Separate corporate personality bars recovery of company sales tax arrears from a former director absent winding up.

A company is a separate juristic entity, so sales tax arrears due from it cannot be recovered from a former director or his attorney merely because of prior association with the company. The corporate veil may be lifted only in recognised situations, and personal substitution of the director for company liability was impermissible. Section 18 of the Central Sales Tax Act, 1956 did not justify recovery because the company was not under winding up. The recovery proceedings against the former director and his attorney were therefore illegal and were set aside.

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Issues: Whether recovery of sales tax arrears due from a company could be effected against its former director or his attorney, and whether section 18 of the Central Sales Tax Act, 1956 could justify such recovery in the absence of winding up of the company.

Analysis: A company registered under the Companies Act, 1956 is a separate juristic entity distinct from its directors and shareholders, and its corporate veil can be lifted only for limited purposes recognised by law. The liability to pay the company's sales tax dues remains that of the company, and a director cannot be substituted in his personal capacity for recovery of those dues merely because he was once associated with the company. The objection based on section 18 of the Central Sales Tax Act, 1956 was also untenable because that provision was inapplicable where there was no winding up of the company.

Conclusion: Recovery proceedings against the former director and his attorney were illegal and were set aside; the petitioners succeeded.

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