The central legal point established in the judgment is that the liability of the transferee under Section 15 of the KST Act is contingent upon the transfer of the entire business, including assets, liabilities, and goodwill.

V. K. SINGHAL, J.

( 1 ) IN all these matters, the controversy being common, they are disposed of by this common judgment.

( 2 ) IN W. P. No. 32428 of 1993, validity of Section 15 of the Karnataka Sales Tax Act, 1957, has been assailed while in W. P. Nos. 1444243 of 1998, the action of the respondents in initiating the proceedings, for recovery from purchaser of plant, land and building has been challenged.

( 3 ) THE facts of the case are that, there was a concern in the name M/s. Mishal Paper Mills (P) ltd. , manufacturing duplex board, to which financial assistance was provided by the State financial Corporation. In respect of default, when the payments were not made by the said company, powers under Section 29 of the State Financial Corporations Act, were invoked and assessments of the assets of the unit were taken. Thereafter, steps were taken by the Financial corporation for auctioning the said unit. The petitioner purchased the land, plant and machinery in auction as the highest bidder. In respect of the recovery of dues of sales tax, proceedings were initiated against the defaulting company and notices were issued to the petitioner treating it as the transferee-company. It is in this background that the provisions of Section 15 of the KST Act and the action of the respondent have been challenged.

( 4 ) SECTION 15 of the KST Act reads as under ;

"tax payable on transfer of business, etc.-- (1) When the ownership of the business of a dealer liable to pay tax or penalty or any other amount under the provisions of this Act, is transferred, the transferor and the transferee shall jointly and severally be liable to pay any tax or penalty or any other amount payable in respect of such business and remaining unpaid at the time of transfer, and for the purpose of recovery from the transferee such transferee shall be deemed to be the dealer liable to pay the tax or penalty or other amount under this Act. "

( 5 ) THERE was a judgment given in Alpha Silicones v. Assistant Commercial Tax Officer (Recovery), Gulbarga [1990 ]77 STC68 (Kar ), where a similar controversy was considered by the single Bench of this Court, it was found that the transferee has purchased the concern in an auction held by the KSFC. The ownership in this context was interpreted as the assets of the business both movables and immovables along with the goodwill of the business. It was held that the KSFC had only acted as an agent for the transferor being a creditor of the dealer, like any other creditor, the steps which have been taken to recover the loan advanced by it to the defaulter of the security of the business assets, it was held that the purchasers are the transferees. Since Section 15 of the KST Act, provides that the liability is on the transferor as well transferee, they being jointly and severally liable for the payment of tax and penalty for any other amount payable under the Act in respect of the business transferred and remaining paid at the time of transfer. It was considered that the transferee gets into the shoes of the transferor and takes over the liability of the transferor and along with the ownership of the business. Since, the provision is made with the object of payment of tax payable by the transferor it was construed that the payment shall be made from transferee.

( 6 ) FROM the perusal of the provisions of Section 15 of the KST Act, it is evident that the liability of the transferee is fixed when the ownership of the business of the dealer is transferred. There can be transfer of the entire business or it can be part transfer of the business. But in a case where "ownership of the business" is transferred, it can refer only to the transfer of the entire business. The transferor and transferee have been jointly and severally made liable for payment of tax, penalty and other dues and by deeming fiction the transferee is deemed to be the dealer liable to pay the said amount. So far as the validity of such provision is concerned, it ma

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