@JUDGMENTTAG-ORDER
1. The petitioner was a Director in Indian Cardamom Growers Trading Corporation Limited registered under the Indian Companies Act. He resigned from the Directorship in and by letter dated 1.6.1987. The Company had also filed Form-32 with the Registrar of Companies on 1.6.1987 as required u/s 303(2) of the Companies Act, 1956 specifying the changes in the Directorships of the Company. It is the case of the petitioner that he had no connection whatsoever with the said Company after his resignation.
2. In or about November, 1995 the petitioner received a notice from the first respondent alleging that a sales tax of Rs. 3,09,165 was due from the Company towards the Tamil Nadu General Sales Tax and the Central Sales Tax for the year 1981-82. Since the petitioner had nothing to do with the Company, he did not reply for the same. Now, the petitioner received the impugned notice dated 31.10.2001 from the first respondent to recover the said amount under the Revenue Recovery Act. So the petitioner has filed the above writ petition challenging the jurisdiction of the respondents to recover the said amount from the petitioner.
3. Learned counsel for the petitioner has submitted that since the petitioner had already resigned from the Directorship, the recovery proceedings taken against the petitioner cannot be sustained in law. It is not in dispute that the Company is in existence and not wound up. On that basis, learned counsel for the petitioner submitted that there is no power or authority for the respondents to recover the arrears of sales tax due from the Company from the Director who had already resigned long ago.
4. Learned Government Advocate has submitted that since the Company is liable to pay the said huge amount, the respondents sought to recover the amount from the petitioner who was, the Director. But he fairly admits that there is no provision to enable the respondents to take such recovery proceedings against the petitioner.
5. To appreciate the rival submissions, it is necessary to appreciate the scheme of the Act. Section 19-B of the Tamil Nadu General Sales Tax Act gives power to the authorities to recover the tax from the Director of the Company at the time of such winding up Section 19-B of the Act reads as follows:
"19-B. Liability to lax private company on winding up:- Where a dealer is a private company and such company is wound up, every person who was a director of such company at the time of such winding up shall, notwithstanding such winding up, be jointly and severally liable for the payment of tax, penalty or other amount payable under this Act by such company whether assessment is made prior to or after such winding up unless he proves that the non-payment of lax cannot be attributed to any gross neglect misfeasance or breach of duty on his part in relation to the affairs of the company."
Even the said provision will apply only if a Company had wound up and to the directors who hold the said status at the time of winding up of the company. That is not the case here. So Section 19-B does not empower the authorities to take recovery proceedings against the petitioner.
6. Section 19-A of the Act will apply regarding the liability of the partitioned Hindu family, dissolved firm etc. The said provision also cannot be made applicable to the petitioner''s case.
7. The other provision to be considered is Section 18 of the Central Sales Tax Act. It deals with the liability of Directors o� private company in liquidation which reads as follows:
"Notwithstanding anything contained in the Companies Act, 1956, when any private company is wound up after the commencement of this Act, and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then, every person who was a director of the private company at any time during the period for which the tax is due shall be jointly and severally for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.
So according to the said provision, even if any private company is wound up after the Act, the person who was a director, during the period for which the tax is due, is also jointly and severally liable to pay the amount. But since the company in question is not in liquidation or is not yet wound up, the impugned proceedings taken against the petitioner cannot be sustained.
8. A Division Bench of the High Court of Andhra Pradesh in
"6. On the other hand, the learned Special Government Pleader for Taxes meekly attempt to support the impugned action.
Section 16-B of the APGST Act reads:
"Liability of directors or a private company in liquidation.-
When any private company is wound up and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of the private company at any time during the period for which the tax is due, shall be jointly and severally liable for the payment, of such tax, unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company."
It is apparently clear from the provisions of Section 16-B that, that section has no application at all unless the company is wound up. According to the provisions of Section 16-B, the directors of a private limited company will become liable for any sales tax arrears only under the circumstances clearly contemplated in that section, viz., in the course of liquidation and if the tax assessed on the company is found not recoverable in the liquidation proceedings. It is relevant to note that in respect of the tax assessed and due from the assessee-company, no demand could be forwarded by the respondents to the petitioner-director for recovery of the arrears of tax except in the manner provided in Section 16-B. In the instant case, the assessee-company is not in liquidation and it has not yet wound up under the provisions of the Companies Act and therefore the necessary conditions to invoke the provisions of Section 16-B do not exist and consequently the impugned notice could not be treated to have been issued in exercise of the power conferred on the second respondent by Section 16-B of the APGST Act. In the case of Ramnarayan Shahu v. Commercial Tax Officer, 1990 (78) STC 97; 1990 (10) APSTJ 197, it was held that the directors of a private limited company cannot be proceeded against personally in recovery of the amounts due from the company except in the manner provided u/s 16-B of the APGST Act and the impugned notice issued to one of the directors was quashed."
9. The provision which has been dealt with in the above decision is similar to Section 18 of the CST Act and the said judgment is applicable to the facts of the case in all force.
10. In view of the above said principles of law and Section 18 of the CST Act the proceedings taken by the respondents against the petitioner is without jurisdiction and authority or law. So the same is set aside. The writ petition is allowed. No costs. Consequently W.P.M.P. No. 33128 of 2001 is closed.
