners have prayed for setting aside the order made by the Judicial Magistrate First Class.
10. Before adverting to the contentions raised by Sri S. R. Hegde, the learned counsel representing the petitioners in both the petitions, it appears, it would be necessary and advantageous to refer to the undisputed facts and the position in law bearing on the questions that need answer in these petitions.
11. The partnership deed between respondent Nos. 3 and 4 in both the petitions was executed on 11th January, 1975. The copy of the partnership deed placed on record by the petitioners in Criminal Revision Petition No. 283 of 1989 shows that respondent No. 3 in both the petitions and one Arun Bhikkurao Kodkani were carrying on business in partnership at Siddapur under a deed of partnership executed on 6th October, 1973; that Arun expressing his desire to retire from the firm, retired on 24th October, 1974; that respondent No. 4 in both the petitions, offered to be a partner in the firm; that respondent No. 3 agreed to take her as a partner of the firm with a view to strengthen the financial position of the firm under certain terms and conditions; that both respondent Nos. 3 and 4 agreed to admit petitioner Nos. 1 and 2 in both the petitions, who were then aged 11 years and 6 years respectively, to the benefits of the firm only; and that respondent Nos. 3 and 4 were carrying on the business in partnership from 25th October, 1974, by taking over the assets and liabilities of the old firm at book value. A further reading of the partnership deed would show that respondent Nos. 3 and 4 agreed to carry on the trade under the name and style of 'M/s. Shriram Adike Stores, Siddapur'; that the business of the firm was trading in betel-nuts, pepper and cardamom; and that respondent Nos. 3 and 4 agreed to carry on business in any other goods as may be decided between them from time to time. It is clear from the partnership deed that each of the petitioners was given 30 paise share in the net profit with no burden or obligation to share the loss, if any.
12. Thus, as on 11th January, 1975, both the petitioners were minors. The copies of the transfer certificates of Sudharshan (petitioner No. 1) and Sunil (petitioner No. 2), produced by them, would show that Sudharshan was born on 8th December, 1963 and Sunil was born on 12th December, 1967. Petitioner Nos. 1 and 2 attained majority on 8th December, 1981 and 20th December, 1985, respectively. The partnership deed reads that respondent Nos. 3 and 4 agreed that Digambar, the father of petitioners, should be appointed as the Manager of the firm and that he should be paid a remuneration of not less than Rs. 2,000 per annum or more as they (respondent Nos. 3 and 4) may deem fit from time to time.
13. The period of 6 months from 8th December, 1981, the date on which Sudharshan (petitioner No. 1) attained majority would be 8th June, 1982, whereas the said period of 6 months from 20th December, 1985, the date on which Sunil attained majority, would be 20th June, 1986.
14. The turnover of the business of the firm for the period from 1st October, 1979 to 18th October, 1980, was assessed and the firm was found due in a sum of Rs. 1,07,403.45 towards sales tax. The assessment of the turnover of the business of the firm for the period from 19th October, 1980 to 7th October, 1981, was made for the purposes of tax and the firm was found liable to pay a sum of Rs. 1,54,050 towards sales tax. During the aforesaid periods, both petitioner Nos. 1 and 2 were still minors. In other words, they had not attained majority.
15. Demand notices were issued requiring the firm to pay the tax assessed and the same was served on 28th July, 1988. The due date for payment was 19th August, 1988. Since the tax as demanded was not paid on or before the due date for payment, applications were filed by the Assistant Commissioner of Commercial Taxes (Asst.), Dharwad, to recover the tax, as well the penalty levied under section 13(2) of the Act.
16. The firm is in existence. It has not been dissolved. According to the learned counsel for the petitioners, the firm discontinued its business with effect from 1st August, 1981.
17. Section 15(2) of the Act, as substituted by Act 9 of 1964, which has come into force with effect from 1st April, 1964, deals with the liability of a dissolved firm to pay the tax or penalty. It lays down that when a firm liable to pay the tax, or penalty, is dissolved, the assessment of the tax and the imposition of penalty shall be made as if no dissolution of the firm had taken place, and every person who was at the time of dissolution a partner of the firm and the legal representative of any such person who is deceased, shall be jointly and severally liable to pay the tax or penalty assessed or imposed.
