Holding

The appellant, having permitted the lessee to use its registration and acting as the lessee's agent, is jointly and severally liable for the sales tax, and the appellate authority could not lawfully assign liability solely to the lessee.

Summary

Periyar & Pareekanni Rubbers Ltd., a distillery registered under the Kerala General Sales Tax Act, leased its factory to Eagle Distillery Ltd. The lessee continued to use the lessor's sales‑tax registration number and statutory Forms C and D, but failed to remit the tax collected. The assessing authority issued notices to the appellant for the assessment years 1984‑85, 1986‑87 and 1987‑88 and held both parties jointly and severally liable. The appellate authority, however, directed recovery only from the lessee without impleading the appellant, a decision later upheld by the Tribunal and the High Court. The Supreme Court held that the appellant, by allowing the lessee to use its registration and by not surrendering it upon ceasing to be an assessee, acted as an agent of the lessee and was therefore jointly and severally liable for the tax; the appellate authority could not hold the lessee alone liable. The Court dismissed the appeals, confirming the appellant’s liability to pay the assessed sales tax.

Issues considered

The liability for sales tax when a lessee uses the lessor's registration number and statutory forms.
Whether joint and several liability attaches to both lessor and lessee under the Kerala General Sales Tax Act and Rules.
The applicability and retrospective effect of Section 19C of the Kerala General Sales Tax Act.
The duty of a registered dealer to surrender its registration upon ceasing to be an assessee.
Whether an appellate authority can hold the lessee solely liable without impleading the appellant.

Legislation cited

Central Sales Tax Act
Kerala Abkari Act
Kerala General Sales Tax Act, 1963s. 19(c), s. 2(8), s. 3, s. 5, s. 6
Transfer of Property Acts. 100

Subjects

sales taxjoint and several liabilityregistration numberleaseagentCrown debtpurposive constructionKerala General Sales Tax Actassessmenttax evasion

Judgment

[2008} 4 S.C.R. 540

A PERIYAR & PAREEKANNI RUBBERS LTO. ~ ..
V.
STATE OF KERALA
(Civil Appeal Nos.1804-1807 of 2008)
MARCH 7, 2008
8
(S.B. SINHA AND HARJIT SINGH BEDI, JJ.)

Kerala General Sales Tax Act, 1963; S. 19(c)/Central
t
Sales Tax Act, Kerala General Sales Tax Rules, rr. 33(A)(3)1
c Central Sales Tax (Kerala) Rules, 1957; r.11(6): ,.
Liability to pay sales tax -Appellant company leased
out factory in favour of another company- Allowing lessee to
use sales tax registration number and Forms 'C' and (D' allotted
to it- Notice for recovery of sales tax from appellant -
D Challenge to - Recovery proceedings quashed by Single
Judge of High Court directing the assessing authority to
complete the final assessment by issuing notice to both the
appellant as a/so the lessee - Assessing authority holding
both the parties liable to pay sales tax jointly and severally -
E Appellate authority directing recovery of the tax from lessee
only - Appeal filed thereagainst by Revenue allowed by
Tribunal - Revision Petition dismissed by High Court -
Correctness of- Held: Correct- In terms of r. 33A(3) of Kerala
General Sales Tax Rules rlw r.11 (6) of Central Sales Tax Rules,
F appellant was duty bound to surrender the registration number
on its ceasing to be an assessee but he did not surrender the
same and allowed lessee to continue to use it and a/so Forms
'C' & (D' -High Court held the appellant liable to pay the sales
tax jointly and severally with the lessee - Though, it preferred
an appeal thereagainst but it did not implead Jessee as a party
G
- Hence, it was impermissible for the appellate authority to
hold the Jessee alone liable for payment of the tax - For all
intent and purport, appe/fant was serving as an agent of the
Jessee -· Though, at the relevant time there did not exist any

