By TIOL News Service

NEW DELHI, MAY 05, 2015: THE question raised before the Supreme Court is whether the respondent-Revenue could resile from a settlement entered into with the assessee on the basis of which the appellant has already paid and settled his dues under the Act.

The protracted proceedings in the instant case have spawned over three decades.

The appellant had joined as a partner in the assessee-Firm. The relevant assessment years are Samvat 2034 (12.11.1977 to 31.10.1978) and Samvat 2035 (01.11.1978 to 24.06.1979). The Assessing Authority had carried out the assessments and confirmed the demand for Rs.13 ,33,091 /- under the Act and Rs.85,878 /- under the Central Sales Tax Act, 1956 (" CST Act") for Samvat 2034; and Rs.28,18,202 /- under the Act and Rs.44,577 /- under the CST Act for Samvat 2035. The appellant had preferred appeals against the assessments before the first appellate authority, which were dismissed by order dated 30.09.1981.

Being aggrieved by the aforesaid orders, the appellant had approached the Maharashtra Sales Tax Tribunal. During the pendency of the said appeals, the appellant had addressed a letter to the State Minister for Finance dated 23.11.1983, seeking settlement of sales tax dues payable by him as a partner of the assessee-Firm. It is the case of the appellant that the then State Minister for Finance accepted the offer of settlement and accordingly, in the light of the said settlement, the Commissioner of Sales Tax had issued a letter on 16.01.1984 quantifying the amount due and payable by the assessee-Firm for the relevant assessment years on the basis of the partnership deed. Before the Tribunal, the respondents have denied the existence of such settlement and further submitted that there has been no decision quantifying the individual liability of the appellant and absolving him from the liability to pay for the dues of the assessee-Firm for said assessment years. Since, the question before the Tribunal was restricted to determination and payment of liability by the appellant qua the assessee-Firm, the Tribunal had refused to adjudicate upon both:

(a) whether there exists any settlement between the parties regarding the tax liability and

(b) whether the appellant was relieved of his obligation under the Act.

Then the appellant approached the Writ Court. The assessee had contended that he had approached the State Minister for Finance seeking settlement of his individual dues, which was accepted as well as implemented by the order of the Commissioner dated 16.01.1984 and, therefore, the appellant is absolved of all the liabilities confirmed against the assessee-Firm for the relevant assessment years.

The Revenue has adopted a stand that under the Act, apart from the power of remission of tax payable by the dealer under Section 45 of Act, there exists no other provision which would empower the authorities to settle the liability of an individual partner. Further, that Section 18 of the Act specifically provides that in respect of the dues of the firm, the liability of a partner is joint and several and, therefore, neither the State Minister for Finance nor the Commissioner could have legally entered into any settlement regarding the liability of individual partner in respect of the dues of the assessee-Firm.

The High Court, after due consideration of the submissions made by both the parties and meticulous examination of the case records as well as the relevant provisions of law, has observed that the case of the appellant does not require them to examine the validity of the liability confirmed against the assessee-Firm and thus, examined the question as to whether the settlement entered into between the Commissioner and the appellant is permissible under the Act. The High Court has concluded that under Section 18 of the Act the partners of the Firm are jointly and severally liable to pay the tax dues of the assessee-Firm and no provision under the Act contemplates a settlement between a partner of the assessee-Firm and the Commissioner to determine individual liability. The High Court has further noticed that Section 45 of the Act which speaks of power of remission of the Commissioner also does not contemplate any settlement of the nature claimed and therefore, could not be invoked to shelter the appellant from discharging his liability under the Act. Hence, the Writ Court has thought it fit to fix the entire liability of payment of sales tax on the assessee and upheld the order passed by the Revenue by the judgment and order dated 03.02.2006.

This judgment of the High Court is questioned by the assessee before the Supreme Court.

The Supreme Court observed,

The plain reading of Section 45 of the Act would indicate that the legislature has vested the power of remission of tax only with the Commissioner and subjected the exercise of said power in accordance with such circumstances and conditions as prescribed by the State Government under the Bombay Sales Tax Rules, 1959. The Section neither speaks of any power to enter into a settlement for such purposes by the State Minister of Finance nor prescribes exercise of powers by the Commissioner in light of any such settlement.

Section 18 of the Act specifically provides that the liability of a partner in respect of the dues payable by the firm is joint and several. But for Section 45 of the Act which permits remission of the tax payable by the dealer, that is, the assessee-Firm, there is no provision under the Act empowering the State Government or the Commissioner to enter into a settlement with an individual partner regarding his liability in respect of the dues payable by the assessee-Firm. Further, the Rules relevant to the exercise of power of remission by the Commissioner under the Act viz., Rules 43A , 44 and 44A also do not provide any condition with respect to remission of sales tax under the Act by entering into any settlement, more so a settlement for the payment of individual liability of partners under the partnership deed.

Therefore, in the absence of any specific provision contained in the Act or the Rules, there could be no settlement with an individual partner so as to discharge him from his obligation to pay the sales tax dues payable by the assessee-Firm.

The Supreme Court further observed, "It is trite that the letter of law has to be accorded utmost respect and strictly adhered to especially while interpreting a taxing statute. There ought not exist any scope for impregnating the interpretation by reading equity into taxing statutes."

The Court quoted the classic statement of Rowlatt, J;

"In a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."

The Supreme Court also observed, "The convoluted mesh of facts and the extremely protracted proceedings which span over three decades, at the instance of appellant, indicate that the basis of case made out by the appellant does not exist in either the statute law or, in fact, any law applicable to the present proceedings. The settlement, if any, reached between the appellant and the State Government for part payment of tax liability by the partner of an assessee-Firm would not fall under the four corners of the Act or the Rules as has been claimed by the appellant since the beginning of the proceedings under the Act."

The Supreme Court was of the considered opinion that the High Court has rightly examined the issues before it and the judgment and order passed by it does not suffer from any error, whatsoever, and thus, the civil appeal being devoid of any merit requires to be dismissed. The judgment and order passed by the High Court is confirmed.

In the result, the appeal is dismissed with costs of Rs.5 ,00,000 /-.

(See 2015-TIOL-95-SC-CT-LB)