Director liability for company tax arrears arises only on winding up; procedural rules cannot create personal recovery.

Personal liability for a private company's tax arrears could not be fastened on ex-directors under the Tamil Nadu General Sales Tax Act, 1959, because Section 19B applies only where the company has been wound up and the directors held office at that time. The company had not been wound up, so the statutory basis for recovery was absent. Rule 40 was held to be merely procedural and could not independently create director liability or support recovery in the absence of the substantive conditions in the Act. In the absence of any winding-up order or other basis to lift the corporate veil, the demand notice against the ex-directors was without jurisdiction and unsustainable.

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Issues: Whether tax arrears of a private company could be recovered from its ex-directors under the Tamil Nadu General Sales Tax Act, 1959, in the absence of winding up of the company, and whether Rule 40 could independently sustain such recovery.

Analysis: Section 19 applies to firms and partners, and Section 19A applies to Hindu undivided families, dissolved firms and associations of persons. Section 19B creates liability of directors only when a private company is wound up, and the liability extends to directors who held office at the time of winding up. The company in question had not been wound up, so Section 19B was not attracted. Rule 40 is only a procedural provision relating to intimation and registration and cannot itself authorise recovery from directors when the substantive liability provisions do not apply. In the absence of any winding up order or other material justifying lifting of the corporate veil, the ex-directors could not be proceeded against personally for the company's tax dues.

Conclusion: Recovery from the ex-directors was impermissible, and the impugned demand notice was without jurisdiction.

Final Conclusion: The tax demand against the ex-directors could not be sustained, and the challenge to the recovery notice succeeded.

Ratio Decidendi: Personal liability for company tax arrears can be fastened on directors only when a specific statutory provision so provides, and under Section 19B such liability arises only upon winding up of the private company.

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