Amalgamated company recovery cannot proceed against a non-existent entity or its former director under director-liability rules.

Recovery action against an amalgamating company was held unsustainable where the assessment and attachment were directed at an entity that had already ceased to exist; the tax authorities had to proceed against the successor amalgamated entity instead. Section 44(6) of the Maharashtra Value Added Tax Act, 2002 was also held inapplicable to fasten liability on a former director in these circumstances, because the statute contemplates director liability only where the company's dues cannot otherwise be recovered and the proper course was recovery from the successor company. The impugned freezing of the bank account and recovery proceedings were quashed, while leaving open lawful action against the legally liable successor entity.

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Issues: (i) whether recovery proceedings and freezing of the bank account could be sustained for tax dues assessed in the name of a company that had already amalgamated and ceased to exist; (ii) whether Section 44(6) of the Maharashtra Value Added Tax Act, 2002 could be invoked to fasten liability on a former director in such circumstances.

Issue (i): Whether recovery proceedings and freezing of the bank account could be sustained for tax dues assessed in the name of a company that had already amalgamated and ceased to exist.

Analysis: The assessment order and the consequential recovery action were directed against an entity that had ceased to exist upon amalgamation. Once the amalgamation took effect, the tax liability, if any, had to be pursued against the amalgamated entity and not against the defunct company. Recovery by attachment or freezing of the petitioner's bank account on the basis of an order passed against a non-existent entity was therefore legally unsustainable.

Conclusion: The action of freezing the bank account and the underlying recovery proceedings were invalid and could not be sustained, in favour of the assessee.

Issue (ii): Whether Section 44(6) of the Maharashtra Value Added Tax Act, 2002 could be invoked to fasten liability on a former director in such circumstances.

Analysis: Section 44(6) contemplates liability of directors of a private company where tax dues of that company cannot be recovered, subject to the statutory conditions. The provision was held inapplicable to a case where the company had already amalgamated with another entity and the authorities were required to proceed against the successor company. On that footing, no liability could be fastened on the petitioner as a former director for the dues of the erstwhile company.

Conclusion: Section 44(6) could not be used to recover the dues from the petitioner, in favour of the assessee.

Final Conclusion: The petition succeeded and the impugned recovery action was quashed, leaving the authorities free only to proceed in law against the legally liable successor entity, if otherwise permissible.

Ratio Decidendi: A recovery or assessment action initiated against a non-existent amalgamating company is a jurisdictional nullity, and director-liability provisions cannot be used to recover such dues from a former director where the statute requires pursuit of the successor amalgamated entity.

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