TaxTMI 
TaxTMI 
2009 (1) TMI 496
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....r the entire arrears within a stipulated period. 2. During the pendency of the writ petition, interim order of stay was passed on 19-5-2004, but at the instance of the first respondent, the same was modified by order dated 7-9-2006 and conditional interim order was passed subject to payment of 25 per cent of the amount demanded. The writ appeal has been preferred against the modified conditional interim order aforesaid. 3. According to the petitioners, they are the ex-directors of the company and, therefore, no demand can be made from them under section 19 or 19A of the TNGST Act. The impugned notice dated 17-2-2004, directing the petitioners, the directors of the company, to pay the tax payable by the company is not sustainable in law under the CST and TNGST Acts and tax dues payable by the company cannot be recovered from the directors even after their resignation. 4. The case of the petitioners is that the company was both the dealer and assessee and liable to pay tax under the CST and TNGST Acts. The third petitioner, who had already died during the pendency of the writ petition on 26-7-2008, had earlier resigned from the company on 28-6-1994. Petitioner Nos. 1, 2 and 4 resi....
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...., directors of private company cannot be made liable for payment of tax while the company is in existence. 7. Learned counsel, appearing on behalf of the petitioners, while referred to tax liability which relates to the years 1993-94 to 1995-96, submitted that petitioner Nos. 1, 2 and 4 having resigned on 16-12-1996 and the (deceased) third petitioner having retired on 28-6-1994, cannot be held liable even though tax liability relates to assessment year prior to their resignation/retirement. Reliance was placed on decisions of one or other High Court, relevance of which will be discussed at the appropriate stage. 8. The stand of the first respondent-revenue is that the company is a dealer under the TNGST Act and the CST Act. The registration certificates were cancelled with effect from 1-4-1997, for non-renewal as per the provisions of the Act. The dealer last filed the annual return for the year 1996-97 under both the Acts on 26-6-1997, signed by one R.R. Vasudevan as managing director. Since then, the dealer has stopped carrying on business activity and, therefore, according to the revenue, the business has been wound up and there is discontinuance of the same. Rule 40 prescrib....
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....the assessment year 1993-94 and the sum of Rs. 1,671 for the assessment year 1995-96. (3)The company is only in symbolic existence for the past ten years without any business activity or affairs carried on and no positive evidence is forthcoming from the petitioners to show that the company is still active in the sense of carrying on business. (4)While the petitioners are taking a plea that only the properties of the company could be proceeded against for recovery of arrears of sales tax and not against the individual directors personally, no statement is forthcoming with regard to the properties owned by the company to enable the authorities to enforce recovery against the company. (5)The company being enabled to collect the sales tax from their customers as an agent of the State, the retention of such amounts is an act of unjust enrichment and being derogatory of public interest. (6)Some of the directors are family members and there is no proof regarding relationship of other directors. 11. According to learned counsel for the first respondent, the aforesaid facts would attract the "doctrine of lifting of corporate veil". Reliance was placed on the decision of the Supreme Co....
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....applicable to a company or its directors/ex-directors, as the provision is applicable to "firms" and its partners. 18. Section 19A provides liability to tax on partition in Hindu family, dissolved firm or other association of persons, as quoted hereunder : "19A. Liability to tax of partitioned Hindu family, dissolved firm, etc.-Where a dealer is a Hindu undivided family, firm or other association of persons, and such family, firm or association is partitioned, or dissolved, as the case may be- (a )the tax payable under this Act by such family, firm or association of persons for the period up to the date of such partition or dissolution shall be assessed as if no such partition or dissolution had taken place and all the provisions of this Act shall apply accordingly ; and (b )every person who was at the time of such partition, or dissolution a member or partner of the Hindu undivided family, firm, or association of persons and the legal representative of any such person who is deceased shall, notwithstanding such partition or dissolution, be jointly and severally liable for the payment of the tax, penalty or other amount payable under this Act by such family, firm or association....
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....n 19B of the TNGST Act. 22. Counsel for the revenue placed much reliance on rule 40, which reads as follows : "40. Every firm or company consisting of partners shall, at the time of submitting the application for registration under section 21 of the Act and every registered dealer entering into or forming a new partnership in regard to his business shall, within thirty days of such event happening, send to the registering authority and to the assessing authority if he is different from the registering authority and if the firm, company or registered dealer has more than one place of business also to the Commercial Tax Officer or the Deputy Commercial Tax Officer in whose area of jurisdiction the firm or company or registered dealer has a place of business, a declaration in Form IX signed by all the partners stating the names and addresses of all the partners and their respective shares in the business. If a partner retires without the partnership being dissolved thereby he shall send to the registering authority and to the assessing authority if he is different from the registering authority and if the firm, company or registered dealer has more than one place of business, also t....