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of <h1>Court Quashes Notices, Remits Claim for Re-examination. Upholds Due Process & Director Rights.</h1> <h3>Rachappa Versus Assistant Commissioner For Commercial Taxes (Recovery)</h3> The court allowed the petition, quashed the impugned notices, and remitted the matter back to the authority for re-examining the petitioner's claim. The ... Liability of Company - recovery from the director of Company - Attachment of property of petitioner for liability of Company - Petitioner contends that he was a Director of the Company from 1996 and as he is not the proprietor, he is not personally liable for the liability of the Company that too for the period anterior to his becoming Director of the Company - Held that:- Under Section 14 of the Karnataka Sales Tax Act, a partner of the Firm can be proceeded against the dissolved firm or the firm which is ceased to continue its business. However, in respect of a Company, the liability of its Directors would be restricted. There is no provision under the Act so as to fasten the entire liability on any one of the Directors of the company to recover the amounts due in respect of the erstwhile assessee-Company Petitioner was only a Director of the Company and as such, proceedings initiated for mutating the revenue records in the name of 1st respondent that too without issuing notice to the petitioner would be in complete violation of principles of natural justice. Such action of respondent Nos.1 and 2 cannot be sustained. The ends of justice would be met if 1st respondent is directed to consider the claim of the petitioner and thereafter take appropriate steps to recover the amount in accordance with the provisions of the Act and also by taking note of the fact that petitioner is a Director of a Company incorporated under the Companies Act and if it comes to the conclusion that petitioner was not the Director of the Company for the period in question, it would be needless to state that liability cannot be fastened on the petitioner. However, if the 1st respondent-authority were to find on facts otherwise, he would be at liberty to proceed against petitioner in accordance with law - matter remanded back - Decided in favour of assessee. Issues:1. Assessment order and appeals under Karnataka Sales Tax Act, 1957.2. Liability of a director of a company for the company's tax dues.3. Violation of principles of natural justice in attaching property without notice.Analysis:1. Assessment order and appeals under Karnataka Sales Tax Act, 1957:The case involves M/s. Sheshadri Oil Refineries Pvt., Ltd., as an assessee under the Karnataka Sales Tax Act, 1957 for the assessment year 1994-1995. After a series of appeals and remands, the first appellate authority directed the assessing authority to accept the original return filed by the assessee. Subsequently, the assessing authority determined the tax payable by the assessee to be &8377; 2,14,254/-. The petitioner contended that the attachment of their property was done without notice, raising issues regarding procedural fairness.2. Liability of a director of a company for the company's tax dues:The petitioner, a director of the company, argued that they should not be personally liable for the company's liabilities, especially for the period before becoming a director. The court noted that under the Karnataka Sales Tax Act, the liability of directors of a company is restricted, and there is no provision to impose the entire liability on any one director for recovering amounts due from the company. The court emphasized that proceedings against a company and its directors should be distinct, and liability should be established based on specific provisions.3. Violation of principles of natural justice in attaching property without notice:The court found that the actions of the revenue authorities in mutating revenue records in the name of the petitioner without notice were a violation of principles of natural justice. The court emphasized that the petitioner being only a director of the company, such actions without proper notice were unjust. The court directed the authorities to consider the petitioner's claim and proceed in accordance with the law, ensuring that liability is appropriately determined based on facts.In conclusion, the court allowed the petition, quashed the impugned notices, and remitted the matter back to the authority for re-examining the petitioner's claim. The court emphasized the importance of following due process and ensuring that liability is established based on legal provisions, protecting the rights of directors in such cases.
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