Personal liability of company directors for tax arrears requires express statutory basis; premature recovery without assessment is unsustainable.

Directors are not personally liable for a company's sales tax arrears merely because they hold office, unless a statute expressly creates such liability. Coercive recovery against them cannot be sustained without a served assessment or penalty order and while an exemption claim remains pending. The article also notes that recovery action taken in the absence of fair procedure and prior notice is vulnerable as a breach of natural justice. On these principles, personal recovery from directors and premature coercive enforcement were treated as unsustainable.

---

---

Issues: (i) Whether directors of a company can be personally proceeded against for recovery of sales tax arrears allegedly due from the company; (ii) Whether recovery proceedings could be sustained in the absence of served assessment orders and while an exemption claim was pending.

Issue (i): Whether directors of a company can be personally proceeded against for recovery of sales tax arrears allegedly due from the company.

Analysis: The company was treated as a distinct legal entity separate from its directors. The petitioners were only directors and had no shown personal assets of the company. The Court applied the settled principle that dues of a company cannot, merely by reason of office, be recovered from its directors in the absence of a statutory basis imposing such personal liability.

Conclusion: The issue was decided in favour of the petitioners. They had no personal liability for the company's alleged sales tax arrears.

Issue (ii): Whether recovery proceedings could be sustained in the absence of served assessment orders and while an exemption claim was pending.

Analysis: The Court noted that no assessment order or penalty order had been served before coercive recovery was initiated. It also accepted that the company's exemption request as an SSI unit was pending before the competent authority. In these circumstances, coercive recovery was held to be premature and unsustainable, and the proceedings were also found violative of natural justice.

Conclusion: The issue was decided in favour of the petitioners. The recovery proceedings were held unsustainable.

Final Conclusion: The writ petition succeeded, the impugned recovery action against the directors was held unenforceable, and the notices challenged in the petition were quashed.

Ratio Decidendi: Directors of a company are not personally liable for recovery of the company's tax dues unless a statute expressly creates such liability, and coercive recovery cannot be initiated without a valid assessment order and observance of fair procedure.

---