JUDGMENT
1. The matter arises both under the Kerala General Sales Tax Act, 1963 and under the Central Sales Tax Act, 1956 (hereinafter referred to as “the KGST Act and CST Act”, respectively). The same assessee is the revision petitioner in all these cases. The assessment years concerned are 1986-87 and 1987-88. The Sales Tax Appellate Tribunal, Additional Bench, Kozhikode, by a common order dated December 20, 2001 disposed of four appeals filed by the State and cross-objections filed by the assessee. The appeals filed by the State were allowed and the cross-objections filed by the assessee were dismissed. Initially the assessee had filed only one revision against the order in T.A. No. 144 of 1995 and cross-objection No. 86 of 1995 as T.R.C. No. 416 of 2002. Later, the assessee, realising the fact that the order in the other appeal will operate as res judicata, filed the other three revisions along with applications for condoning the delay. The State has filed counter-affidavits objecting to the condonation of delay. However, in view of the fact that common questions are involved in all these revisions and in view of the fact that T.R.C. No. 416 of 2002 had already been admitted and particularly considering the affidavits filed by the counsel for the petitioner stating that the revisions were prepared along with T.R.C. No. 416 of 2002 but not filed then since there was only one copy of the Tribunal order served by the Tribunal, the delay petitions were allowed in spite of the objection by the State.
2. T.R.C. No. 416 of 2002 and S.T. Revision No. 27 of 2003 are filed against the assessment orders under the KGST Act for the years 1986-87 and 1987-88 whereas S.T. Revisions Nos. 26 and 28 of 2003 are filed against the assessments under the CST Act for the said years. Since a common question regarding the liability of the assessee to be assessed for the aforesaid years is involved and since the parties are the same, all the revisions are disposed of by this common judgment.
3. Brief facts are as follows: Petitioner-company had set up a distillery to compound or blend locally made foreign liquor and imported foreign liquor at Cheemeni in Hosdurg Taluk and obtained a licence (annexure A) from the Commissioner of Excise, Kerala State, for the period from April 30, 1971 to March 31, 1975. This was being renewed from time to time up to March 31, 1989. This distillery was operated as a unit of the petitioner under the name and style of “M/s. Normandy Breweries and Distilleries”. Petitioner, for this business, took out registration both under the KGST Act and under the CST Act. The petitioner was being assessed in respect of this unit by the Assistant Commissioner (Assessment) and later transferred the files to the Inspecting Assistant Commissioner, Kasargod.
4. In 1984, the petitioner had temporarily leased out this unit to another company by name M/s. Eagle Distillery (P) Ltd., Regd. Office 8-2-1A Main Road, Bangalore by registered lease deed dated December 1, 1984. This was approved by the Board of Revenue by its order dated April 27, 1985 (annexure C). As per the terms of the lease the lessee was to pay a monthly rent of Rs. 1,25,000 for the lease of the factory, the services of all the labour and staff of the unit had to be continued without any break and all liabilities incurred subsequent to December 1, 1984 has to be discharged by the lessee. They include the sales tax liabilities also. The lease arrangements, it is stated, was intimated to the sales tax authorities by letter dated May 4, 1985 and May 30, 1985 after receipt of the Boards order.
5. It is stated that after the lease deed the lessee carried on the business of distilleries by retaining the trade name “Normandy Breweries and Distilleries” since the excise licence was in the said name as also to commercially exploit the goodwill which had been earned by the petitioner over a period of years.
6. The lessee independently applied for a separate sales tax registration under the KGST Act and under the CST Act. It is stated that the Managing Director of the lessee later approached the petitioner with a request to permit the lessee to continue to use the registration of the petitioner till August 31, 1985 wherein the lessee had confirmed that the sales tax dues up to the end of July, 1985 had already been paid and assured that they will continue to pay future sales tax also. On the strength of this assurance, it is stated, the petitioner wrote to the sales tax department that its sales tax registration be continued till August 31, 1985 and a similar letter dated August 24, 1985 requesting for continuation of the same till September 30, 1985 was also sent. This was repeated by another letter dated November 29, 1985 requesting for continuation of the registration till December 31, 1985. The petitioner, it is stated, bona fide believed that fresh sales tax registration might have been given to the lessee. Petitioner, it is stated, sent a registered letter to the department confirming that no further requests were made by the lessee for continuation of the registration and also sought for information regarding any arrears of sales tax till December 31, 1985, but no reply was received.
