Corporate personality shields directors from personal recovery of company tax dues absent statute or proven veil-piercing facts.

Sales tax or trade tax dues of a company cannot ordinarily be recovered from the personal assets of its directors or authorised representative. Corporate personality remains distinct, and personal recovery is permissible only where a statute expressly authorises it or where specific facts justify lifting the corporate veil, such as fraud, sham dealings, diversion of funds, or use of the company as a mask to evade liability. On the stated facts, there was no pleading or proof of fraud, siphoning, or personal gain, so the recovery notice against the individuals was held unsustainable and the department was left to proceed only against the company and its assets.

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Issues: Whether sales tax or trade tax dues of a company can be recovered from the personal assets of its directors and authorized representative in the absence of any specific statutory provision, and whether the doctrine of lifting the corporate veil was attracted on the facts.

Analysis: A company is a separate juristic person distinct from its shareholders and directors, and its liabilities do not ordinarily become personal liabilities of those managing it. Recovery from directors can be sustained only where the statute so provides or where the facts justify lifting the corporate veil, such as fraud, sham transactions, diversion of funds, or use of the corporate form as a mask to evade liability. The record disclosed no pleading or proof of fraud, siphoning of funds, or personal gain by the petitioners. The mere existence of outstanding dues, or the fact that the company had failed to satisfy them, was insufficient to bypass corporate personality. In the absence of a specific statutory provision authorising recovery from directors, the department could proceed only against the company and its assets.

Conclusion: The recovery notice against the petitioners personally was unsustainable and was quashed. The issue was decided in favour of the assessee.

Final Conclusion: Personal recovery for the company's tax dues was impermissible on these facts, and the respondents were left free to proceed only against the company and its assets.

Ratio Decidendi: Corporate personality cannot be ignored to recover a company's tax dues from directors unless the statute expressly permits it or the department specifically pleads and proves facts justifying lifting of the corporate veil.

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