H 540
.{ I
PERIYAR & PAREEKANNI RUBBERS L.,..D. v. STATE 541
OF KERALA
4 .., provision to assess two persons by fastening joint and several A
liability, but Revenue could recover the tax if permissible
otherwise -- However, it would not be appropriate for the
Supreme Court to interfere with the irrpugned judgment in
exercise of power u/Article 136 of the Constitution -Constitution
of India, 1950- Article 136 -Scope of. B
Doctrines:
Doctrine of 'Crown Debt' and 'purposive construction'-
Applicability of.
Appellant is a registered company running a distillery. c
It obtained a licence for manufacture of liquor under the
Kerala Abkari Act. The appellant allegedly leased out the
factory in favour of another company, wherefor requisite
approval was granted by the Government. The 'lessee'
applied for registration under the Kerala General Sales D
Tax Act. Since the process for registration having been
delayed, the appellant allowed the lessee to use the
registration number allotted to it and also Forms 'C' & 'D'.
The 'lessee' did not deposit the amount of sales tax
collected by it. The authorities issued a notice to the E
appellant for recovery of Sales Tax for the assessment
Years 1984-85, 1986-87 and 1987-88. Questioning the
legality and validity of the notice for recovery of the tax,
appellant filed a writ petition. However, the appellant did
• not press its liability in regard to the payment of the tax F
for the year 1984-85. Single Judge of the High Court
directed the assessing authority to complete the final
assessment in terms of provisions under 1963 Act for the
assessment years 1986-87 and 1987-88. The assessing
authority held both the appellant as also 'the lessee' jointly
G
and severally liable for payment of the tax. Appeals
preferred thereagainst were allowed by the appellate
authority in so far as the appellant was concerned and
directed recovery of the tax only from 'the lessee'. The
Revenue preferred second appeal before the Tribunal,
H
542 SUPREME COURT REPORTS [2008] 4 S.C.R.

A which was allowed by the Tribunal. Revision applications ~ ..
filed thereagainst by the appellant before the High Court
were dismissed by the High Court. Hence the present
appeals.
AppeHant-Company contended that the assessing
B authority being aware of the fact that the distillery was
being run by 'the lessee', no liability in respect thereof
could have been fastened on it; that even assuming that
it effected sales of the manufactured goods under the
registered number allotted to it, it was liable for payment
c of Sales Tax only for the period from 7th November, 1985
to 31st December, 1985; that the High Court committed a
serious error in passing the impugned judgment relying
on or on the basis of Section 19C of the Act which had no
application in the instant case, as it was brought to the
D statute book only with effect from 29th August 1989 and
not from retrospective effect; and that liability to pay tax
being upon 'a dealer' within the meaning of Section 2 sub-
section(8) of the Act, no assessment proceedings could
have been initiated against it.
E Respondent-State submitted that a finding of fact
having been arrived at by the Tribunal and that a fraud
had been committed by the appellant and the lessee the
impugned judgment should not be interfered with; that
appellant having allowed the lessee to use the registration
F number as also the prescribed Forms 'C' and 'D' which •
were supplied by the department to it, later, it cannot turn
round and contend that it was not liable to pay the tax;
that since in the Writ petition the subject matter of
challenge was not the order of assessment but the liability
G as a garnishee, the impugned judgment is unassailable
and that even assuming that Section 19C of the Act is not
applicable, the pre-assessment notice as also the
assessment proceedings having been conducted
pursuant to the direction issued by the High Court in its
H judgment dated 12th February, 1993, the correctness
\ I

PERIYAR & PARFEKANNI RUBBERS LTO. v. S:ATE 543
OF KERALA

whereof having not been questioned, the impugned order A
.. ...,
cannot be found fault with.
Dismissing the appeals, the Court
HELD: 1.1 The Lessee used the statutory forms as
also the registration number of the appellant. The Kerala 8
Abkari Act was enacted to consolidate and amend the law

- ., relating to the levy of a general tax on the sale or purchase
of goods in the State of Kerala. (Paras - 13, 14) [551-D;
552-G]
1.2 Taxes are leviable on sale of goods. Registration c
in the instant case was in the name of the appellant.
Despite grant of a lease, the Lessee, for a long time used
the registration number of the Lessor as also the statutory
forms. (Para - 15) [552-H; 553-A]
D
1.3 The liability to pay sales tax is not only fastened
upon the registered dealer within the meaning of Kerala
General Sales Tax Act and the Rules framed thereunder,
but also on the agent or the transferee. A finding of fact
has even arrived at that the transaction was a sham one
and at all material times, the appellant was acting as an E
agent of 'the lessee'. Appellant had a duty to surrender
the unused delivery note on discontinuance of the
business or cancellation of its certificate of registration
or on its ceasing to be an assessee under Rule 33 A (3) of
the Kerala General Sales Tax Rules and Rule 11 (6) of the F
Central Sales Tax (Kerala) Rules 1957. Appellant did not
take any step for the termination of lease, although a
t right was conferred upon it in this behalf. (Para - 16)
[553-B, C, D]
G
1.4 Management of business may be handed over
by the owner to another but .the department must be made
known thereabout. A fresh registration certificate must be
)
applied for and granted. (Para - 19) (554-D]
M.A. Rahman and others vs. State of Andhra Pradesh H
\ J
544 SUPREME COURT REPORTS [2008] 4 S.C.R.

