Director liability for company tax dues upheld where statutory recovery provisions permit action against personal property.
A director of a private company remained exposed to recovery action for the company's unpaid Tamil Nadu VAT dues, because the statutory scheme under Sections 26, 35, 36 and 37 permits liability to be fastened on persons in control and directors where the company is not functioning or is wound up. The court noted that the company had filed returns, accepted liability, and then defaulted after unchallenged tax demands, and it rejected reliance on authorities arising under different State enactments. The auction proceedings against the director's personal property were therefore not liable to be interdicted, and the challenge to the auction notice failed.
Issues: Whether the petitioner, being a director of a private company, could avoid recovery proceedings and auction of his personal property for the company's tax arrears under the Tamil Nadu Value Added Tax Act, 2006.
Analysis: The petitioner admitted incorporation of the company and his role in signing the documents for registration. The record showed that the company had filed monthly returns, accepted tax liability, and later defaulted in payment after reversal of input tax credit and consequential demands, which were not challenged. The statutory scheme under Sections 26, 35, 36 and 37 of the Tamil Nadu Value Added Tax Act, 2006 was applied to hold that where a company is not functioning, and in any event where a private company is wound up, the persons in control and the directors may be fastened with liability in the manner contemplated by the Act. The Court distinguished the authorities relied on by the petitioner as arising under different State enactments and found them inapplicable on the facts.
Conclusion: The petitioner remained liable for the tax dues of the company, and the auction proceedings against the property were not liable to be interdicted.
Final Conclusion: The challenge to the auction notice failed, and the writ petition was dismissed, with liberty to the respondent to proceed afresh in accordance with law.
Ratio Decidendi: Where the statutory scheme imposes joint and several liability on directors or legal representatives for a company's tax dues, a director cannot resist recovery merely by asserting separate personal ownership of property when the company's liability remains unpaid and enforceable under the Act.
TaxTMI 
AI Drafter ✕
TaxTMI 
TaxTMI 