18. In Ganesha Narayana Hegde Doddamane v. Commercial Tax Officer : 1976(1)KarLJ233 , this Court held that the partners of a firm would not be personally liable for payment of the sales tax payable by the firm and that the liability would extend to the assets of the firm that may be found in their possession. The position that held the field prior to the insertion of the provisions of section 15(2A) and 15(2B) by Act No. 23 of 1983, which came into force on 18th November, 1983, was that any arrears of tax due by a firm which was not dissolved, could not be recovered by attaching the personal property of the partners and that the recovery could be made attaching the properties of the firm only. There was no provision in the case of a continued firm for recovery of tax or penalty or any other amount under the Act by the firm, from the partners of the firm. The legislature thought of removing this lacuna in the law and, therefore, inserted the provisions of section 15(2A) and 15(2B) of the Act. Under these provisions, every partner of the firm is made liable to pay the tax or penalty or any other amount under the Act by the firm jointly and severally. In the case of any partner who has retired from the firm, his liability is not only for the amount unpaid at the time of his retirement, but also for any amount which became due for the period during which he was a partner. Having regard to the provisions contained in section 15(2A) of the Act, it can be said that where any firm is liable to pay any tax or penalty or any other amount under the provisions of the Act, the firm and each of the partners of the firm are jointly and severally liable for such payment.
19. In the cases on hand, the demand notices were issued to the firm and its partners in the prescribed form No. 6. A perusal of the copies of the demand notices produced before the Judicial Magistrate First Class, Siddapur, along with the applications would show that the total tax assessed and the balance of tax payable by the firm after adjusting the tax paid has been shown therein. The balance of tax mentioned in the demand notices was payable within 21 days from the date of the receipt of the demand notices. It is clear from the applications that the demand notices were served on 28th July, 1988.
20. It is not the case of the petitioners and respondent Nos. 3 and 4 in both the petitions that the demand notices were not served on the firm and on them or that they made payment of the tax as demanded on or before the due date.
21. Thus, the resultant position that emerges from the aforesaid facts is, they committed default in the payment of tax within the prescribed time. If any default is made in the payment of tax within the prescribed time, the whole of the amount on the date of default becomes a charge on the properties of the defaulter and the same can be recovered by any one of the modes provided in the Act. The modes of recovery of tax provided under the Act are under section 13(3)(a), 13(3)(aa), 13(3)(b) and section 14. The Assistant Commissioner of Commercial Taxes (Asst.), Dharwad, in the cases on hand, resorted to the mode of recovery of tax as provided under section 13(3)(b) of the Act by making applications to the jurisdictional Magistrate with a prayer to recover the arrears as if it was a fine imposed by the court.
22. In both the Criminal Miscellaneous cases, respondent No. 3 and respondent No. 4 and petitioner Nos. 1 and 2 sought to resist the applications on the ground that the assessment orders were invalid and unsustainable. But it is not their case, that being dissatisfied with the assessment orders, they or any of them preferred any appeal against the same as provided in the Act.
23. Having regard to the provisions contained in sections 32 and 35 of the Act and the position in law based on the interpretation of the said provisions, as settled by a series of decisions, respondent No. 3 and respondent No. 4 and the petitioners cannot challenge the validity of assessment orders. In my opinion, the learned Magistrate has rightly negatived the challenge. A Magistrate acting under section 13(3)(b) has no jurisdiction or competence to decide the validity or otherwise of an assessment. True, a Magistrate exercising the powers under section 13(3)(b) has to be treated as a persona designata and not as an inferior criminal court. The bar imposed by section 32 of the Act to go into the question of validity of assessment operates only on criminal courts and not on Magistrates exercising the power under section 13(3)(b). But the section creates a statutory fiction that a tax assessed or any amount due under the Act is a fine imposed by the Magistrate. In view of this fiction, the Magistrate cannot go into the legality or validity of the tax assessed.
24. Having covered the ground so far, I now proceed to refer to the contention urged on behalf of the petitioners in support of the prayer made in the two criminal revision petitions for setting aside the orders.
