Corporate veil protection bars personal recovery of company tax dues from directors absent statutory basis or proof of misuse.

Trade tax dues of a public limited company could not be recovered from its directors personally in the absence of statutory authority or material showing fraud, misuse of corporate personality, or other grounds to pierce the corporate veil. The company's status as a sick industrial company did not itself justify personal recovery against directors. Because no prior investigation or relevant factual basis was shown to disregard the company's separate legal existence, enforcement against the directors' personal assets was impermissible. The authority could proceed against the company's assets and take further action only if proper grounds for lifting the corporate veil were established.

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Issues: Whether trade tax dues of a public limited company could be recovered from its directors without prior investigation and material justifying lifting of the corporate veil.

Analysis: The company had been declared a sick industrial company under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. Recovery was sought from the directors personally, but no investigation or factual material was shown to establish fraud, misuse of corporate personality, or any other circumstance warranting disregard of the company's separate legal existence. The relevant legal principle is that personal recovery against directors cannot be made merely because company dues remain unpaid, unless the statute so provides or the facts justify piercing the corporate veil. The burden lies on the authority to place material showing that the corporate form is being used as a shield for unlawful conduct.

Conclusion: The recovery notice could not be enforced against the personal assets of the directors. The challenge succeeded to that extent, while the Department was left free to proceed against the company's assets and to take further action if proper grounds for lifting the corporate veil were established.

Final Conclusion: Personal recovery from directors of a company for trade tax dues was held impermissible on the facts, in the absence of material justifying piercing the corporate veil.

Ratio Decidendi: Directors of a public limited company cannot be made personally liable for the company's tax dues unless the governing statute so provides or the authority establishes, on relevant material, circumstances justifying lifting of the corporate veil.

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