The Supreme Court of India clarified that 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, and hence Revenue could resile from such a settlement entered into with the assesse.
The individual partner of the assesse-Firm claimed that the Commissioner of Sales tax quantified the amount due and payable by the assesse-Firm after individual partner reached settlement with the then State Minister for Finance.
“In the absence of any specific provision contained in the Act [Bombay Sales tax Act] or the Rules [Bombay Sales Tax 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”, a Large Bench of the Court ruled.
The Court said, “…..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.
The Court said that Section 45 of the Act 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.