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Judgment
Ganapatia Pillai, J.—This is an application under Art. 226 of the Constitution for the issue of a writ of certiorari to quash the order of the
Deputy Commercial Tax Officer, Park Town, Madras in Re. 521/57-B1 dated 30th August 1957 and the order of the Board of Revenue, Madras
in B. P. Rt. 2208 dated 24th October 1958. The two orders, which are sought to be quashed, relate to records of assessment of sales-tax for the
years 1948-49 and 1949-50 payable by All India Trading Co. The facts are these. All India Trading Co., was a business conducted by A. N.
Purushothama Raju as the sole proprietor. This business was transferred to the petitioner by a conveyance dated 5th October 1956. This
conveyance transferred to the petitioner the good-will, quota licences and all other benefits and liabilities which Purushothama Raju had in
connection with this business. Under the document of purchase there was a specific agreement between the transferor and the transferee as to
what liabilities of the transferor should be discharged by the transferee. Schedule I attached to the document mentioned the liabilities which the
vendor himself should discharge out of the sale consideration and the rest of the liabilities it was agreed should be discharged by the vendee and the
vendor agreed to indemnify the vendee for such liabilities not disclosed in Schedule I but paid off by the vendee. I may straightaway mention that
the sales-tax liability of the business for the two years in question is not mentioned in Schedule I as one of the liabilities to be discharged by the
transferor. The arrears of sales-tax due for 1948-49 was Rs. 3836-4-0 and the sales-tax due for 1949-50 was Rs. 1218-1-9. Attempts were
made by the department to collect these arrears from the previous owner Purushotham Raju and even prosecutions were launched for the non-
payment of the tax but the effort failed on the ground that Purushotham Raju''s whereabouts were not known and he could not be produced before
the criminal Court. The arrear demanded from the petitioner represented what remained after part payments were made by the original assessee.
The criminal proceedings against the original assessee were ultimately dropped on 10th December 1955. It appears two charge-sheets had been
laid against the original assessee and both the prosecutions ended for the same reason that the whereabouts of the original assessee could not be
traced. By a notice dated 17th April 1957 the Deputy Commercial Tax Officer, Park Town, Madras, called upon the petitioner to pay the arrears.
The petitioner denied his liability to pay the arrears and appealed to the Commercial Tax Officer and also to the Board of Revenue. Both these
authorities declined to grant the request of the petitioner and hence the present petition to quash the orders.
The main ground on which the orders are attacked is that the person liable to pay the tax was Purushotham Raju and there is no provision either
in the Madras General Sales Tax Act or in the Rules framed thereunder to collect such arrears from the petitioner who has purchased the business
from Purushotham Raju. In the view I take of the liability of the petitioner to pay all the debts of the business according to the deed of conveyance
it may not be necessary to decide the question of law argued before me. Yet I shall indicate my opinion for the sake of completeness.
Rule 21-A which is relied on to enable the department to collect the tax from the purchaser of the business is attacked by Mr. P. C.
Parthasarathi Iyengar as ultra vires the powers of the Government in making rules under the Act. The Act, with which we are concerned, is the Act
of 1939 as amended from time to time and not Act I of 1959 which came into force subsequent to the taking of steps for collection of the arrears
from the present petitioner. Rule 21-A reads thus:
When the ownership of the business of a dealer liable to pay the tax under the Act is entirely transferred, any tax payable in respect of such
business and remaining unpaid at the time of the transfer shall be recoverable from the transferor or the transferee as if they were the dealers liable
to pay such tax, provided that the recovery from the transferee of the arrears of taxes due prior to the date of the transfer shall be only to the extent
of the value of the business he obtained by transfer. The transferee shall also be liable to pay tax under the Act on the sales of goods effected by
him with effect from the date of such transfer and shall within 30 days of the transfer apply for registration or licence, as the case may be, unless he
already holds a certificate of registration or licence as the case may be.
The material part of this rule, which gives power to the State Government to collect sales tax due by the vendor from the purchaser of that
business, even though the period for which the tax was assessed and levied related to a point of time before the purchase is reproduced as S. 27 of
Madras Act I of 1959. Mr. Parthasarathi Iyengar learned Counsel for the petitioner founded an argument upon this circumstance and contended
that it was only after it was realised that R. 21-A was ultra vires the powers of the State Government in making rules that S. 27 of Act I of 1959
came to be enacted. This argument merely begs the question and does not, in my opinion, furnish the answer to the question.
