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2014 (5) TMI 534 - HC - VAT and Sales TaxEvasion of Tax - Lifting of Corporate veil - Quashment of recoveries & recovery certificate – Held That:- This Court is informed that the assets of the company have been sold for realisation of the dues of IFCI (the secured creditor) - The dues of Department are still to be recovered - The order passed by AO lifting the corporate veil was successfully challenged by only two of the directors namely Shri I.M. Puri and Shri G.L. Tandon - The appeal filed by Shri A.S. Solanki-the petitioner in Writ Tax No. 1499 of 2005 was dismissed - Shri Jagbir Singh-the petitioner in Writ Tax No. 1464 of 2005 had not challenged the order - Shri A.S. Solanki has also not challenged the order by which the appeal was dismissed - Thus, there is no good reason to interfere with the recovery certificates issued in their individual names from their personal assets. Relying upon M/s Meekin Transmission Ltd, Kanpur Nagar and another vs. State of UP and ors 2008 (2) TMI 406 - ALLAHABAD HIGH COURT] - Where the circumstances so warrant, in which, the persons are found evading tax under veil of corporate personality; the corporate entity is employed to circumvent statute or to evade the existing obligation to commit illegality or defrauding others; and have resorted to dubious methods to artifice or subterfuge to avoid payment of taxes, the corporate veil can be lifted to recover the dues from the persons responsible for such illegal acts. Relying upon Calcutta Chromotype Ltd vs. Collector of Central Excise Kolkata [1998 (3) TMI 138 - SUPREME COURT OF INDIA] - There is no doubt that the petitioners and other directors persuaded the BIFR to allow them to run the sick industrial company with fresh infusion of funds from IFCI with two nominee directors of IFCI - The application for eligibility certificate u/s 4-A was made with false declaration that the plant and machinery is new - The eligibility certificate was not granted - Initially the company was doing well but as soon as Shri I.S. Gambhir and Shri L.K. Luthra took over successively as Managing Directors of the company, they started defrauding in payment of sales tax both State and Central; the excise dues and electricity dues - They incurred liability of several crores of rupees and did not participate in the proceedings of assessment - The date, when the company again stopped production, has not come on record - However, the company started production with fresh capital given by IFCI, only to defraud the secured creditors to avoid taxes and electricity dues - The directors of the company hiding behind the corporate veil made use of the corporate entity under the umbrella of BIFR to circumvent statutes, commit illegality and evade the liability of payment of taxes, central excise dues and electricity dues - The returns were not filed - The entire amount was utilised for personal gains - The directors used the State resources for enriching themselves - They robbed the coffers of the State while sitting in Delhi - The corporate veil under the patronage of BIFR was used as subterfuge to avoid payment of taxes – No ground is found to interfere with the recoveries from the personal assets of the petitioners – Decided against assessee.
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