Case Law Details

Case Name : Sunita Ramesh Bansal Vs Assistant Commissioner of State Tax (Gujarat High Court)
Appeal Number : R/Special Civil Application No. 229 of 2022
Date of Judgement/Order : 13/01/2022
Related Assessment Year :

Sunita Ramesh Bansal Vs Assistant Commissioner of State Tax (Gujarat High Court)

It appears that Ms. Veena Bhagvandas Jindal from whom the writ applicant purchased the plot, at one point of time, was a Director in a Company by name the Jindal Alufoils Pvt. Ltd. According to the writ applicant, she came to know upon inquiry that Ms. Jindal had resigned as a Director of the said Company way back in the year 2015.

It appears that the State intends to recover some amount from the Jindal Alufoils Pvt. Ltd. towards the sales tax. For the purpose of recovery of such dues, the State went to the extent of creating a charge over the property purchased by the writ applicant on the premise that the said property was owned by the Director of the said Company and the Director would be responsible for the dues of the Company. It appears that the charge has been created in the record of rights by mutation of entries.

The section 78 specifically deal with offence by companies and the criminal liability is fastened on the Directors who were in charge of and were responsible for the conduct of the business of the Company, but does not at all provide for any personal liability of the Directors to pay the sales-tax dues of the Company nor does it empower the authorities to proceed against the personal properties of the Directors. The very fact that the same Legislature has in the same Act provided for criminal liability of the Directors without providing for any personal liability of the Directors of their personal properties for payment of sales-tax dues of the Company in question, the provisions of Section 78 lend support to the case of the petitioners rather than the case of the authorities.

As regards the faint plea of lifting the corporate veil, as per the settled legal position, the corporate veil is not to be lifted lightly. It is only when there is strong factual foundation for lifting the corporate veil that the question of examining the applicability of the principle of lifting such veil would be required to be examined. In neither of the two petitions raising the controversy, the authorities have passed any specific order fastening the liability on the Directors personally, much less any factual foundation has been laid to invoke the doctrine of lifting the corporate veil. Hence it is not necessary to dilate on the said principle any further.”

In view of the aforesaid, this writ application succeeds and is hereby allowed. The charge created by the State in the revenue records with respect to the subject property is set aside and both the orders of attachment are also hereby quashed and set aside.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following prayers:

“A. YOUR LORDSHIPS be pleased to issue a writ of mandamus or writ of certiorari or any other writ or order or direction, the quashing and setting of the attachment orders dated 10/07/2020 and 28/07/2020 passed by the respondent No.2 (produced at Annexure E and F); and further be pleased to quash and set aside the impugned action of the Respondents whereby a lien/charge is earmarked on the property of the petitioner being plot No.22/a admeasuring 352.25 sq. mtrs. situated at Urmi Cooperative Housing Society, bearing final plot Nos.543, 544, 545, 546, 547 peikki of T.P. Schme No.1, Jetalpur.

B. That pending hearing and final disposal of the present application, YOUR LORDSHIPS be pleased to stay the implementation, operation and execution of the orders dated 10/07/2020 and 28/07/2020 (produced at Annexure E and F) and the impugned action of the Respondent No.1 hereto and restrain the Respondents from taking any coercive steps (including auction) against the property of the petitioner being Plot No.22/a admeasuring 352.25 sq. mtrs. situated at Urmi Cooperative Housing Society, bearing final plot No. 543, 544, 545, 546, 547 peikki of T.P. Schme No.1, Jetalpur;

C. YOUR LORSHIPS be pleased to award the cost of litigation.

D. Any other order or relief that may be deemed just and expedient in the interest of justice.”

2. The facts giving rise to this writ application may be summarized as under:

2.1 The writ applicant purchased an immovable property being the Plot No. 22/A admeasuring 352.25 Sq. Mtrs. situated at the Urmi Cooperative Housing Society, bearing Final Plot Nos.543, 544, 545, 546, 547, paikee of the T.P. Scheme No.1, Jetalpur, originally recorded as Revenue Survey Nos.107, 116 of village: Jetalpur, Taluka and District: Vadodara from one Ms. Veena Bhagvandas Jindal. The purchase of the said property was by way of a registered sale deed.

