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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE V RAMASWAMI
R. D. Fernandes, In Re - Appellant
Versus
. - Respondent
Case No : Petition under sections 435 and 439
Decided On : 24 October 1956
MADRAS GENERAL SALES TAX ACT - SECTION 16-A - VALIDITY - ASSESSMENT - VALIDITY - CRIMINAL COURT - JURISDICTION - OUTSIDE SALES - NON-RESIDENT DEALER - DISSOLUTION OF FIRM - LIABILITY OF PARTNERS.
Fact of the Case:
The Mangalore Tile Agency, a partnership firm dealing in tiles and ridges, failed to produce their accounts for check and was assessed to tax on a turnover of Rs. 2, 23, 651-8-0 for 1950-51 to the best of the Deputy Commercial Tax Officer's judgment. The firm did not pay the tax within the time allowed and a sum of Rs. 945-6-5 was in arrears. The partners were prosecuted under section 15(b) of the Madras General Sales Tax Act for non-payment of arrears.
Finding of the Court:
The court held that the transactions in question were not outside sales but were sales within the State of Madras liable to pay tax under the Madras General Sales Tax Act. The court also held that the firm could not be described as a non-resident dealer and that the assessment was validly made on the firm. The court further held that the State debt was recoverable from and out of the partnership assets even after dissolution and in the hands of the partners or otherwise.
Issues: 1. Whether the transactions in question were outside sales or sales within the State of Madras liable to pay tax under the Madras General Sales Tax Act? 2. Whether the firm could be described as a non-resident dealer and the assessment should have been made only on its agent in the State under section 14-A of the Act? 3. Whether the State debt was recoverable from and out of the partnership assets even after dissolution and in the hands of the partners or otherwise?
Ratio Decidendi: 1. The court applied the considerations set out in the Bench decision in State of Madras v. Ramalingam and Co. to hold that the transactions in question were not outside sales but were sales within the State of Madras liable to pay tax under the Madras General Sales Tax Act. 2. The court held that the firm could not be described as a non-resident dealer because there was no proof adduced to show that it was merely a commission agent and that it did not apply for licensing and exemption under section 8 of the Act. 3. The court held that the State debt was recoverable from and out of the partnership assets even after dissolution and in the hands of the partners or otherwise, as provided for in sections 45 to 55 of the Indian Partnership Act.
Final Decision: The court dismissed the criminal revision petition.
1. This is a criminal revision directed against the conviction and sentence of the learned District Magistrate of South Kanara in S.T.C. No. 120 of 1956.
2. The facts are : The Mangalore Tile Agency, Bunder, Mangalore reported a "nil" gross turnover and a net turnover of Rs. 1, 11, 825-12-0 in its "A" return submitted for the year ending 31st March, 1951.
3. This firm is a partnership concern dealing in tiles and ridges. Its two partners are Messrs. A. M. Fernandes and R. D. Fernandes, who are related to each other. The head office of the firm is stated to be at Ratnagiri in Bombay State and Sri R. D. Fernandes is stated to be in charge of that head office. The branch at Bunder, Mangalore, is under the management of the other partner Sri A. M. Fernandes. There have been misunderstandings between the two partners. It is stated by A. M. Fernandes that he ceased to be a partner of the firm with effect from 1st October, 1951.
4. Inasmuch as the dealers failed to produce their accounts for check, the Deputy Commercial Tax Officer issued a rule 9 notice calling upon them to show cause why they should not be assessed to tax on a turnover of Rs. 2, 23, 651-8-0 for 1950-51 to the best of his judgment on the data furnished therein.
5. In response to this notice A. M. Fernandes appeared without accounts and gave a written statement to the Deputy Commercial Tax Officer to the effect that he was purchasing tiles and ridges from different tile factories at Mangalore and shipping the same partly to the head office at Ratnagiri and partly to different ports in Bombay State against orders, that all these purchases and export sales were made by him under instructions from the other partner, R. D. Fernandes, that he used to pay the purchase price to the factories concerned and receive the major portion of the sale proceeds, that the sale invoices in respect of all export sales made against orders were signed and issued by him in the name of the firm, that the firm has not maintained any accounts except purchase bills and one sale invoice book and that they were with R. D. Fernandes from 1st October, 1951, and that the "A" return submitted by him for 1950-51 included all the export sales made by him during the year and that the turnover shown therein was quite correct.
6. On account of this A. M. Fernandes expressing inability to produce the accounts for the reasons stated above, another notice was issued to R. D. Fernandes at Ratnagiri to produce the accounts. But no accounts were produced and this R. D. Fernandes seems to have directed this A. M. Fernandes to produce the accounts which naturally in the face of the assertions of A. M. Fernandes proved to be futile.
7. Therefore, the Deputy Commercial Tax Officer determined that the taxable turnover for 1950-51 was Rs. 1, 11, 825-12-0 to the best of his judgment on the data before him and found the tax due as Rs. 1, 825-6-5, the tax paid as Rs. 330 and the tax to be paid as Rs. 1, 495-6-5.
8. This Mangalore Tile Agency did not pay the tax within the time allowed as per notice in Form B served on the first partner on 9th July, 1952, and on the second partner on 23rd April, 1952. A sum of Rs. 550 was adjusted from the refund due to the firm for the year 1951-52 and a sum of Rs. 945-6-5 was in arrears. The prosecution in S.T.C. No. 120 of 1955 under section 15(b) of the Madras General Sales Tax Act is as regards the non-payment of arrears.
9. The case for the partners was that the sales in question were outside sales; that the firm of Mangalore Tile Agency is a non-resident dealer and as such the assessment could have been made only on the agent in the State under section 14-A of the Act; and that the assessment order made on a firm after its dissolution is without jurisdiction and unenforceable against the partners of the dissolved firm.
10. The learned Magistrate held that the prosecution had proved their case beyond reasonable doubt and convicted the revision petitioners as charged and sentenc
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