Sri Ganesh Coconut Company vs Assistant Commercial Tax Officer II, Vizianagaram and Another

P.A. Choudary, J.—One Sana Jagannadha Rao, son of Samba Murthy and his wife Sana Varalaxmi and his nephew Voona Manmadha Rao constituted a firm called Ganesh Cocoanut Company at Vizianagaram. It was registered u/s 12 of the Andhra Pradesh General Sales Tax Act on 1st January, 1983. On 16th March, 1983 a notice was issued u/s 12(e) of the above Act calling upon the abovementioned partnership firm to deposit a sum of Rs. 1,00,000 within one week from the date of receipt of the notice. The said notice contained justification for that demand. The first partner who was the managing partner was also the managing partner of another firm called Uma Sankar Cocoanut Company formed with two of his brothers and the said Uma Sankar Cocoanut Company and the present firm were located in the neighbouring premises at Door Nos. 7-2-28 and 7-2-26 of the same premises. The said Uma Sankar Cocoanut Company of which the first partner was the managing partner was formed earlier and had defaulted in payment of sales tax to the extent of Rs. 80,876. It was therefore thought necessary by the sales tax authorities to call upon the present firm called Ganesh Cocoanut Company to make the above deposit of Rs. 1,00,000 to ensure proper and timely payment of taxes. On receipt of the above notice, a reply had been sent on behalf of the Ganesh Cocoanut Company on 21st March, 1983. In that reply, the second partner, the wife of the first partner and the third partner, his nephew denied knowledge of the fact that Uma Sankar Cocoanut Company of which the present first partner was the managing partner fell in arrears of sales tax to the extent of Rs. 80,876.00. They had also asserted that the present firm had nothing to do with the said Uma Sankar Cocoanut Company. They also pleaded that the first partner has no concern with the losses and the profits of Ganesh Cocoanut Company and that it was presently being managed by the third partner who is the nephew of the first partner. On receipt of this reply, which was obviously sent as an explanation to show cause notice issued by the authorities u/s 12(e) of the Act, the authorities rejected the explanation and confirmed their demand. It is against this order that the present writ petition has been filed.

It is not denied that the facts on which the sales tax authorities have relied upon to make their demand for furnishing security are true and correct. In fact, it cannot be denied that Sri Sana Jagannadha Rao, who was the Managing Partner of Ganesh Cocoanut Company at the time when the present notice was issued was also the Managing Partner of M/s. Uma Sankar Cocoanut Company which defaulted in paying sales tax to the tune of Rs. 80,876.00. Uma Sankar Cocoanut Company was a partnership firm consisting of the brothers of Sana Jagannadha Rao, the present Managing Partner of Ganesh Cocoanut Company. The present firm "Ganesh Cocoanut Company" is also a partnership firm consisting of the said Sana Jagannadha Rao, his wife and his nephew. It would not call for a great legal ingenuity to see through the legal veil drawn across the reality by the said Jagannadha Rao forming partnerships in different names and evading sales tax. Clearly in forming these firms he is acting not in bona fide exercise of his rights of forming partnerships and doing business. He designed and even partly succeeded in forming Uma Sankar Cocoanut Company for the purpose of defrauding public revenue to the extent of Rs. 80,876.00. In order to escape his tax liabilities there, he now promoted this firm. In the circumstances and on the aforesaid facts, we are of the opinion that the authorities are more than justified in demanding the security from the present partnership firm which is no less and no more than an alter ego of the said Jagannadha Rao.

It is the purpose of section 12 to protect the legitimate sales tax revenue from such less than honest traders. The argument that the petitioner-firm had not been given any opportunity to show cause why such security should not have been demanded from him is more formal than substantial. Both the parties have understood the notice issued by the department on 16th March, 1983 as a show cause notice. It is on that basis the petitioner-firm had submitted its explanation without asking for further opportunity and it was on consideration of that explanation the department had imposed this liability on the firm. We see no procedural objection in that course adopted by the department. We, therefore, reject that argument. We are only sorry that this fraudulent petitioner under the cover of the interim orders of this Court had been able to carry on business for the last 4 or 5 years without furnishing the security. Nothing shakes the public confidence in the writ jurisdiction more than the misuse to which it is being put by these English speaking white-collared folk.

We see no merit in this writ petition, and it is accordingly dismissed with costs. Advocate''s fee Rs. 250.

Writ petition dismissed.