Personal liability for company tax dues requires express statutory authority; a managing director cannot be arrested for corporate arrears.

A limited company is a separate juristic person, so sales tax arrears due from the company cannot be recovered by arresting its managing director unless a statute expressly creates personal liability. Section 6 of the Punjab General Sales Tax Act, 1963, was held inapplicable to an incorporated company, and Rule 40(1) of the Punjab General Sales Tax Rules did not authorise arrest for company dues. Mere difficulty in recovery from the company did not justify personal arrest. The arrest warrants against the managing director were therefore liable to be cancelled, and recovery had to proceed only against the company and its assets.

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Issues: Whether the managing director of a limited company could be arrested for recovery of sales tax arrears due from the company.

Analysis: A limited company is a juristic person distinct from its shareholders and directors. In the absence of a statutory provision making the managing director personally liable, recovery of assessed sales tax due from the company could only be enforced against the assets of the company. Section 6 of the Punjab General Sales Tax Act, 1963, dealing with partition, dissolution or disruption of certain dealers, had no application to an incorporated company. Rule 40(1) of the Punjab General Sales Tax Rules did not authorise arrest of the managing director for the company's tax dues. Mere difficulty in recovering the tax from the company could not justify arrest of the petitioner.

Conclusion: The arrest of the managing director for recovery of the company's sales tax arrears was unlawful, and the arrest warrants were liable to be cancelled. The decision was in favour of the petitioner.

Final Conclusion: Personal arrest of a director or managing director cannot be used as a mode of recovery for tax dues owed by a limited company unless the governing statute expressly creates such personal liability.

Ratio Decidendi: A company's tax liability does not become the personal liability of its directors or managing director unless the statute expressly so provides; recovery must proceed against the company and its assets.

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