A and others AIR 1961 SC 1471 and Pramod Foods Pvt. Ltd.
vs. State of Kerala 69 (1988} STC 257 Ker. - relied on. r-

1.5 The business by the Lessee continued under the
old name. It was done at the behest of the appellant. It,
therefore, cannot then turn around and contend that it was
8 not liable to pay any tax. (Para - 19} [554-E]
1.6 It may be true that Section 19C of the Act having
come into effect from 29th August 1989, could not be given
any retrospective effect but then the legislature was not ,
presumed to take into consideration a situation of the
c present nature. It is presumably for the said reason, the
High Court evolved such a procedure which was
acceptable to all the parties. Pursuant to or in furtherance
of the direction of the High Court also, notices were issued.
Appellant submitted itself to the jurisdiction of the
D assessing authority. Its liability was held to be joint and
several with that of the lessee. It preferred an appeal
thereagainst but it did not implead 'the lessee' as a party
therein. In absence of 'the lessee' as a party to the said
appeal, it was impermissible for the appellate authority
E to hold 'the lessee' alone liable for payment of tax.
(Para- 20) [554-F, G, H; 555-A]
2.1 Assessee is the manufacturer of the liquor, is an
assessee and is a dealer within the meaning of the Income
Tax and Sales Tax Act. For the purpose of realization of
F the sales tax, one who manages the business may not
come to the front. Applying the doctrine of Crown Debt
the assets of the unit could be attached or sold therefor.
Crown Debt, as is well known, unless there is a statutory
interdict, prevails over all other debts. It is based on the t)
G principle that public interest prevail over the private
individual. (Para - 24) [556-C, D]
Halsbury's Laws of England Fourth Edition Volume 8-
referred to.
H 2.2 It is impossible for the legislature to envisage all
PERlYAR & PAREEKANNI RUBBERS LTD. v. STATE 545
OF KERALA

...,
situations. Recourse to statutory interpretations therefor A
should be done in such a manner so as to give effect to
th~ object and purport thereof. Doctrine of purposive
construction should, for the said purpose, be taken
recourse to. (Para - 28) [557 -C, D)
B
New India Assurance Company Ltd. v. Nusli Neville
Wadia and Anr. JT (2008) 1 SC 31 -referred to.

2.3 Ordinarily this Court would have accepted the
contention that prior to coming into force of Section 19C
of the Act, there did not exist any provision in the Act to c
assess two persons by fastening joint and several
liability. However, the superior courts and in particular,
this Court, would not come on the way of the revenue to
recover arrears of tax, if it is otherwise permissible in law.
(Para - 29) [557-0, E] D
2.4 The 1983 Act provides for the mode and manner
in which the revenue may be recovered. The property of
the dealer, namely, one in whose name the registration
stood, can be proceeded with. Its properties may be
subjected to attachment and sale. In that view of the matter, E
it is not a case where, this Court, while exercising its
jurisdiction under Article 138 of the Constitution of India
should interfere with the impugned judgment. However,
it is observed that in law the appellant is liable to pay the
.. amount of sales tax assessed by the assessing authority. F
(Paras - 31, 32 & 34) [557 -G, H; 558-A, 8]
State of Karnataka & Anr. vs. Shreyas Papers Pvt. Ltd. &
Others (2008) 1 SCC 815 - referred to
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. G
1804-1807 of 2008.
From the final Judgment and Order dated 25.03.2004 of
)
the High Court of Kerala in Tax Revision Case No. 416 of 2002
and Sales Tax Revision Cases Nos. 26, 27 & 28 of 2003. H
546 SUPREME COURT REPORTS [2008] 4 S.C.R.

A Joseph Markose, Dileep Pillai and M.P. Vinod for the
Appellant.
Y. Yashobant Das, R. Sathish for the Respondent.
The Judgment of the Court was delivered by
8 S.B. SINHA, J. Leave granted.
1. Appellant is a company registered under the
Companies Act, 1956. It runs a distillery. It obtained a licence
under the trade name of "Normandy Breweries and Distilleries"
c for manufacture of liquor under the Kerala Abkari Act (1 of 1077).
2. It was registered as a dealer both under the Kerala
General Sales Tax Act (the Act) as also under the Central Sales
Tax Act.

