1998 (11) TMI 643

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....ctory at Balasore, Orissa. The business of the company is stated to have all along been in financial distress. For its business in Calcutta it was a registered dealer under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act") and was subject to assessment under the Act. By amendment of the 1941 Act turnover tax was introduced by a new section 6B effective from April 1, 1979. The company's gross turnover exceeded Rs. 50 lakhs during the accounting year ending on June 30, 1980 and the company became liable to pay tax from July 1, 1980 according to this section. But the company challenged this section's constitutional vires and did not pay the tax. The CTO assessed, inter alia, turnover tax (in short "TT") from the financial year ending on June 30, 1981 and onwards. The assessment notices in respect of 1980-81 and 5 other years, viz., 1982-83, 1983-84, 1984-85, 1985-86 and 1986-87 were issued by the assessing officer. The writ application filed by the company was eventually transferred to this Tribunal and was dismissed on November 30, 1992. The company was served with notice by the assessing authority (CTO) directing the company to appear before him on January 15, 1....

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....ty in the eye of law and can sue or be sued and can shoulder liability or own assets in its own name as a juristic person, independent of its shareholder as well as the directors who are nothing but functionaries for the company. He adds further that for the liabilities of the company none such director can be taken to task or threatened with criminal proceeding. He further adds that the Revenue is competent to proceed against the company if it is so inclined; but there is no legal sanction for service of notices on the directors, by name (vide Notice No. 10392 dated January 14, 1997 and 19268 dated March 5, 1998) or even by designation (vide Notice No. 5307 dated September 10, 1997), conveying an administrative fiat for personal appearance of the directors or carrying threat of arrest or of intimidation of criminal proceeding. He further contends that the individual liability of the shareholders, including the directors vis-a-vis, the company is limited to the extent of unpaid amount of share value held by them and no further. He points out that in the case of the company all shares are fully paid up, leaving no room for calling upon the shareholders and for that matter, the direc....

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....e directors of the company. According to the company, excepting Bijoy Kumar Bhatter and Mr. Paritosh Chandra Chatterjee there is no other director. The others have either retired or died. But these are questions of fact. If such pleas are taken before the C.O., the said authority is competent to probe into the matter giving the company an opportunity of being heard and if necessary can modify the notice to keep the same in tune with the legal provisions. This Tribunal cannot enter into such factual aspects and to give a finding. At any rate such plea cannot be a legitimate ground for avoiding appearance of the company through competent representatives in pursuance of the notice and to contest the certificate proceedings. 5.. As regards the company's objection as to the alleged threat of initiation of criminal proceeding and arrest of the addressee-directors, we do not find it altogether prohibited under the statute. Notice dated January 14, 1997 speaks of probable step of lodging the first information report (FIR). Notice dated September 10, 1997 speaks of lodging of FIR and issue of warrant. But "issue of warrant" does not mean warrant of arrest alone, it may also mean warrant ....

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....is within the scope of any of those activities as enumerated in the section. In the second case Ramachandran v. State of Kerala [1984] 55 STC 209 it was held by the High Court of Kerala that a director of a company could not be personally proceeded against for arrears of sales tax due from the company. This decision was in the context of the Kerala General Sales Tax Act, 1963 which did not contain any provisions permitting any proceeding against a director in the abovementioned circumstances. We have already seen that section 22A(2) of the 1941 Act approves of such proceeding against a director in certain circumstances. This, however, does not mean that a director's own personal property is liable to be proceeded against, except to the extent of unpaid part of shares held by him. 7.. The last reported decision Rameswar Agarwalla v. State [1955] 6 STC 397 is no doubt in the context of the 1941 Act. It was held by the Calcutta High Court that the Revenue authorities cannot proceed against a shareholder of a company for carrying of business by the company in contravention of section 7(1) of the 1941 Act. Firstly, in the case before us we are not concerned with the shareholders i....