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2014 (7) TMI 489 - HC - VAT and Sales TaxRecovery of the sales tax/ trade tax dues outstanding against the Company - Ex parte order passed - Lifting the corporate veil - whether the liability due against the Company can be fastened and recovered against the Directors of the Company - Held that:- in a case where the corporate personality has been obtained by certain individuals as a mask to prevent tax liability or to divert the funds of the Company for some illegal purpose, the corporate veil can be lifted so that the persons can be identified and made responsible and the tax liability of the Company could be recovered from the persons responsible for such fraud. However, this doctrine cannot be applied as a matter of course in a routine manner to recover the dues of a Company on the mere pretext that the dues are now not recoverable from the Company and, therefore, a resort has been made to recover the dues of the Company from the personal assets of the Directors. If such a course is permitted, it will lead to disastrous results and would completely destroy the juristic personality of the Company. The principle of lifting the corporate veil is to find out as to who was responsible for committing the fraud and diverting the assets of the Company. It is not necessary that recovery has to be made against the Director or a promoter shareholder. The purpose of lifting the veil is to find out the person, who was operating behind the corporate personality for his personal gain. Company has filed an appeal against the ex parte assessment order, which is pending consideration. Consequently, the Company is still in existence. The substratum of the Company has not eroded. The mere fact that the Company has failed to pay the dues is by itself insufficient to invoke the doctrine of lifting the corporate veil and is not sufficient to ignore the statutory corporate personality conferred upon the Company - Company has filed an appeal against the ex parte assessment order, which is pending consideration. Consequently, the Company is still in existence. The substratum of the Company has not eroded. The mere fact that the Company has failed to pay the dues is by itself insufficient to invoke the doctrine of lifting the corporate veil and is not sufficient to ignore the statutory corporate personality conferred upon the Company - Decided in favour of assessee.
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