0 3. It demised the factory in favour of one "Eagle Distillery
(P) Ltd." (Lessee) by a Deed of Lease dated 1st December,
1984, wherefor requisite approval was granted by the
Government of Kerala on or about 27th April, 1985.
4. The Sales Tax Authorities were intimated thereabout by
E communications dated 4th May, 1985 and 30th May, 1985.
The said letters read as under:
"4th May, 1985

I am writing this letter to inform you that I have leased
F out the Distillery unit in Cheemeni, Kasargod District to
Eagle Distilleries Pvt. Ltd., having their registered office
at Bangalore, Karnataka, for a period of 5 years from 1st
December, 1984. The specific reason we have not
renewed the registration this year, is this. We have asked
G Eagle Distilleries to take a new registration in their name.
I am enclosing herewith a copy of the lease deed for your
reference. Kindly acknowledge receipt of the same."
"30th May, 1985
H Further to our Regd. Ack. Due letter alongwith the
~ ~
PERIYAR & PAREEKANNI RUBBERS LTO. v. STATE 547
OF KERALA [S.B. SINHA, J.}
., copy of the lease deed which you have acknowledged on A
7.5.85. We wish to inform you that our Distillery unit at
Cheemeni known as "Normar.dy Breweries & Distilleries"
Cheemeni will not be in any way responsible for the tax
due after the 1st December, 1984. For any tax dues after
that date will have no claim over the assets and properties B
of Normandy Breweries & Distilleries. As these Supplies
have been made by the lessees and they have collected
the payments and they have only lease right on the unit
subject to the lease conditions."
5. The 'lessee' applied for registration under the said Act. c
The process for r~gistration, however, got delayed.lt asked the
appellant to allow it to use the old registration number. By
communications of diverse dates the same was allowed. It is,
however, stated that permission to use the registration number
of the appellant had not been renewed after 31st December, D
1985.
6. The 'lessee', ·however, continued to file returns in its own
name. It did not deposit the amount of sales tax collected by it.
It furthermore appears that the requisite forms for carrying out
inter trade sale and intra trade sale, namely Forms 'C and 'D', E
which at the request of the appellant had been supplied by the
revenue, were continued to be used by the 'lessee'. A notice for
recovery of Sales Tax for the Assessment Years 1984-85, 1986-
87 and 1987-88 was served upon the appellant.
F
7. Appellant filed a writ application questioning the legality
and validity thereof. Before the High Court, however, its liability
in regard to the payment of tax for the year 1984-1985 by the
appellant was not pressed.
8. By a judgment and order dated 12th February, 1993, a G
learned Single Judge of the said Court in view of the rival
contentions raised therein by the appellant and the 'lessee', as
)
regards their respective liability, opined that the question as to
who is liable for payment of tax relating to those two Assessment
Years, when admittedly the business was carried out by the H
,,
548 SUPREME COURT REPORTS [2008] 4 S.C.R.

A 'lessee' under the deed of lease, is a question which would arise
for consideration before the assessing authority, when the final
assessment is to be carried out. It was directed:
"12 I accordingly quash Exts. P13 and P17 and the
proceedings for recovery which have culminated in those
B proceedings. The assessing authority namely the 4th
respondent is directed to complete the final assessment
under the Kerala General Sales Tax Act, 1963; for the
years 1986-87 and 1987-88 with notice to the first
petitioner Company and to the sth respondent."
c
Pursuant to or in furtherance of the said direction, a pre-
assessment notice dated 16th November, 1993 was served both
upon the appellant and the 'lessee' proposing to reject the returns
and accounts as incorrect and incomplete and to finalise the
D assessment on the basis of the best judgment assessment as
specified therein. The 'lessee' did not respond thereto. Cause
was shown by the appellant. In the assessment proceeding only
the appellant represented.
The assessing authority passed an order of assessment
E holding both the appellant as also 'the lessee' jointly and
severally liable for the sales tax dues both under the Act as also
Central Sales Tax Act for the Assessment Years 1986-87 and
1987-88. Statutory appeals were preferred thereagainst and
by a judgment and order dated 30th January, 1995 the appellate
F authority allowed the said appeals in so far as the appellant
was concerned and directed recovery of the dues only from 'the
lessee'. The Revenue preferred second appeals before the
Tribunal. The Tribunal by its order dated 20th December, 2001
allowed the appeals of the Revenue. Revision applications filed
G thereagainst by the appellant before the High Court have been
dismissed holding:
"27. The question in such circumstances is as to whether
the lessee can also be made liable. It is unnecessary for
us to consider the same since the lessee has not
H questioned its liability fixed under the assessment orders
PERIYAR & PAREEKANNI RUBBERS LTO. v. STATE 549
OF KERALA [S.B. SINHA, J.:
dated 31.1.1984. lr the above circumstances. we uphold A
the assessment orders as confirmed by the Appellate
Tribunal for the years 1986-87 and 1987-88 both under
the KGST Act and under the CST Act.