7. According to the petitioner since the unit was given on lease which was approved by the Commissioner of Excise also the responsibility of production and sale of foreign liquor was on the lessee and the lessee alone can be made liable for the sales tax dues. It is stated that the lessee also on account of the financial difficulties and non-allotment of alcohol quota abandoned the unit in October, 1988. The lease agreement was also terminated on March 20, 1989.
8. Earlier when recovery proceedings were initiated against the petitioner in respect of the liability to pay sales tax for the assessment years 1986-87 and 1987-88, petitioner filed Writ Petition O.P. No. 1468 of 1989 before this Court which was disposed of by judgment dated February 12, 1993 (annexure L). This Court in the said judgment referred to the factual circumstances and the contentions raised by either side. This Court observed that all the proceedings were initiated pursuant to the provisional order and that no final assessment has been completed for the years 1986-87 and 1987-88 at that time. This Court in the above circumstances observed that the liability for the tax relating to these years when admittedly the business was carried on by M/s. Eagle Distillery (P) Ltd., under the lease given to them is a question which arise for consideration before the assessing authority when the final assessment is completed. This Court in the above circumstances observed that it is a matter for consideration in the final assessment and that it is desirable that the assessing authority will consider the matter in all its ramifications in the final assessment proceedings with notice to the petitioner herein and the 6th respondent therein, who is the lessee-company. This Court in the above circumstances quashed the recovery proceedings and directed as follows:
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 6th respondent. The 4th respondent will address himself to the question as to who is liable for the sales tax dues during these two years in respect of the transactions of Normandy Breweries and Distilleries, whether the petitioner or the 6th respondent with reference to the files and with reference to such documents as either party may desire to produce before him. Both parties will be entitled to raise all their contentions in fact or in law as also produce such documents as they desire before the assessing authority at the time of completion of the final assessment and the said authority shall consider the question in all its aspects before fastening the liability on either the petitioner or the 6th respondent. Since the assessments are old, the 4th respondent-assessing authority shall complete the final assessment with all expedition.
9. Pursuant to this judgment, the assessing authority had issued notices both to the petitioner and to M/s. Eagle Distillery (P) Ltd., the lessee-company. The lessee did not respond, however, the petitioner had produced the books of accounts and other documents. The assessing authority thereafter issued pre-assessment notices for the assessment years 1986-87 and 1987-88 both under the KGST Act and under the CST Act [annexures N(a) to (d)]. Since no reply was received either from the petitioner or from the lessee-company, the assessing authority completed the assessment for both the years as proposed (annexures Q to T).
10. Petitioner then filed Writ Petition O.P. No. 4315 of 1994 before this Court. This Court took the view that the petitioner has to avail the alternate remedy provided under the statute. However, petitioner, by way of amendment, produced the copy of the appeals filed before the appellate authority and sought for stay of the recovery proceedings pursuant to the assessment orders till the disposal of the appeals. This Court by judgment dated April 7, 1994 (annexure U) taking note of the fact that very serious question of facts and law has to be adjudicated by the appellate authority, granted stay of recovery proceedings pursuant to the assessment orders till the disposal of the appeals, particularly relying on the decision of this Court in Hindustan Petroleum Corporation Ltd. v. State of Kerala [1993] 89 STC 106 (Ker) [FB] : 1993 KLJ (Tax Cases) 298. Appellate authority was also directed to dispose of the appeals within six months. It was made clear in the said judgment that this will not preclude the recovery from “Eagle Distillery (P) Ltd.” unless recovery from them is stayed by order of any superior authority.
