NISHAD PATEL Vs. STATE OF KERALA

JUDGEMENT

(1.) Heard counsel on both sides.

(2.) Petitioners are Directors of a company by name Alliance Leathers (P) Ltd. which had availed a loan from K.S.I.D.C. and K.F.C, to set up a factory at Edayar for manufacture of dressed, tanned hides and skins from raw hides and skins. Exts. P2 to P6 are the preassessment notices issued by the 3rd respondent against the company for the years 1990-91 to 1993-94 proposing to assess the company under the Kerala General Sales Tax Act. On receipt of Exts. P2 to P6, the first petitioner filed Ext. P7 reply in his capacity as a Director of the company. In Ext. P7, the first petitioner specifically requested the 3rd respondent to keep the assessment and penalty proceedings pending till final decision is taken by the 2nd respondent on the question of exemption as an S.S.I. Unit. However, no final assessment orders or penalty order pursuant to Exts. P2 to P6 have been served either on the company or on the petitioners till this date to the best of the knowledge of the petitioners. While so, on 30.3.1995, officers of the 5th respondent namely; the Special Tahsildar (RR), Kanayannur came to the house where the petitioners are residing and told the first petitioner that recovery proceedings for recovering sales tax due from the company are sought to be taken against the petitioners under S.23 of the Kerala General Sales Tax Act. Aggrieved by the aforesaid action of the respondent in making the petitioners liable for arrears of sales tax due from the company, they have approached this Court with the present writ petition for the issuance of a writ of certiorari to quash Exts. P2 to P6 and for quashing all proceedings taken by respondents 3 to 5 against the petitioners under S.23(2) of the Kerala General Sales Tax Act in respect of the sales tax allegedly due from M/s. Alliance Leathers (P) Ltd. and for other incidental reliefs.

(3.) Moreover, no assessment order has been served either on the company or on the petitioners in respect of the sales tax allegedly due from the company. Without serving assessment orders, the 3rd respondent cannot initiate proceedings for recovery of sales tax said to have been assessed. After filing Ext. P7 reply to the preassessment notices and penalty notice, the petitioners have not heard anything from the 3rd respondent in respect of the same. As such, the proceedings initiated by the 3rd respondent and continued by respondents 4 and 5 without serving copies of assessment orders and others imposing penalty on the petitioners is totally without jurisdiction and unsustainable. The case law on the subject is covered by two decisions of this Court reported in Ramachandran v. State of Kerala ( 1983 KLT 1024 ) and Punalur Paper Mills Ltd. v. District Collector, Quilon ( 1985 KLT 758 ). In Ramachandran's case it has been held that there is no provision of law which enables the Revenue to proceed against the petitioners who are only Directors of the company, personally for recovery of arrears of sales tax due from the company, which is a distinct and different legal entity. In the latter decision cited supra, it was ruled out that for recovery of sales tax arrears due from the company, no proceedings can be initiated against the Director or the Managing Director. In the light of the above decisions it has to be held that the petitioners are not liable to be proceeded against for recovery of sales tax allegedly due from the company of which they are only directors with no personal liability.