28. However, since the assessments against the lessee,
M/s. Eagle Distillery (P) Ltd. have not been questioned by
8
it and since it has become final, considering the peculiar
facts and circumstances of' this case, we direct the
assessing authority to proceed first against the said
company for realization of the arrears of sales tax due for
these two under both the enactments. After exhausting the C
steps against the said company, if any amounts are
outstanding towards sales tax dues for the aforesaid two
years, the assessing authority is entitled to proceed against
the petitioner and its assets. However, petitioner is directed
to furnish sufficient security for the due payment of the D
dues in case the said amount cannot be recovered from
the lessee as directed above, to the satisfaction of the
assessing authority within a period of two months from the
date of receipt of a copy of this judgment."

9. Mr. Joseph Markose, learned Senior Counsel appearing E
on behalf of the appellant, would inter alia submit:

i) That the assessing authority being aware of the fact
that the distillery was being run by 'the lessee·, no
liability in respect thereof could have been fastened F
on the appellant.

ii) Assuming that it effected sales of the manufactured
goods under the registered number of the appeHant,
it was liable for payment of Sales Tax on~y for the
period from 7th November, 1985 to 31st December, G
1985.

iii) The High Court committed a serious error in passing
the impugned judgment relying on or on the basis of
Section 19C of ~he Ac which had no application in H
550 SUPREME COURT REPORTS [2008] 4 S.C.R.

A the instant case. as it was brought to the statute book
only with effect from 29th August, 1989 and had no
retrospective effect

iv) L1ability to pay tax being upon 'a dealer' within the
meaning of Section 2 Sub-section (8) of the Act, no
B assessment proceedings could have been initiated
against the appellant.

10. Mr. Y. Yashobant Das. learned Senior counsel
appearing on behalf ofthe respondent-State, on the other hand,
c would submit:
i) That a finding of fact having been arrived at by the
Tribunal and that a fraud had been committed by the
appellant and the lessee', the impugned judgment
should not be interfered with.
0
ii) Appellant having allowed its alleged 'lessee' to use
the registration number as also the prescribed forms
'C and '0', which were supplied by the department
to it on its asking, now it cannot turn round and
contend that it was not liable to pay any tax.
E
iii) Since in the Writ Petition the subject matter of
challenge was not the order of assessment but the
liability as a garnishee, the impugned judgment is
unassailable.
F iv) Assuming Section 19C of the Act is not applicable,
the pre-assessment notice as also the assessment
proceedings having been conducted pursuant to the
direction issued by the High Court in its judgment
dated 12th February, 1993, the correctness whereof
G having not been questioned, the impugned order
cannot be found fault with.
11. We may not, for the purpose of the present case,
consider the assessment orders as also the appellate orders.
H The Tribunal upon analysing the materials placed before the
' PERIYAR & PAREEKANNI RUBBERS LTD. v. STATE 551
OF KERALA (S.B. SINHA, J.]

assessing authority. inter alia held: A
UThus the conduct of the parties lead to the inference that,
the Lessee acted as an Agent of the Lessor and hence,
the lessor ls also responsible for the business conducted
during that period. So, the assessment completed in the
name of both Lessor and Lessee by fixing the liability 8
jointly and severally is proper.''
Despite the fact that the Lessee had applied for the
registration, it requested the department to keep in abeyance
the said application for registration, which stood rejected with c
an observation that they could apply for registration afresh when
they started business in the new name. Registration of the
appellant thereafter continued without being cancelled.
12. The High Court directed the assessing authority to
issue notice and complete the final assessment by posing a D
question for its decision in regard to the liability of either the
appellant or the Lessee.
13. The Lessee used the statutory forms as also the
registration number of the appellant. In the aforementioned fact E
situation the Tribunal opined:
"13. Again relying on the letter dt. 20.3.89, purported to
have been issued by the General Manager. Normandy
Breweries and Distilleries Ltd. (Periyar & Pareekanni
• Rubber Ld.) i.e. the lessor, and addressed to the Officer F
of the Assessing Authority, it was submitted by the learned
State Representative who appeared for the Revenue that,
even though there was a clear provision for termination of
the lease deed when the lessee makes default for a
continuous period of 4 months, the Lessor has not taken G
any action to terminate the lease deed till the rent arrears
accumulated to Rs.30 lakhs i.e. the lessor was keeping
silent for a period of 24 months as to accumulate the dues
over Rs. 30 lakhs which.an ordinary prudent man would
not be under such circumstances. Thus, it is clearly H
552 SUPREME COURT REPORTS [2008] 4 S.C.R.