2.2 It appears that Ms. Veena Bhagvandas Jindal from whom the writ applicant purchased the plot, at one point of time, was a Director in a Company by name the Jindal Alufoils Pvt. Ltd. According to the writ applicant, she came to know upon inquiry that Ms. Jindal had resigned as a Director of the said Company way back in the year 2015.

Directors’ personal property cannot be Attached to Recover Companies Sales Tax Dues

2.3 It appears that the State intends to recover some amount from the Jindal Alufoils Pvt. Ltd. towards the sales tax. For the purpose of recovery of such dues, the State went to the extent of creating a charge over the property purchased by the writ applicant on the premise that the said property was owned by the Director of the said Company and the Director would be responsible for the dues of the Company. It appears that the charge has been created in the record of rights by mutation of entries.

In such circumstances referred to above, the writ applicant has come up before this Court with the present writ application.

3. We have heard Mr. Nimesh Kapadia, the learned counsel appearing for the writ applicant and Mr. Utkarsh Sharma, the learned AGP appearing for the respondents.

4. The issue raised in the present writ application is no longer res integra in view of the pronouncement of this Court in the case of Manharlal Hirjibhai Virdiya Vs. Assistant Commissioner of Commercial Tax, Special Civil Application No.12733 of 2021 decided on 08.10.2021. We quote the relevant observation at paras 8 and 8.1 as under:

“8. Having heard the learned advocates for the respective parties and considering the material on record, it appears that it is not the case of the State that the property in question at any point of time belonged to the company nor is it the case that. The only question that arises for determination in this petition under Article 226 of the Constitution of India is whether for the purpose of recovery of sales tax dues under The Gujarat Value Added Tax Act and Gujarat Sales Tax Act against Gujarat against a private limited company, the personal property belonging to the Managing Director of such company can be attached.

8.1. The Co-ordinate Bench while considering the similar issue, relying upon the decision of Division Bench of this Court rendered in Special Civil Application No.243 of 1991 with Special Civil Application No.3103 of 1991 and Special Civil Application No.7578 of 1991 in the case of Mr.Choksi Vs. State of Gujarat, has allowed the said petition and quashed and set aside the impugned notification by holding that the auction of the residential property in question as illegal and bad in law and restrained the respondents from attaching or selling any private property of the Managing Director of the Company for realization of the aforesaid dues. Relevant findings and observations of the aforesaid decisions are as follows:

“12. …..The section 78 specifically deal with offence by companies and the criminal liability is fastened on the Directors who were in charge of and were responsible for the conduct of the business of the Company, but does not at all provide for any personal liability of the Directors to pay the sales-tax dues of the Company nor does it empower the authorities to proceed against the personal properties of the Directors. The very fact that the same Legislature has in the same Act provided for criminal liability of the Directors without providing for any personal liability of the Directors of their personal properties for payment of sales-tax dues of the Company in question, the provisions of Section 78 lend support to the case of the petitioners rather than the case of the authorities.

13. As regards the faint plea of lifting the corporate veil, as per the settled legal position, the corporate veil is not to be lifted lightly. It is only when there is strong factual foundation for lifting the corporate veil that the question of examining the applicability of the principle of lifting such veil would be required to be examined. In neither of the two petitions raising the controversy, the authorities have passed any specific order fastening the liability on the Directors personally, much less any factual foundation has been laid to invoke the doctrine of lifting the corporate veil. Hence it is not necessary to dilate on the said principle any further.”

5. In view of the aforesaid, this writ application succeeds and is hereby allowed. The charge created by the State in the revenue records with respect to the subject property is set aside and both the orders of attachment are also hereby quashed and set aside.

6. If the State has to recover the dues from the Company towards the Sales Tax, it shall proceed to do so in accordance with law by availing any other legal remedy available to it.

With the aforesaid, this writ application stands disposed of.

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