JUDGMENT Yashoda Nandan, J.
1. A Division Bench of this Court has referred the following question of law to a Full Bench for its opinion:
"Whether the Karta of a Hindu undivided family which has discontinued business could be arrested in the course of recovery proceedings for the realization of arrears of sales tax and penalty due from the Hindu undivided family for the period prior to the discontinuance of its business?"
The material facts giving rise to this reference are that Messrs. Bharat Ice, Oil ,and Allied Industries was a Hindu undivided family firm. Kunj Behari Lal was the Karte of the family, The firm was registered as a 'dealer' under the U. P. Sales Tax Act -- hereinafter referred to as the Act. The firm which started business in 1965 discontinued it in the year 1970. A sum of Rs. 24,106.65 P. was payable by the firm as arrears of sales tax as well as penalty for the assessment years 1963-69 to 1970-71. A part of this liability had been paid by the firm but a sum of Rs. 6063.12 P. remained due. Sales tax authorities commenced recovery proceedings for the amount. In January, 10-74 the Deputy Collector (Collection), Sales Tax, Moradabad, proceeded to recover the aforesaid amount by arrest and detention of Kunj Behari Lal. Kunj Behari Lal consequently filed the present writ petition challenging the legality of the proceedings on the ground that he could not be arrested and detained for recovery of the arrears of sales tax and penalty which were due from the family firm because he was the Karta thereof. When the petition came up for hearing before a Division Bench of this Court, on behalf of the petitioner reliance was placed on a decision by R. S. Pathak, J. (as he then, was) and C. S. P. Singh, J. in Shiv Narain v. Sales Tax Officer, Muzaffarnagar, (1972) 29 S'TC 150 (All.), in" that decision the contention was accepted that the Karta of a Hindu undivided family could not be arrested for the purposes of recovering tax due from the Hindu undivided family. The learned Judges who decided the case of Shiv Narain (supra) followed with approval an earlier decision by R. S. Pathak, J. in Baladin Ram Kalwar v. Income-tax Officer, B Ward, Varanasi, (1966) 62 ITR 302 (All). Learned Standing Counsel, who represented the respondents in the writ petition, on the other hand, placed reliance on the un-reported decision by one of us (Satish Chandra, J.) in Raja Ram v. Tahsildar, Haldwani, (Civil) Misc. Writ No. 5121 of 1964 decided on 2-3-1965 (All.) in which it was held that by reason of Section 3-C (1) (b) of the Act "every member of the family is deemed to be a 'dealer'. The 'dealer' on non-payment of the tax becomes a defaulter and is proceeded with as such. Each member of the family being himself a 'dealer' would be a defaulter as well. If each member was- a defaulter, proceedings by way of arrest could well be taken against such a member." Since in Shiv Narain's case neither the decision of this Court in Raja Ram's case nor Section 3-C (b) of the Act had been noticed, the Bench before which the writ petition came up for hearing felt that it requires reconsideration. Hence this reference.
2. The question referred to us must be considered with reference to the provisions of the Act unhampered by any decision concerned with the Income-lax Act because no provision exists in the Income-tax Act analogous to Section 3-C which will be adverted to presently.
3. The word 'dealer' is defined in Section 2 (c) of the Act. The definition makes it clear that a Hindu joint family has been treated by the legislature as a 'dealer' and a taxable entity separate and distinct from the individuals constituting it By reason of Section 3 of the Act, every 'dealer', including a Hindu undivided family, incurs the liability to taxation subject to the provisions of the Act. Section 3-C of the Act, as far as relevant for our purposes, runs as follows :
"3-C (1). Where a dealer is a firm, or association of persons or a joint Hindu family, and such firm, association or family has discontinued business--
(a) tax including penalty, if any payable under this Act by such firm, association or family up to the date of such discontinuance may be assessed and determined as if no such discontinuance had taken place; and
(b) every person who was at the time of such discontinuance a partner of such firm or a member of such association or family shall, notwithstanding such discontinuance, be liable severally and jointly for the payment of the tax assessed and penalty imposed and payable by such firm, association or family whether such assessment is made or penalty is imposed prior to or after such discontinuance, and, subject as aforesaid, the provisions of this Act shall apply as if every such person or partner were himself a dealer:
Provided that... ...... ... ...... ... ......"
Section 3-C (1) (a) makes possible assessment of tax and imposition of penalty in respect of a period prior to discontinuance of business by a firm, association of persons or joint Hindu family even after such discontinuance against the firm, association or family as the case might be as if such firm, association or family were still continuing business. The discontinuance of business by a firm, association of persons or joint Hindu family may have been occasioned because of the firm, association of persons or joint Hindu family having come to an end. In such cases proceedings for recovery of taxes assessed in accordance with Section 3-C (1) (a) could not have been taken against the non-existent firm, association of persons or joint Hindu family because they would not be 'dealers'. Section 3-C (1) (b) is intended to meet such situations. On account of this provision of the Act, the taxes assessed and penalties imposed on such firms, associations or families either before discontinuance of business by them or thereafter become, in the eye of law, the joint as well as several liability of every person who was at the time of such, discontinuance a partner of the related firm or member of the concerned association or family. Further as a consequence of the legal fiction introduced by the last clause of Section 3-C (1) (b), the provisions of the Act, including Sections 8 and 33 thereof, become applicable to such partners or members as are contemplated by its earlier part, as if they were themselves the 'dealers' on whom taxes had been assessed or penalties imposed.
4. Because of Section 3-C (1) (b) of the Act thus even after discontinuance of business by a joint Hindu family taxes assessed and penalties imposed on it for a period prior to such discontinuance become the liabilities of every member of such family including its Karta as if he himself were a 'dealer'. If any member of such a family fails to pay the tax or penalty liabilities of the Hindu undivided family, he becomes a defaulter. In such an event if the Karta or any other member of the Hindu undivided family which has discontinued business is nominated in the certificate envisaged by Section 33 of the Act, he would be, in our opinion, liable to be arrested in the course of recovery proceedings for realization of arrears of sales tax and penalty due from the Hindu undivided family. In our opinion, C. M. W. No. 5121 of 1964, D/- 2-3-1965 (All.) (supra) was correctly decided. We are in respectful disagreement with the decision of this Court in (1972) 29 STC 150 (All.) (supra) to the extent that it took a contrary view.
5. For the reasons given above, our answer to the question referred is that:--
"The Karta like any other member of a Hindu undivided family which has discontinued business could be arrested in the course of recovery proceedings for the realization of arrears of sales tax and penalty due from the Hindu undivided family for the period prior to the discontinuance of its business, in case he is mentioned in the certificate contemplated by Section 33 of the. Act."