A established that the attempt made by the Lessor & Lessee
was to defraud the Revenue by non-payment of tax which
is legitimately due to the government. More-over, since
the lease deed dt. 1.12.84 was terminated into toto, with
effect from the very beginning, there is no lease deed and
8 no relationship of Lessor & Lessee. In such a situation,
the Lessor become liable for the tax due on the business
done in the name of M/s. Normandy Breweries & ,.
Distilleries, Cheemaeni. Likewise, since the Lessee has
admittedly conducted the business and collected tax, and
c has not remitted the same to the Government the Lessee
becomes liable for the business conducted. Thus, at any
rate, the Lessor and Lessee are jointly and severally liable
for the tax which is legitimately due to the Government.
So, the order of assessment has to be restored."
0 It was furthermore held:
"26. Thus, since it has come out in evidence that, the
application for· Registration put in by the lessee was
dismissed under the circumstances referred to above and
the Registration of the lessor continued in force and that
E the lessor has without returning the delivery notes and the
C forms issued in their favour to the department, thereby
violated the Mandatory provisions under the Rules and
permitted the lessee to continue to do the business in the
trade name of the lessor themselves, we find that, here,
F the assessing authority was perfectly justified in finding
that, the Lessor and Lessee were colluding with each other
and were practicing fraud on the Government in order to
evade payment of tax which is legitimately due to the
Government."
G
14. The Act was enacted to consolidate and amend the
law relating to the levy of a general tax on the sale or purchase
of goods in the State of Kerala. "Registered dealer" has been
defined to mean a dealer registered under the Act.
H 15. Admittedly, taxes are leviable on sale of goods.
PERIYAR & PAREEKANNI RUBBERS LTO. v. STATE 553
OF KERALA [S.B. S:NHA, J.]
..
Registration in the instant case was in the name of the registrant A
i.e. M/s. Periyar & Pareekanni Rubbers Ltd. Despite grant of a
lease, the Lessee. admittedly for a long time used the registration
number of the Lessor as also the statutory forms supplied by
the revenue to it.
16. The liability to pay sales tax, not only is fastened upon 8
the registered dealer within the meaning of the said Act and the
f"" Rules framed thereunder, but also on the agent or the transferee.
A finding of fact has been arrived at that the transaction was a
sham one and at all material times, the appellant was acting as
an agent of 'the lessee'. Appellant had a duty to surrender the c
unused delivery note on discontinuance of the business or
cancellation of its certificate of registration or on its ceasing to
be an assessee under Rule 33A (3) of the Kerala General Sales
Tax Rules and Rule 11 (6) of the Central Sales Tax (Kerala) Rules,
1957. Appellant did not take any step for the termination of lease, D
although a right was conferred upon it in this behalf. As has been
noticed by the High Court, the lease amount was not deposited
for more than four months. Termination of the lease was effected
by it only after a long time i.e. on 20th March, 1989, when the
arrears of rent mounted to about Rs.30 lakhs. E
17. Rule 51 mandates a dealer to send information as to
when it ceases to continue its business for which it was
registered. Registration of a dealer has a statutory purpose,
,; viz. to carry out and achieve the object of the Act which primarily
~
is levy and collection of tax. It a!so enables the State to fasten F
the tax liability on the parties which may be found liable therefor
so as to enable it to realize the same.
18. In M.A. Rahman and Ors. v. State of Andhra Pradesh
and Ors. AIR 1961 SC 1471 this Court opined:
G
"4. It will be clear from this analysis of the impugned
~

~
~ provisions of the Act that the purpose and object of the Act
to levy and collect tax for purposes of the general revenues
of the State and the liability for payment is placed under
Section 3 upon the person effecting the sale. He is required H
554 SUPREME COURT REPORTS [2008] 4 S.C.R.

A by Section 5 of the Act to keep books of account in the
prescribed form and to submit to the Commercial Officer
and to such other officers as may be prescribed, a return
in such form, containing such particulars and at such
intervals, as may be prescribed. Along with the return,
B under Section 6 he is required to pay the amount of tax
due in respect of the motor spirit sold by him in retail
during the proceeding month according to the return. In
order therefore that the State may have a check on the ....,
person from whom the tax is due Section 4(1) provides for
c registration of dealers who carry on the business in motor
spirit. Without such registration it would be impossible for
the State to know the persons who are selling motor spirit
and from whom the tax is due."
[See also. Pramod Foods Pvt. Ltd. v. State of Kerala 69
D (1988) STC 257 Ker.]
19. Management of business may be handed over by the ~

