Former director liability and provisional attachment under VAT law: notice stayed and demat attachment found to have lapsed.

Section 38 of the Maharashtra Value Added Tax Act was considered in relation to a former director who was not the registered dealer, and the Court found no prima facie basis to sustain the notice against him personally; interim stay was therefore granted as against that petitioner. Section 35 was also examined on provisional attachment of demat accounts, and the attachment was held to have ceased by operation of law after expiry of one year because no lawful extension was shown; it had thus lapsed. The revenue was left free to proceed in accordance with law against the dealer entity and its current directors.

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Issues: (i) Whether the notice issued under Section 38 of the Maharashtra Value Added Tax Act, 2002 could be sustained against a former director who was not the registered dealer. (ii) Whether the provisional attachment of the demat accounts had ceased to operate under Section 35 of the Maharashtra Value Added Tax Act, 2002.

Issue (i): Whether the notice issued under Section 38 of the Maharashtra Value Added Tax Act, 2002 could be sustained against a former director who was not the registered dealer.

Analysis: Section 38 operates in relation to the dealer and the creation of a charge or transfer of assets during the pendency or after completion of proceedings. On the facts placed before the Court, the petitioner had resigned as director before the relevant period ended, and the impugned notice proceeded on an assumption that he continued to be connected with the dealer and liable in that capacity. The record disclosed no prima facie basis for issuing the notice against him personally.

Conclusion: The notice under Section 38 was stayed as against the petitioner.

Issue (ii): Whether the provisional attachment of the demat accounts had ceased to operate under Section 35 of the Maharashtra Value Added Tax Act, 2002.

Analysis: Section 35 provides for provisional attachment only for a limited duration, and the attachment ceases after expiry of one year unless validly extended in the manner permitted by law. No material was shown to establish a lawful extension of the attachment period. The attachment therefore had lapsed by operation of law.

Conclusion: The provisional attachment of the demat accounts had ceased to have effect.

Final Conclusion: Interim protection was granted to the petitioner, while the revenue was left free to proceed in accordance with law against the dealer entity and its current directors.

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