2019 (5) TMI 571 - HC - VAT and Sales Tax

Court quashes property attachment order for recovery of sales tax dues from Director's wife

The court quashed an order attaching property under section 155 of the Bombay Land Revenue Code for recovery of sales tax dues from a private limited ... Attachment of property of the wife of the Director - recovery of tax dues - section 155 of the Bombay Land Revenue Code - recovery of alleged outstanding sales tax dues of Company from the property belonging to the wife of Director - HELD THAT:- This court in the case of M.R. Choksi v. State of Gujarat [ 2012 (3) TMI 392 - GUJARAT HIGH COURT ] has observed that there is no statutory provision in the Gujarat Sales Tax Act, 1969 which empowers the sales tax authorities to fasten the liability of the company on its Director in the matter of payment of sales tax dues - Similarly, there is no provision in the Gujarat Value Added Tax Act, 2003 also, which empowers the authorities acting thereunder to recover the dues of a private limited company from its Directors. When it is not permissible for the respondent to proceed against the Director of the company for recovery of the tax dues of the company, the question of recovering such dues from the property which belongs to the wife of the Director would not arise. Demand do not sustain - appeal allowed - decided in favor of appellant. Issues:Challenge to order attaching property under section 155 of the Bombay Land Revenue Code based on recovery of sales tax dues from a private limited company's Director's wife.Analysis:1. The petitioner challenged an order attaching their property under section 155 of the Bombay Land Revenue Code for recovery of sales tax dues of a private limited company. The petitioner acquired the property through a registered sale deed and received an attachment notice for outstanding sales tax dues of the company. The petitioner, being the wife of one of the Directors, contended that authorities cannot recover dues from a Director's family member as per the Gujarat Sales Tax Act, 1969 and Gujarat Value Added Tax Act, 2003.2. The petitioner's advocate relied on legal precedents like M.R. Choksi v. State of Gujarat and C.V. Cherian v. C.A. Patel, where it was held that sales tax authorities cannot hold a company's Director liable for dues. The advocate argued that there is no provision empowering authorities to recover dues from a Director's family member. The court was referred to cases like Different Solution Marketing (P.) Ltd. v. Assistant Commissioner of Commercial Taxes and Umesh Mohanbhai Garala v. Commercial Tax Officer to support the argument that recovery from the petitioner is not legally justified.3. On the other hand, the Assistant Government Pleader argued that under the Gujarat Value Added Tax Act, 2003, tax, interest, and penalty assessed for any period can be recovered from a Director. The respondent contended that the property transfer to the petitioner was after the tax dues period, justifying the attachment. Referring to section 47 of the Act, it was argued that the transfer is void against tax dues claim. The respondent emphasized the petitioner's responsibility towards tax dues and urged dismissal of the petition.4. The court observed that there is no statutory provision allowing authorities to recover a private limited company's dues from its Directors under the Gujarat Sales Tax Act, 1969 or Gujarat Value Added Tax Act, 2003. The court cited M.R. Choksi v. State of Gujarat to support this position. As recovery from Directors is not permitted, recovering dues from the property of the Director's wife is unjustified. The court concluded that the respondent's action lacked legal authority and statutory backing, leading to the quashing of the attachment notice and order.5. Consequently, the petition succeeded, and the court allowed it, quashing the impugned notice and order. The rule was made absolute with no order as to costs.