OM PARKASH WALECHA Vs. STATE OF HARYANA

JUDGEMENT

(1.) THE moot controversy raised in the instant petition filed under Article 226 of the Constitution is as to whether the outstanding dues of the State and Central Sales Tax payable by a Company can be recovered from the Director of the Company in his personal capacity. The instant petition prays for quashing show cause notice dated 22.12.2005 (P-1), issued by the Assistant Collector Grade-I/Sub-Divisional Magistrate (Hauz Khas), New Delhi-respondent No. 2, for recovery of Rs. 22,25,036/- as arrears of land revenue on the basis of Recovery Certificate dated 19.10.2005, issued by the Collector-cum-Deputy Excise and Taxation Commissioner, Bahadurgarh-respondent No. 3. Quashing of an earlier notice dated nil, issued by respondent No. 2 for recovery of Rs. 23,20,036/- on account of Sales Tax payable by M/s Agni Wire Industries (P) Ltd., Bahadurgarh, has been sought (P-3), which was issued in the name of the petitioner as well as his son Shri Pankaj Walecha. It has further been prayed that the respondents be directed not to recover the amount in question from the petitioner in his personal capacity being the Director of the Company.

(2.) THE petitioner is one of the Directors of M/s. Agni Wire Industries Pvt. Ltd. Bahadurgarh, which started its business of manufacture of aluminum wires in 1996. It is claimed that Sales Tax exemption for the period from 24.04.1996 to 23.04.2005, in terms of Rule 28-A of the Haryana General Sales Tax Rules, 1975, was granted to the company of the petitioner, as is evident from Exemption Entitlement Certificate dated 16.03.1997 (P-2). Somehow, the company could not survive and suffered huge financial losses. In the year 1999, the company was taken over by the Haryana Financial Corporation from whom a loan was taken. Subsequently, the Haryana Financial Corporation sold the movable and immovable assets of the company. In December 2002, the petitioner and his son, who was also on the Board of Directors of the Company, received a notice from respondent No. 2 to pay an amount of Rs. 23,20,036/- as Sales Tax liability of M/s Agni Wire Industries Pvt. Ltd. (P-3). The petitioner replied to the said notice, which was duly received on 28.01.2003, taking the stand that he was not aware of any proceedings out of which the demand notice was issued (P-4). On 22.12.2005, respondent No. 2 again sent a show cause notice to the petitioner for recovery of Rs. 22,25,036/- as arrears of land revenue on the basis of Recovery Certificate dated 19.10.2005, issued by the Collector-cum-Deputy Excise and Taxation Commissioner, Bahadurgarh-respondent No. 3 (P-1). On 18.01.2006, the petitioner sent a reply to the notice (P-5). It has further been claimed that the son of the petitioner also addressed a letter to respondent No. 2 apprising him various judgments passed by this Court as well as Kerala High Court wherein it has been held that the directors of the company are not personally liable to pay the sales tax liability of the company (P-6). The petitioner then filed C.W.P. No. 9395 of 2006 in the Delhi High Court, impugning notice dated 22.12.2005, however, the same was dismissed as withdrawn vide order dated 23.05.2006 with liberty to file the same in appropriate Court (P-7). The petitioner has challenged the notices (P-1 and P-3) on the issue of jurisdiction of the respondents to demand and recover arrears of Sales Tax personally from him being a Director of the Company on the ground that neither he is an assessee nor a defaulter and there is no provision under the Haryana General Sales Tax Act, 1973 (for brevity, 'the 1973 Act') or the Central Sales Tax Act, 1956 (for brevity, 'the 1956 Act'), which empowers the respondents to recover the arrears due from the company by proceeding against its Director.

(3.) LEARNED counsel for the petitioner has vehemently argued that the matter is squarely covered by the Division Bench judgments of the Court in the cases of Suneet Khurana v. Assistant Collector, (1997) 10 PHT 495 (P&H), and Mukesh Gupta v. State of Haryana, (1996) 8 PHT 326 (P&H), wherein it has been held that no recovery either of Haryana General Sales Tax or Central Sales Tax could be effected personally from the Director in respect of the liability of the Company. Learned counsel also referred to Single Bench judgments of Karnataka High Court and Kerala High Court in the cases of Lalita Shivaram Ubhaykar v. Commercial Tax Officer, Bangalore, (1975) 35 STC 267, and Ramachandran v. State of Kerala, (1984) 55 STC 209.