11. The first appellate authority thereafter by order dated January 30, 1995 disposed of the appeals for the assessment years 1986-87 and 1987-88 both under the KGST Act and under the CST Act whereby the assessments were set aside and the matter was remanded to the assessing authority for fresh disposal, after hearing the lessee company and after such enquiry as found fit. It was also made clear therein that the assessing authority shall have the liberty to initiate proceedings against M/s. Eagle Distillery (P) Ltd., based on the materials on merit. The State took up the matter in appeal before the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode. The assessee, petitioner herein, had also filed cross-objection. The Tribunal by a common order dated December 20, 2001 set aside the order of the first appellate authority and sustained the assessment orders passed by the assessing authority.
12. Learned counsel appearing for the petitioner submitted that the petitioner was conducting the business in the name and style of M/s. Normandy Breweries and Distilleries Ltd., after obtaining requisite licence from the Excise Commissioner as also sales tax registration, that later by a registered lease deed dated December 1, 1984 (annexure B) leased out the right to conduct the said unit to another company by name M/s. Eagle Distillery (P) Ltd. having its registered office at Bangalore in the State of Karnataka and that based on the said lease deed the lessee was conducting the distillery from December 1, 1984. Counsel submitted that as per the lease agreement the liability to pay the sales tax, etc., from December 1, 1984 was on the lessee and that this lease agreement was approved by the Excise Commissioner. Counsel further submitted that the petitioner had informed the factum of lease and the stoppage of business by the petitioner to the assessing authority in May, 1985 immediately after getting the approval of the lease from the Excise Commissioner. Counsel submitted that the liability to pay sales tax in respect of the distillery business conducted thereafter is on the lessee and that the lessee was doing the business, filing returns and was remitting the tax in its status as a dealer under the KGST Act. Counsel submitted that though the lessee had applied for independent registration as a dealer both under the KGST Act and under the CST Act after the lease arrangement, in view of certain difficulties pointed out by the lessee and the request made by the lessee for permission to use the registration certificate and the assurance given that tax will be promptly paid, petitioner had requested to continue the registration by various letters up to December 31, 1985 and that thereafter the petitioner did not seek for any extension. Counsel submitted that this Court in the earlier proceedings has clearly found that the lessee was doing the business and that the books of accounts and other documents maintained by the petitioner would clearly show that the petitioner was not doing the distillery business from December 1, 1984. Counsel further submitted that the business was admittedly being conducted by the lessee and therefore the respondent could have proceeded only against the lessee for realisation of the arrears of sales tax.
13. Shri Raju Joseph, learned Special Government Pleader appearing for the respondent, on the other hand, submitted that the question as to who is liable to pay sales tax due during these two years in respect of the transactions of the M/s. Normandy Breweries and Distilleries Ltd. was a matter left by this Court to be decided by the assessing authority with reference to the files and with reference to the documents to be produced by the parties. He also submitted that this Court declined to interfere with the assessment orders passed for the aforesaid two years specifically in the judgment dated April 7, 1994 in O.P. No. 4315 of 1994. Special Government Pleader submitted that though the petitioner had entered into a lease arrangement with another company, M/s. Eagle Distillery (P) Ltd., Bangalore ; had got approval of the same from the Excise Commissioner and had inducted them in the distillery, employees of the lessee continued to be the same and that the registration certificate issued to the petitioner was allowed to be used by the lessee admittedly for the period up to December 31, 1985. He further submitted that though the lessee had applied for separate sales tax registration after making use of the registration certificate issued to the petitioner, lessee had informed the assessing authority that they do not require the registration both under the KGST Act and under the CST Act at present and that they will apply for registration during the assessment year 1987-88. Special Government Pleader further submitted that based on this the assessing authority by proceedings rejected the application for registration submitted by the lessee and also directed them to apply for registration when they start business. Special Government Pleader further submitted that the name of M/s. Normandy Breweries and Distilleries Ltd., as also the registration certificate issued to the said unit and the various documents such as delivery note, C forms, etc., obtained under the registration certificate of the petitioner were being used throughout the two years. Special Government Pleader further submitted that notwithstanding the fact the lease deed was executed in favour of the lessee, the conduct of the petitioner would clearly establish that notwithstanding the lease, the business was being conducted by the petitioner itself through its employees and therefore in the circumstances of the case the assessing authority and the Tribunal were perfectly justified in holding that the lessee was acting only on behalf of the petitioner and therefore the assessment orders making the petitioner and the lessee liable to pay the tax for the assessment years 1986-87 and 1987-88, both under the KGST Act and under the CST Act are justified. Special Government Pleader has also placed before the court the assessment records for the aforesaid two years as well as the registration files of the lessee.