owner to another but the department must be made known
thereabout. A fresh registration certificate must be applied for
and granted.
E
The business by the Lessee continued under the old name.
It was done at the behest of the appellant. It, therefore, cannot
now turn around and contend that it was not liable to pay any
tax.
F 20. It may be true that Section 19C of the Act having come ...
..,.
into effect from 29th August, 1989, could not be given any
. retrospective effect but then the· legislature was not presumed
to take into consideration a situation of the present nature. It is
·presumably for the said reason, the High Court evolved such a
G procedure which was acceptable to all the parties. Pursuant to
or in furtherance of the direction of the High Court also, notices
were issued. Appellant submitted itself to the jurisdiction of the
assessing authority. Its liability was held to be joint and several ') c
with that of 'the lessee'. It preferred an appeal thereagainst but
H it did not implead 'the lessee' as a party therein. In absence of
~ ., ' '"' ' • ' .• --- ·- .-- ~- \ • ' i ;

: PERIYAR & -PAREEKANNI RUBBERS LTD. v. STATE 555
t OF KERALA [S.B. SINHA, J.]
\
j
.· _,..._- .. -- ... ' -.~ .--··. '-·.··. ·;·--·-_ ...... ,., .. _\,;~~~- _-.,._ .., ~-
I
)''•

'the lessee• as a party to the said appeal. it was impermissible A
for the appeflate authority to ho,ld 'the lessee'. alone' liable for'
i
;/
.

'payrn(mfoftaxl Even the Tribunal the Higfl Courfcould not and ....

•
have; in the said fad situation,· issued any direction 'as to how
• • .I .,. • • > • ., ' • --., I ~ ' - ; f , • ~

the arrears of tax should be recovered. '.~ - · · · .
: ;'': ~ ' _··,. ~. • :. ,.·,' .. ~ ('': : : - ~ .;~ ~ •• •_: • - ~ -: ~ '~- .4 .. · . : - ~ ~- :- _._; ~ ..... : -. . -. - ~ -~ -~ ~

: .-. --; 2.1· Strong reliance has been placed by the learned Counsel 8
for the appellant on the deCision of this Court in Lalji Haridas v.
-
lncome~tax
. -. '
Officer
...
. ,..
and Anr. [1961]
. •·. ......... , . ..
~
43 ITR
. .,
:.
387(SC)
. . . wherein
. ' ' . ~~ . . . . ~ -~ .' : ~

the' question which arose for consideration was as; to who
amongst the· tWo· brothers was liable to' pay _tax. It was held:
.-:'.'.-.'.· ' :. .... . . -: :::. . ._·. _; ' ' ... ' ' .·:·; . . -' _., . ; .'_ .-- . c -
·. ·, -_"In cases where it appears to the income-tax authorities
._ -··. that certain income has been received during the relevant
· - . /' assessment year but it is not clear who has received that
-, \ income and prima facie it appears that the income ~ay
,_ .. have been received either by A or 8 a·r by both together, D
/
. · -~ it would be open to the r~fevant income-tax authorities to
. determine .the. said _question -;by. taking appropriate
- -. · .. ,. p~oce,edings_both against A and B. That being so, we do
·.. ,__; not think that Mr. Nambiar would be justified in resisting
;} -.:- :the enquiry_ wh1ch· is propos~d to be held by respondent
·No. 1 in pursuance of the impugned notice issued by him E
.. ..
against ~ the appellant." . ~ .~ · -· ~ "f:_; •• .·_: ·~~'._.·~ .: ;_ -·.--' :--:·~
' • r.____ ·'-
. . : .. ~ .._.<_ ~ 0 •• ! '· ' ..: -~ ...- ...... -
~ ~....' i ::.
•
...'<- ..·+ ...·: - ; 0

'1: .•.-
i,_ '.".· -_.,
... .. r

. :.. ~"; ~2~, Such a procedure in this case was also followed.- Such
a direction has been issued, whereupon the assessment orders
\ have_been pas.sed. We at this stage,·th~refore,.cannot direct F
tpe·authority to· reopen th~·proceeding~ once again,· as was
urged by the learned Counsel. : --· .·: . ··- . '· ·-
23. Reliance was also placed the Commissionerof on
Income-tax,. Madhya .Pradesh; ·Nagpur v. ·~Hukam Chand
Mohan/al AIR 1971 SC 2591 wherein it was held:- ~ 7. ··: - G
. .-_···r~e'assessee~'in_the present cas~. does not f~ll_within"_
·· . ··-~1 r_any
·· ·
of those
., " ·
clauses. There is no specific provision in the, 1 .. · . • ... ,.... .-·. ~ • ~ ·_ · • • ~ • • ( :

.. ·.Act under which it cah'be said that the assessee·;s·a.
-·.. ~-- l:)ers'on by income tax is· payable on the amount of H' whom
~ ,
556 SUPREME COURT REPORTS [2008] 4 S.C.R.

