Vicarious tax liability of directors: private company restriction under section 9D, but broader proceedings may continue under section 16(5).

Section 9D of the Rajasthan Sales Tax Act, 1954 is confined to directors of private companies and cannot be extended to a director of a public company. By contrast, section 16(5) uses the broader term "company" and, read with the Companies Act, 1956, can apply to both private and public companies. That provision permits proceedings against a director or other officer where the company's offence was committed with consent, connivance, or neglect. The director's liability therefore depends on proof of the statutory ingredients, and section 9D does not bar action under section 16(5).

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Issues: (i) Whether section 9D of the Rajasthan Sales Tax Act, 1954 could be invoked against a director of a public company. (ii) Whether section 16(5) of the Rajasthan Sales Tax Act, 1954 permitted proceedings against a director of a public company for liability arising from offences committed by the company.

Issue (i): Whether section 9D of the Rajasthan Sales Tax Act, 1954 could be invoked against a director of a public company.

Analysis: Section 9D is expressly confined to directors of a private company. Its text and explanation show that the special deeming liability created by that provision is attracted only where the company is a private company, including a private company later converted into a public company for the relevant prior period. A public company does not fall within that provision.

Conclusion: Section 9D could not be invoked against the petitioner as director of a public company.

Issue (ii): Whether section 16(5) of the Rajasthan Sales Tax Act, 1954 permitted proceedings against a director of a public company for liability arising from offences committed by the company.

Analysis: Section 16(4) and section 16(5) use the expression "company" without limiting it to a private company. The term is to be understood in the sense given by the Companies Act, 1956, under which both private and public companies are included. Section 16(5) creates liability where an offence by the company is committed with the consent, connivance, or neglect of a director or other officer, and the provision operates independently of section 9D. The director can therefore be proceeded against if the statutory ingredients are established, though the factual determination remains for the assessing authority.

Conclusion: Section 16(5) applied to the petitioner and proceedings could be maintained subject to proof of the statutory ingredients.

Final Conclusion: The review petition failed in the majority view because the petitioner's immunity under section 9D did not bar action under section 16(5), and the challenge to the notice was rejected.

Ratio Decidendi: A provision confined to directors of private companies cannot be extended to directors of public companies, but a separate penal liability clause using the wider term "company" may apply to directors of public companies if the statutory conditions for vicarious liability are satisfied.

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