14. We have considered the rival submissions. The undisputed facts are that the petitioner is the owner of the distillery by name M/s. Normandy Breweries and Distilleries Ltd. at Cheemeni in Hosdurg Taluk, that they had obtained licence from the excise authorities and was conducting the business in the aforesaid name till December 31, 1984, that the petitioner had entered into a lease arrangement with another company by name M/s. Eagle Distillery (P) Ltd., Bangalore, evidenced by a lease deed dated December 1, 1984, that the Board of Revenue had also given its approval by proceedings dated April 27, 1985, that as per the said lease deed, the lessee is given the right to hold the same from December 1, 1984 up to November 30, 1989, that as per clause 3 of the lease deed, the lessee shall pay to the petitioner a monthly rent of Rs. 1,25,000 on or before the last day of each concerned month, that under clause 4 all liabilities pertaining to the schedule properties and the business therein, including those in respect of employees and the excise staff posted in the schedule properties from time, excise duties, sales tax and other liabilities on any account whatsoever up to December 1, 1984 shall be met by the petitioner and shall thereafter be met by the lessee, that the lessee shall be liable to duly pay to the concerned authorities the full amount of excise duty, sales tax, additional sales tax and all other taxes, duties, cesses and levies, etc., that the lessee shall with effect from December 1, 1984 take into its service and continue without interruption the service of all staff and workers now employed by the petitioner in the schedule properties, that unless earlier terminated as hereinafter provided, the lease created shall stand expired on the midnight of the November 30, 1989, that though the lease granted is not terminable by either party, the petitioner shall have the right in the event of rent herein reserved remaining unpaid for any four consecutive months, or in the event of the lessee committing any breach of any of the terms, conditions or covenants contained therein to forthwith terminate the lease and to recover from the lessee in lump any rent remaining due to the petitioner until then as well as the entire balance rent in respect of the balance unexpired period of the lease as also any damages or losses whatsoever caused to the petitioner and that the time fixed for payment of rent reserved, inter alia, shall be the essence of the contract.
15. Notwithstanding the fact that the petitioner had intimated the closure of the business and the lease agreement aforementioned on May 4, 1985 and had also sent a letter on May 31, 1985 stating that the Distillery unit at Cheemeni, namely, Normandy Breweries and Distilleries Ltd., will not be in any way responsible for the tax due after December 1, 1984, the petitioner itself had written to the assessing authority on July 30, 1985 requesting for continuation of the registration till August, 1985 and thereafter by communication dated August 24, 1985 to continue the same till September 30, 1985 and further up to December 31, 1985. The lessee had made an application for registration before the assessing authority on April 22, 1986. Further, in spite of the various notices, lessee did not cooperate with the assessing authority in the matter of registration and lastly the lessee by communication dated December 19, 1986 requested the assessing authority to keep in abeyance the registration proceedings for the present and stated that the lessee will be approaching the assessing authority for sales tax registration in 1987-88. The assessing authority accordingly passed an order on December 29, 1986 rejecting the application for registration. It was specifically stated therein that the lessee can apply for registration certificate afresh when they starts business in the new name.