25. Sri S. R. Hegde, the learned counsel for the petitioners, submitted quite elaborately and at the same time insistently that the petitioners were minors when the firm was constituted; that they were admitted to the benefits of the firm only; and that, therefore, notwithstanding the provisions contained in section 15(2A) of the Act, they cannot be held liable either severally or jointly with respondent Nos. 3 and 4 for payment of the tax and the penalty.
26. A reference to the provisions contained in the Indian Partnership Act ('the Partnership Act' for short) is necessary to decide the validity of the contention. An answer to the contention inevitably involves answers to the two questions, namely, whether, on the date when the liability of the firm to pay tax became enforceable and on the date when the tax became due, petitioner Nos. 1 and 2 were partners of the firm, and, if so, whether they are personally liable to pay the amount claimed in the applications.
27. Section 30 of the Partnership Act is the relevant and material provision to decide the validity of the contention and to answer the two questions. Section 30 of the Partnership Act reads :
'30. (1) A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.
(2) Such minor has a right to such share of the property and of the profits of the firm as may be agreed upon, and he may have access to and inspect and copy any of the accounts of the firm.
(3) Such minor's share is liable for the acts of the firm, but the minor is not personally liable for any such act.
(4) Such minor may not sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm, and in such case the amount of his share shall be determined by a valuation made as far as possible in accordance with the rules contained in section 48 :
Provided that all the partners acting together or any partner entitled to dissolve the firm upon notice to other partners may elect in such suit to dissolve the firm, and thereupon the court shall proceed with the suit as one for dissolution and for settling accounts between the partners, and the amount of the share of the minor shall be determined along with the shares of the partners. (5) At any time within six months of his attaining majority, or of his obtaining knowledge that he had been admitted to the benefits of the partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm, and such notice shall determine his position as regards the firm :
Provided that, if he fails to give such notice, he shall become a partner in the firm on the expiry of the said six months. (6) Where any person has been admitted as a minor to the benefits of partnership in a firm, the burden of proving the fact that such person had no knowledge of such admission until a particular date after the expiry of six months of his attaining majority shall lie on the persons asserting that fact.
(7) Where such person becomes a partner, -
(a) his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership, and
(b) his share in the property and profits of the firm shall be the share to which he was entitled as a minor.
(8) Where such person elects not to become a partner, -
(a) his rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice,
(b) his share shall not be liable for any acts of the firm done after the date of the notice, and
(c) he shall be entitled to sue the partners for his share of the property and profits in accordance with sub-section (4).
(9) Nothing in sub-sections (7) and (8) shall affect the provisions of section 28.'
28. This section deals with the position of a minor under our law of Partnership. Sections 247 and 248 in the Indian Contract Act were the provisions corresponding to section 30 of the Partnership Act.
29. The aforesaid provisions laid down that a minor may be admitted to the benefits of a partnership and that a minor becomes personally liable for the obligations of the firm if he does not repudiate the partnership within a reasonable time after attaining his majority.
30. The legal position of a minor who is admitted to the benefits of a partnership was stated by the Privy Council in Sanyasi Charan Mandal v. Krishnadhan Banerji ILR (1922) 49 Cal 560 at page 570; AIR 1922 PC 237 at pages 239-240, after considering the material provisions of the Contract Act, which at that time contained the provisions relevant to the law of partnership, thus :
'A person under the age of majority cannot become a partner by contract ....., and so according to the definition he cannot be one of that group of persons called a firm. It would seem, therefore, that the share of which S. 247 speaks is no more than a right to participate in the property of the firm after its obligations have been satisfied.'
31. The experience showed that sections 247 and 248 of the Indian Contract Act were defective in many a respect. They did not fix any definite period within which a minor was required to give notice of his intention to leave the firm. They did not provide expressly that the minor on attaining majority became a partner if he did not repudiate his connection with the firm within that time, though this principle was implicit by implication in section 248.
32. Our Contract Act does not lay down fully the rights and remedies of a minor-sharer as such.
33. It was with a view to treat the position of a minor in an exhaustive manner that section 30 of the Partnership Act came on the statute book.
