JUDGMENT Hari Swarup, J.
1. The State of U.P. and Ors. have filed this special appeal against the judgment of a learned single Judge of this court allowing in part the writ petition filed by M/s. Jwala Prasad Sheo Govind and Ors., respondent No. 1, against the recovery proceedings taken by the sales tax authorities. According to the petitioner, and as admitted by the appellants, some amount was due as arrears of sales tax against M/s. Jwala Prasad Krishna Pal. The defaulter-assessee M/s. Jwala Prasad Krishna Pal was a joint Hindu family. Without clearing the arrears of sales tax the joint Hindu family discontinued the business. Thereafter, the karta of the joint Hindu family, namely, Jwala Prasad, entered into partnership with Sheo Govind, Raj Narain and Ram Pal. This partnership commenced business in the same premises under the name and style of M/s. Jwala Prasad Sheo Govind. The assets belonging to the joint Hindu family concern were transferred to this partnership-firm and the value credited to Jwala Prasad's account. The petitioners denied their liability to pay the arrears due against M/s. Jwala Prasad Krishna Pal.
2. The sales tax authorities sought to recover the amount of arrears of sales tax due against M/s. Jwala Prasad Krishna Pal from this newly constituted partnership. The partners resisted and challenged the liability to pay the amount and filed the writ petition. The writ petition was allowed in respect of the amount claimed except for Rs. 1,000, which had already been paid by the partnership-firm. The State Government and the authorities have filed this appeal. The contention of the appellants is that the entire amount due against M/s. Jwala Prasad Krishna Pal was recoverable from the newly constituted partnership-firm by reason of the liability created by the proviso to Sub-section (1) of Section 3-C of the U.P. Sales Tax Act and in the alternative by Sub-section (2) of Section 3-C of the Act.
3. We are unable to accept the contention of the appellants. Relevant portions of Section 3-C are as follows:
Section 3-C. Liability to tax of a dissolved firm, etc. -- (1) Where a dealer is a firm or association of persons or 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 where it is found that a change has occurred in the constitution of the firm or association, the firm or association as reconstituted as well as partners or members of the firm or association, as it existed before reconstitution, shall jointly and severally be liable to pay any tax including penalty, if any, due from such firm or association for any period before its reconstitution.
(2) Liability to tax of transferee. -- Where the ownership of the business of any dealer liable to pay tax is transferred, the transferor and the transferee shall jointly and severally be liable to pay the tax including penalty, if any, payable in respect of such business till the time of such transfer, whether the assessment is made or the penalty is imposed prior to or after such transfer.
4. It is obvious that Sub-sections (1) and (2) operate in separate fields. They deal with different situations. Sub-section (1) deals with cases where business is discontinued and Sub-section (2) where the business continues and is transferred.
5. In the counter-affidavit filed on behalf of the appellants it was admitted that M/s. Jwala Prasad Krishna Pal was a Hindu undivided family of which Jwala Prasad and Ram Pal were members. Sub-section (2) of Section 3-C will not, therefore, in terms apply to the case, as the business of the joint Hindu family, admittedly, had been discontinued. That clause is attracted only where ownership of the business is transferred which is possible only while the business is still continuing and has not been discontinued. It contemplates a transfer of a running business. Where there is discontinuance there cannot be succession, for the two are mutually exclusive concepts. Further, there is no material on record on the basis of which it may be held that the ownership of the business as such had been transferred to the newly constituted firm. The evidence appears to be otherwise. Sub-section (2) of Section 3-C cannot, therefore, come to the appellants' aid.
6. Once it is admitted that the assessee-in-default was a joint Hindu family and had discontinued the business, the proviso to Sub-section (1) of Section 3-C will also not be attracted as in terms it does not apply to such a dealer. It covers cases of firms and associations when reconstituted and not a case where the joint Hindu family discontinues business. In such a case there is no dissolution and reconstitution. The joint Hindu family after discontinuing the business would of course continue to be liable to pay arrears of tax and every person, who at the time of discontinuance of the business was a member of the family, would be liable to pay the amount by reason of clause (b) of Sub-section (1) of Section 3-C. The proviso will, however, not be attracted, though the assets of the defaulting dealer will be liable to be followed. But the new partnership cannot as such be liable.
7. In the result, the appeal fails and is dismissed with costs.