16. As already noted, though the petitioner wanted an adjudication of the contention that after the lease arrangement petitioner is not at all liable to pay the sales tax due in respect of the transactions of M/s. Normandy Breweries and Distilleries Ltd., this Court in the first writ petition had only left the matter to be adjudicated by the assessing authority in the final assessment proceedings. It is true that the lessee was the 6th respondent in the said writ petition and that it was represented by counsel. It is not seen that the 6th respondent has raised any serious contention in the matter. However, this Court had left open the question as to whether it is the petitioner or the 6th respondent liable to pay the sales tax for the two years. It is also seen stated that the 6th respondent had filed letters authorizing Krishnan Bhattathiri, Chief Executive of the unit to represent them on their behalf and that it was in that capacity the said Krishnan Bhattathiri had remitted the renewal fee for registration and made application for the same and that neither the petitioner nor its authorized agents had applied for renewal of the registration after April 1, 1986. Petitioner with reference to the hearing given to it on May 25, 1993 submitted a hearing note dated June 1, 1993 (annexure M). However, when the assessing authority had issued pre-assessment notices, the petitioner did not respond to the same in time and the assessments were completed on January 31, 1994. Though the assessment orders were challenged, this Court directed the petitioner to prosecute the appeals, but stayed the recovery proceedings till the disposal of the appeals.
17. Here it must be noted that the assessment orders for the years 1986-87 and 1987-88 both under the KGST Act and under the CST Act were passed making both the petitioner and the lessee liable to pay the sales tax. In other words, assessments are both against the petitioner and the lessee. It must also be noted that apart from the fact that the lessee did not respond to the notices issued by the assessing authority pursuant to the direction issued by this Court in the judgment dated February 12, 1993 in O.P. No. 1468 of 1989 (annexure L), the lessee did not file any appeal against the assessment orders. Thus the assessment orders against the lessee has become final.
18. Now, so far as the petitioner is concerned, its appeals were heard and disposed of by the first appellate authority by his order dated January 31, 1995. After considering the contentions of the petitioner, the first appellate authority observed as follows:
I find substantial force in the arguments advanced and evidences produced as detailed in the preceding paragraph which would point to the fact that appellant, i.e., Periyar and Pareekanni Rubber Ltd., have not conducted any business in I.M.F.L. during the years 1986-87 and 1987-88. The books of accounts produced for the year 1986-87 before the assessing authority did not reveal anything to show that the appellant had business in the production and sale of I.M.F.L. On the other hand evidences such as letter from Kerala State Beverage Corporation, etc., pointing out the fact that M/s. Eagle Distillery (P) Ltd. cannot escape from the charge that they were doing business in the premises of the appellant. Invoices were raised by M/s. Eagle Distilleries only, in the trade name of Normandy Breweries and Distilleries. All the evidences produced and nature and circumstances of the cases to the rescue of the appellant. Without prejudice to my observation and findings above, I find that the entire facts, evidences and circumstances of the case are to be investigated once again keeping in line with the direction of the honourable High Court of Kerala contained in its judgment No. 1468 of 1989 dated February 12, 1993 and 4315 of 1994 dated April 7, 1994, I therefore find that the assessments should go back to the assessing authority, for fresh disposal after hearing M/s. Eagle Distilleries (P) Ltd., verifying their bank accounts referred to above and also after such other enquiries as found fit. The assessments completed for the years 1986-87 and 1987-88 under the KGST Act and CST Act made in the name of the appellant are accordingly cancelled. The assessing authority shall have the liberty to initiate proceeding against M/s. Eagle Distilleries Pvt. Ltd., based on the material on merit.
19. The Tribunal, in the appeal preferred by the State and in the cross-objection preferred by the petitioner, after considering the respective contentions, held as follows:
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 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, the assessing authority was perfectly justified in finding that, the lessor and lessee were colluding with each other and were practising fraud on the Government in order to evade payment of tax which is legitimately due to the Government.