34. The principles enunciated in the section are : (i) a person, who is a minor according to the law to which he is subject, cannot be a partner in a firm, but with the consent of all the partners for the time being, he may be admitted to the benefits of partnership; (ii) a minor so admitted has a right to such share of the property and of the profits of the firm as may be agreed upon and can have access to and inspect and copy any of the accounts of the firm; (iii) he will not be personally liable for the debts and obligations of the firm though his share in the property and profits of the firm will be liable for the same; and (iv) he can bring suit for accounts or payment of his share in the property or profits of the firm when he intends to sever his connection with the firm, but not otherwise. The principles embodied in section 30(5) of the Partnership Act, extracted earlier, are, within six months of his attaining majority or when he comes to know of his being admitted to the benefits of the partnership, whichever date is later, he has to elect whether he wants to become a partner in the firm or wants to terminate his connection with the firm. He may give public notice of his election. If he gives such a notice, the notice would determine his position as regards the firm. The proviso to section 30(5) lays down that, if he fails to give any notice within the period mentioned in the enacting part of sub-section, he will be deemed to have elected to become a partner of the firm.
35. Under sub-section 7(a) of section 30 of the Partnership Act, where a minor becomes a partner, his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership. Under section 30(7)(b), his share in the property and profits of the firm shall be the share to which he was entitled as a minor. Under sub-sections (5) and (7) of section 30 of the Partnership Act, if during the continuance of a partnership, a person who was admitted at the time when he was a minor to the benefits of the partnership, did not within six months of his attaining majority or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, elect not to become a partner, he would become a partner after the expiry of the said period. Thereafter his rights and liabilities would be the same as those of the other partners as from the date he was admitted to the partnership.
36. In the cases on hand, both the petitioners were admitted to the benefits of the partnership with the consent of respondent Nos. 3 and 4, the partners. They could not have become partners on 11th January, 1975, in view of section 30(1) of the Partnership Act. It is not the case of the petitioners or either of them that after attaining majority they/he exercised the option of becoming a partner in the firm or of severing their/his connection with it. The petitioners or either of them did not give any notice contemplated by section 30(5) of the Partnership Act. In that view of the matter, it can be said that they will have to be deemed to have elected to become partners of the firm. I, therefore, hold that both on the dates on which the liability of the firm to pay tax became enforceable and on the dates on which the amounts covered by the demand notices became due, they were partners of the firm.
37. If answer to the first question has to be as above, as it ought to be, the answer to the second question will have to be necessarily against the petitioners. The firm is in existence. Both the petitioners are its partners. The firm is liable to pay the tax and the penalty. Each of the petitioners is liable to pay the amounts personally and jointly with the firm and other partners.
38. Sri S. R. Hegde maintained that even if it is assumed or held for the sake of arguments that on the dates on which the tax liability became enforceable and on the dates on which the amounts covered by the demand notices became due, the petitioners were partners of the firm, they cannot be held liable for the liability incurred by the firm during the years 1979-80 and 1980-81 during which period admittedly, they were minors. He maintained that this would be so notwithstanding the provisions contained in section 30(7) of the Partnership Act and section 15(2A) of the Act.
