Security bond for tax appeal stay lapses on remand; recovery cannot proceed against a legal heir with no personal liability.

A security bond executed in Form XIX to obtain stay in tax appeal proceedings remains effective only while the appeal is pending; once the appeal is remanded, it becomes unenforceable under Rule 31(1) of the Tamil Nadu General Sales Tax Rules, 1959. Recovery could not therefore be initiated on the basis of that bond. The department also could not proceed against a person who was only a legal heir of a deceased director and not a director or otherwise personally liable for the company's dues, absent a fresh lawful basis or bond. The recovery notice was held without jurisdiction and illegal, and the documents furnished under Form XIX were directed to be released.

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Issues: Whether the security bond executed in Form XIX during the pendency of the appeal remained enforceable after the appeal was remanded, and whether recovery proceedings could be initiated against the petitioner, who was only a legal heir of a deceased director and not a director of the company.

Analysis: Rule 31(1) of the Tamil Nadu General Sales Tax Rules, 1959 provides that a security bond executed for obtaining stay remains in force only during the pendency of the appeal and becomes void or ineffective when the appeal is allowed or remanded. The appeal in the present case had been remanded, so the bond could not survive as a basis for recovery. The petitioner was not a director of the company and was only a third party to the company, and the department could proceed only against the defaulter in accordance with law, not against the legal heir of a deceased director in the absence of a fresh security bond or other lawful basis.

Conclusion: The notice issued for recovery against the petitioner was without jurisdiction and illegal. The security bond had ceased to be enforceable, and the recovery proceedings against the petitioner could not be sustained.

Final Conclusion: The writ petition succeeded and the impugned recovery notice was set aside, with directions to release the documents furnished under Form XIX.

Ratio Decidendi: A security bond furnished to obtain stay in tax appeal proceedings becomes unenforceable on remand or allowance of the appeal under Rule 31(1), and recovery cannot be pursued against a third party who is not legally liable for the company's dues.

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