A Rs. 24,341 /-which came to her by way of remission on
account of what had transpired in the lifetime of her
husband. The Act does not contain any provision making
a successor in business or the legal representative of an
assessee to whom an allowance has atready been granted
B liable to tax under Section 41 (1) in respect of the amount
remitted and received by the successor or the legal
representative."
24. We have noticed hereinbefore that a finding of fact
has been arrived at that for all intent and purport the appellant
c was the agent of 'the lessee'. Furthermore, a distinction must
be borne in mind between the provisions of the Income Tax Act
and Sales Tax Act. Sales tax is leviable on a sale. The
manufacturer of the liquor is an assessee. It is a dealer within
the meaning of the said Act. For the purpose of realisation of
D the sales tax, one who manages the business may not come to
the front. Applying the doctrine of Crown Debt the assets of the
unit could be attached or sold therefor. Crown Debt, as is well ~

known, unless there is a statutory interdict, prevails over all other
debts. It is based on the principle that public interest prevail
E over the private individual. [See Halsbury's Laws of England
Fourth Edition Volume 8 paras 1076 at pg. 666-667].
25. We have referred to the doctrine of Crown Debt not for
its applicability directly but to emphasise its importance in
common law. A statute, particularly a fiscal one, must be
F construed in such a manner so as to give effect thereto. Evasion ...
of tax is looked down upon under our constitutional and statutory '1·

schemes.
26. Reliance has also been placed on Deputy
Commissioner of Sales Tax (Law), Board of Revenue (Taxes),
G
Ernakulam v. Gopal Trading Company 84 (1992) STC 294,
wherein this Court, in a case involving the question as to whether
despite establishing the fact that the purchaser of the goods at
~·
the relevant time had a valid certificate of registration and that
he in fact had purchased the goods, whether the assessing
H
~ ~
PERIYAR & PAREEKANNI RUBBERS LTD. v. STATE 557
OF KERA!...A [S.B. SINHA, J.]

authority must accept the form 25 declaration issued by him A
and make the assessment accordingly, opined that a fresh
opportunity must be given to the assessee.
27.1fthe finding offact arrived at by the Tribunal as affirmed
by the High Court is correct, we would not take recourse to a
construction which will defeat the purport and object of the Act. 8
28. Tax liability of the business concern is not in dispute,
Correctness of the orders of assessment is also not under
challenge. The Tribunal or for that matter the High Court were,
•l, "' therefore, not concerned with the liability fastened upon the c
dealer. The only question was as to what extent the appellant
was liable therefor. It is impossible for the legislature to envisage
all situations. Recourse to statutory interpretations therefor
should be done in such a manner so as to give effect to the
object and purport thereof. Doctrine of purposive construction
D
should, for the said purpose, be taken recourse to. {See New
India Assurance Company Ltd. v. Nusli Neville Wadia and
... Anr. JT 2008 (1) SC 31}
29. Ordinarily, we would have accepted the contention that
L, prior to coming into force of Section 19C of the Act, there did E
not exist any provision in the Act to assess two persons by
fastening joint and several liability. However, the superior courts
and, in particular, this Court, would not come on the way of the
revenue to recover arrears of tax, if it is otherwise permissible
in law. F
,..,
~
30. Apart from the finding of fact arrived at by the Tribunal,
the appellant upon resumption of tenancy would become liable
to pay tax, if it intends to carry on its business.
31. The Act provides for the mode and manner in which
G
the revenue may be recovered. The property of the dealer,
namely, one in whose name the registration stood, can be
proceeded with. Its properties may be subjected to attachment
_.... . and sale .
32. In that view of the matter, it is not a case where, this H
t J ._
558 SUPREME COURT REPORTS [2008] 4 S.C.R.

A Court, while exercising its jurisdiction under Article 136 of the
Constitution of India should interfere with the impugned judgment.
33. In State of Karnataka and Anr. v. Shreyas Papers Pvt.
Ltd. and Ors. [(2006) 1 SCC 615], this Court held that since
there is a transfer of ownership of propertie$ of the transferee,
B as noticed in terms of Section 100 of the Transfer of Property
Act, .the charged property may be sold.
34. We may observe that in law the appellant is liable to
pay the amount of sales tax assessed by the assessing authority.
C 35. Appeals fail and are dismissed accordingly. There shall,
however, be no order as to costs.
S.K.S. Appeals dismissed.

...,.