But Mr. Parthasarathi Aiyangar contended that having regard to the language of S. 19 of the Act the rule in question (R. 21-A) must be held to
be beyond the powers of the State Government. S. 19 provides for the Government making rules to carry out the purposes of the Act, that is,
Sub-S. 1 of S. 19. Then follows Sub-Sec. 2 in which there are numerous clauses indicating the particular topic with reference to which rules could
be framed. It is well known that the enumeration of these topics does not limit the generality of the power conferred by Sub-S. (1) of S. 19.
Indeed the language of Sub-S. (2) of S. 19 is clear because it reads thus:
In particular and without prejudice to the generality of the foregoing power, such rules may provide for (a)...(b)...(c)...etc.
The learned Additional Government Pleader contends that the construction of any clause of Sub-S. (2) of S. 19 should not lead to the inference
that the non-mention of a particular subject in Sub-S. (2) would derogate from the generality of the powers given in S. 19 (1) to make rules to
carry out the purposes of this Act. In particular he contended that the power to make rules for collection of tax which could be lawfully levied
under the Act is a power which is ancillary to the authority to levy tax, and consequently, if there is authority in the Government to frame rules for
the purpose of assessment and levy of tax, that authority should impliedly carry with it the ancillary power to frame rules for collection of the tax
lawfully levied. Apart from the force of this argument which I am not ready to accept, let me now examine Cl. (c) of S. 19 (2) which relates to
assessment of tax in the case of business which have changed ownership. S. 19 (2) (c) deals with the assessment to tax of business which are
discontinued or the ownership of which has changed. Mr. Parthasathi Iyengar argued that the tax levied under the Madras General Sales Tax Act
is levied on the individual, who carries on the business, and consequently the liability to pay the tax is that of the individual, and that such liability
could not be enforced against another individual, unless there was privity or devolution of interest. The principle upon which sales are taxed under
the Madras General Sales-Tax Act may not admit of such a simple categorisation. What is taxed under the Act is really the transaction of sale and
that is the subject matter of the tax. But who is the person that is called upon to pay the tax may vary in individual instances. In some cases (I need
not cite instances as they are too obvious) the sales tax is payable only by the purchaser (if he is also a dealer) and in other cases it is payable by
the trader, who sells the article. Nonetheless it may not be correct to say that in every instance of payment of sales tax the incidence of the taxation
falls only upon the trader who is responsible for the transaction of sale and not upon the successor or the trader who was responsible for the
transaction. It would refer to S. 3 (1) the Act which provides for assessment of tax on annual turnover. Take for instance the case where in the
middle of the year a business is transferred. Can the successor or the purchaser of the business contend that he would not be liable for the
assessment of that year on the ground that for part of the period he was not the person who was the owner of the business ? Mr. Parthasarathi
Aiyangar was not able to point out any provision in the Act which gave exemption from liability for the purchaser for payment of tax for the year in
which he purchased the business. Apart from the question whether S. 19 (2) (c) would cover a case of collection of taxes already levied, from the
purchaser of the business, I would think with some hesitation that S. 19 (1) would give power to the State Government to make the rule in question
as the collection of the tax already lawfully levied under the Act is one of the purposes of the Act and the Government have power to make rules to
carry out all the purposes of the Act. Mr. Parthasarathi Iyengar contended that the liability to pay tax does not attach itself to the business as the
liability to pay land revenue attaches itself to the land, and consequently in the absence of any privity between the person who was liable to pay the
tax and the purchaser, the tax due could not be levied and collected from the purchaser. This argument does not find support from the language of
the conveyance deed in this case, because on a true construction of the deed I hold that the transferee undertook to pay not only Schedule I
liabilities but also other liabilities. The only difference between Schedule I liabilities and other liabilities was that the former were acknowledged by
the transferor and had been paid from out of the price while other liabilities were not provided for out of the price. This is not therefore a case
where the petitioner is being called upon to pay tax for which he has not under taken liability by the deed of conveyance. That finding will be
sufficient to dispose of the claim of the petitioner based upon the illegality of the demand made upon him. The writ petition is therefore dismissed
with costs. The rule nisi is discharged. Advocate''s fee, Rs. 100.