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of <h1>Court rules notices demanding arrears of Central sales tax from director personally illegal and arbitrary.</h1> <h3>Om Parkash Walecha Versus State of Haryana and others</h3> The court ruled in favor of the petitioner, holding that the notices demanding arrears of Central sales tax from the director personally were illegal and ... Whether a director of a company can be made personally liable for the amount due from the company for the arrears of State and Central sales tax? Held that:- We are in agreement with the contentions raised by the learned counsel for the petitioner and are of the view that the notices, annexures P-1 and P-3, are not only illegal but also arbitrary and whimsical as the same have been issued on December 22, 2005. The writ petition is thus, allowed and consequently, notices, annexures P-1 and P-3, are hereby quashed. Issues:1. Whether a director of a company can be made personally liable for the amount due from the company for the arrears of State and Central sales taxRs.Analysis:The petitioner, a director of a company, was served with notices to recover arrears of Central sales tax due from the company. The petitioner challenged the jurisdiction of the respondents to demand and recover arrears personally from him as a director, arguing that he is neither an assessee nor a defaulter under the sales tax laws, and there is no provision authorizing such recovery from a director. Respondent argued that the recovery can be made from the director under section 18 of the Central Sales Tax Act, 1956, which holds directors liable for tax dues if the company is wound up and taxes cannot be recovered. The petitioner clarified that the company is not yet wound up, which was not contested by the respondents.The petitioner relied on previous judgments to support the argument that recovery of sales tax dues cannot be made personally from a director. The court noted that the provisions cited by the respondents were not applicable since the company was not liquidated. The court agreed with the petitioner's contentions, stating that the notices were issued illegally and arbitrarily despite established legal precedents. The court referenced previous cases where it was held that recovery of sales tax dues cannot be made from a director personally. As no new arguments were presented by the respondents, the court allowed the writ petition, quashed the notices, and imposed costs on the respondents due to the lack of statutory basis for the notices.In conclusion, the court ruled in favor of the petitioner, holding that the notices demanding arrears of Central sales tax from the director personally were illegal and arbitrary. The court emphasized that the law had been settled in previous cases where it was established that recovery of sales tax dues cannot be made from a director unless specific conditions, such as the company being wound up, are met. The court quashed the notices and imposed costs on the respondents due to the lack of legal basis for their actions.
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