The case of the lessor that since lessee kept huge arrears of rent, i.e., Rs. 30 lakhs, and hence, lease was thereby terminated also could not be accepted since no reasonable man would remain silent without taking any action for such a considerable long period. Thus, considering all the above facts and circumstances of the matter, we find that the assessing authority was justified in finding that, here, both the lessor and lessee were liable for the tax liability, and hence, the first appellate authority was not correct in cancelling the assessments made in the name of M/s. Periyar and Pareekanni Rubbers Ltd., and in directing the assessing authority to initiate action against M/s. Eagle Distilleries (P) Ltd. Hence, we hereby quash the order of the first appellate authority and restore the order of assessments. Thus, all these appeals succeed and cross-objections are liable to be dismissed.
20. From the aforesaid discussion of the materials on record, the following facts and circumstances are in support of the contentions of the petitioner: The petitioner had executed a registered lease agreement dated December 1, 1984 transferring the right to manufacture and vend foreign liquor in the petitioner’s unit to M/s. Eagle Distillery (P) Ltd., intimated the assessing authority that the business hitherto conducted by the petitioner in the name of M/s. Normandy Breweries and Distilleries Ltd., is being conducted by the lessee from December 1, 1984 ; the petitioner had also produced the registered lease deed before the assessing authority ; the Board of Revenue (Excise) had permitted the lease arrangement as per order dated April 27, 1985 ; the lessee had applied for separate registration from April 1, 1985 ; the lessee had been filing returns for the subsequent periods ; sales invoices showed the name of M/s. Eagle Distillery (P) Ltd., the petitioner had not accounted the transactions of M/s. Normandy Breweries and Distilleries Ltd., in its books or in the balance sheet.
21. On the other hand, the following facts and circumstances are against the petitioner: Though the petitioner had intimated the factum of lease agreement and the closure of its business the petitioner had requested the assessing authority by various communications to continue the registration granted in its favour for being used by the lessee ; the very same employees of the petitioner’s unit, viz., M/s. Normandy Breweries and Distilleries Ltd., continued to be the employees of the lessee by virtue of the lease agreement ; Krishnan Bhattathiri who was the Chief Executive of the petitioner was the Chief Executive of the lessee even after the lease agreement ; he had submitted applications for renewal of the registration of the petitioner by remitting the requisite fees ; though the lessee filed application for registration, they were not seriously prosecuting the same and ultimately they submitted that they do not require the registration at present and that they will apply for the registration during 1987-88 ; the assessing authority in the said circumstances rejected the application for registration submitted by the lessee with a direction to file fresh application when the lessee starts the business in the name of their unit ; the registration certificate issued to the petitioner was allowed to be used by the lessee ; the delivery notes, C forms and other documents issued to the petitioner were allowed to be used by the lessee for the business conducted during 1986-87 and 1987-88 and further though the lessee entered appearance before this Court in the first writ petition, and was a party to the judgment in that case, they did not respond to any of the notices issued by the assessing authority nor did they challenge the assessment orders passed against them.
22. One more important aspect to be noted is that though the lessee had defaulted lease rent consecutively for more than 4 months, the petitioner did not take any action for terminating the lease arrangement in accordance with the clause in the lease deed. For 2 years the petitioner did not take any steps for realization of the rent or for termination of the lease.
23. The question as to whether the petitioner is liable to pay the sales tax due for the assessment years 1986-87 and 1987-88 has to be considered in the above background.