39. In State of Madhya Pradesh v. Shyama Charan Shukla : [1972]1SCR861 , depended upon by the petitioners, the respondent had challenged certain orders relating to assessment of sales tax in a writ petition filed in the Madhya Pradesh High Court. The respondent had held mineral concessions for extracting manganese ore in respect of mining areas in the districts of Balaghat, Chhindwara, Bhandara and Nagpur in the erstwhile State of Madhya Pradesh, i.e., before the reorganisation of the State. Under section 4 of the Central Provinces and Berar Sales Tax Act, 1947, which was then applicable, a dealer was liable to pay tax on all the sales if the gross turnover exceeded the limit specified in section 4(5) and he was required under section 8 to get himself registered as a dealer. The material period in the case was from October 1, 1953 to December 26, 1958. Between October 1, 1953 and October 31, 1956, Nagpur and Bhandara districts were in the State of Madhya Pradesh and between November 1, 1956 and December 26, 1958, the aforesaid two districts came to be included in the new State of Maharashtra. According to the appellant, the respondent had effected sales of manganese ore from the mines during the periods mentioned above without registering himself as a dealer in spite of the fact that the turnover had exceeded the prescribed limit. A number of notices had been issued by the Sales Tax Officer calling upon the respondent to get himself registered and to show cause why he should not be assessed under section 11(5) of the Central Provinces and Berar Sales Tax Act, 1947. This Act had been subsequently repealed and had been replaced by the Madhya Pradesh General Sales Tax Act, 1958 ('the Act of 1958'). Towards the end of the year 1958, the respondent had applied for registration to the Sales Tax Officer, Chhindwara Circle, exercising jurisdiction over the Balaghat and Chhindwara districts. On December 27, 1958, a registration certificate had been granted to him. Thereafter, the Sales Tax Officer had issued a notice to the respondent under sections 17, 18 and 19 of the Act of 1958 and had proceeded to assess the respondent for the period 1st October, 1955 to 26th December, 1958. The amount assessed had come to Rs. 31,580.42 and a penalty of Rs. 5,000 had been imposed. The respondent's appeal to the Appellate Assistant Commissioner of Sales Tax and to the Board of Revenue had been dismissed at the admission stage itself, since the respondent had not deposited the past dues of the tax and the penalty demanded of him as required by the Central Provinces and Berar Sales Tax Act, 1947 and the Act of 1958. The order of assessment dated April 23, 1960, had been challenged by the respondent.
Interpreting the scope of section 78 of the States Reorganisation Act, 1956, which provided 'the right to recover arrears of any tax or duty on property, including arrears of land revenue shall belong to the successor State in which the property is situated and the right to recover arrears of any other tax or duty shall belong to the successor State in whose territories the place of assessment of that tax or duty is included', the Supreme Court held that the word 'arrears' in section 78 should not be given a narrow meaning and that the word 'arrears' in respect of tax has been used in the sense dues or what has become due by way of tax and that it did not depend on assessment proceedings or quantification of the amount. The Supreme Court held that section 78 applied even in relation to sales tax for a pre-reorganization period which had not yet been the subject of assessment proceedings.
40. The principles laid down by the Supreme Court are that it is a part of the general scheme of all the sales tax laws that taxes become due the moment a dealer makes either purchases or sales which are subject to taxation and the obligation to pay the tax arises. The Supreme Court further held that although the tax liability which comes into existence cannot be enforced till the quantification is effected by assessment proceedings the liability for payment of tax is independent of the assessment. The liability to pay tax is a present liability. When assessment of tax and penalty has been made and demand notice is issued, the tax and penalty become due. Applying the principles laid down by the Supreme Court in the case of State of Madhya Pradesh v. Shyama Charan Shukla [1972] 29 STC 215, it can be said that the liability to tax claimed from the firm and its partners under the demand notices was incurred by the firm during the period covered by the assessment proceedings and the obligation to pay the tax arose at that time. But the tax liability which came into existence during the years 1979-80 and 1980-81 was not enforceable till the quantification was effected by the proceedings. Though the liability incurred by the firm for payment of tax was independent of the assessment proceedings, the fact remains that the liability became enforceable only after the quantification was effected by assessment proceedings. Indeed, it is true, the petitioners were minors when the firm incurred the liability to pay tax and when the obligation to pay arose. But in view of my conclusion that the petitioners will have to be deemed to become partners of the firm on the expiry of the period of six months stated in section 30(5) of the Partnership Act and in view of the provisions contained in section 30(7) of the Partnership Act, the petitioners cannot escape the personal liability to pay the tax. At the time the tax liability became enforceable, i.e., after the conclusion of the assessment proceedings and at the time when the demand notices were served and the amount claimed in the applications became due, the petitioners were partners of the firm. Viewed from any angle, it is difficult to exonerate the petitioners from the personal liability to answer the claims made in the two applications.
41. Added to that, section 15(2A) of the Act which came into force with effect from 18th November, 1983, clearly lays down that where any firm is liable to pay any tax or penalty or any other amount due under the Act, the firm and each of the partners of the firm shall be jointly and severally liable for such payment.
42. I, therefore, hold that the orders impugned in these petitions are perfectly valid, legal and proper, calling for no interference. The petitions cannot succeed and, therefore, they are dismissed.
Petitions dismissed.