24. According to us, the facts and circumstances mentioned hereinabove would indicate that notwithstanding the induction of the lessee by legally accepted methods, namely, execution of registered lease deed, permission from the Board of Revenue (Excise), it would appear that the business of M/s. Normandy Breweries and Distilleries Ltd., was being conducted by the petitioner, of course with the connivance of the lessee. We say so, because the petitioner had permitted the registration certificate and various other documents, such as delivery notes, C forms, etc., issued by the assessing authority to the petitioner, for the business conducted in the name of the lessee, the petitioner’s employees, particularly, the chief executive Mr. Krishnan Bhattathiri, continued to be the chief executive of the lessee even after the lease ; he, on behalf of the unit submitted application for renewal of the certificate of registration granted to the petitioner by remitting the required fees ; the petitioner did not act in consonance with the terms of the lease, in that though the lessee had defaulted payment of rent for more than four months, no action was taken to terminate the lease agreement and even on their own showing, particularly its letter addressed to the assessing authority on March 20, 1989 intimating the factum of termination of the lease had clearly stated that the lessee had defaulted payment of the lease rent to the tune of Rs. 30 lakhs (for 24 months), that they owed Rs. 8,00,000 to the sales tax department, Rs. 1.5 lakhs to the excise department, besides non-payment of employees wages. That apart, even after the lease agreement though the lessee had applied for independent registration both under the KGST Act and under the CST Act none of the directors of the lessee-company even appeared before the assessing authority in spite of receiving several notices and they ultimately did not prosecute the application by stating that they will approach the assessing authority for registration in the year 1987-88. Though the assessing authority has directed the lessee to apply for fresh certificate of registration after commencing the business, the lessee did not approach the assessing authority thereafter for registration. Lessee had also not seriously contested the matter in spite of notices issued and the lessee did not even question the liability cast on them. These circumstances would clearly indicate that the lessee was not at all concerned with the consequences. It may be probably due to the fact that the lessee may not be having any assets. The entirety of the circumstances according to us clearly demonstrate that what was apparent was not the real and that the petitioner had employed a device by which it can escape from the sales tax liability by defrauding the Revenue.
25. This Court in the earlier judgments clearly directed the assessing authority to consider as to whether the sales tax liability can be saddled on the petitioner or the lessee with reference to the records. The assessing authority taking into account the facts and circumstances of the case held that the lessee was only acting as the agent of the petitioner and that it is in the above circumstances, the assessing authority has made the petitioner and the lessee jointly and severally liable to pay the sales tax for the years 1986-87 and 1987-88, both under the KGST Act and under the CST Act, Petitioner has taken a contention that the assessing authority cannot make both the petitioner and the lessee liable for the sales tax dues. In othdr words, the contention of the petitioner was that the assessing authority has to make either the petitioner or the lessee liable, but cannot make both liable for the same dues. The registered dealer in respect of the transactions of M/s. Normandy Breweries and Distilleries Ltd., was the petitioner though the petitioner had stated that it had discontinued the business from December 1, 1984. Petitioner continued to be registered dealer up to December 31, 1985. Petitioner did not return the various documents such as delivery notes, C forms, etc., the chief executive who was the chief executive of the petitioner, even after the lease applied for renewal of the certificate of registration and the business continued with the said registration certificate during both these assessment years. In these circumstances, the petitioner themselves can be held responsible for the sales tax liability of the unit for the years 1986-87 and 1987-88 both under the KGST Act and under the CST Act.
26. In this context, it is not out of place to refer to the provisions of section 19C of the KGST Act providing for protective assessment. As per the said section notwithstanding anything to the contrary contained in any judgment, decree, order, direction or decision of any court, Tribunal or other authority, where the assessing authority has reason to believe that any person, is, or was carrying on business in the name of, or in association with any other person, either directly or indirectly, whether as agent, employee, manager, power of attorney holder, guarantor or in any other capacity, such person and the person in whose name the registration certificate, if any, is taken, shall jointly and severally, be liable for the payment of the taxes, penalty or other amount due under this Act which shall be assessed, levied and recovered from all or any of such person or persons as if such person or persons are dealers. The proviso thereto only says that before taking action under this section, the persons concerned shall be given a reasonable opportunity of being heard. Though section 19C of the KGST Act was inserted only with effect from August 29, 1989 and would apply prospectively, the principles behind the same have to be noted.
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 questioned its liability fixed under the assessment orders dated January 31, 1984. In the above circumstances, we uphold 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 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 years under both the enactments. After exhausting the 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 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.
29. Tax revision cases are disposed of as above.