TMI Blog2011 (7) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... s pertinent to note that the property in question was sold by the petitioner during the pendency of the present writ petition and vide order dated April 7, 2011 the sale proceeds in the form of FDR have been deposited with the principal registrar of this court. Resultantly, as this court has allowed the writ petition the principal registrar of this court is directed to release the FDR in question.Writ petition is allowed - Writ Petition No. 3731 of 2005 - - - Dated:- 7-7-2011 - SHANTANU KEMKAR AND SHARMA S.C. JJ. P.M. Choudhary for the petitioner Vivek Patwa, Deputy Government Advocate, for the respondents ORDER The petitioner before this court has filed this present writ petition being aggrieved by the action of the respondents in auctioning the personal property of the petitioner for satisfying the recovery of the sales tax dues relating to M/s. Mahesh Niranjan Jute Pvt. Ltd., a company incorporated and registered under the Companies Act, 1956. The contention of the petitioner is that he is an individual engaged in various business in his individual capacity and is the owner of the property in question which is being auctioned by the Commercial Tax Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Department in auctioning the personal property of the petitioner, is bad in law. The petitioner has also raised a ground that section 32 of the M. P. Commercial Tax Act permits the recovery of dues from a dealer or a person liable to pay tax and only a dealer or a person liable to pay tax can be treated as a defaulter against whom recovery proceedings can be initiated. The contention of the petitioner is that the company in question is the alleged defaulter and therefore in absence of specific provisions permitting the Sales Tax Department to recover the dues, the dues of the company cannot be recovered from the personal property of the director who is doing business independently. The learned counsel for the petitioner has also argued before this court that by virtue of amendment in the M. P. Commercial Tax Act, 2003, section 24A has been inserted with effect from November 25, 2003, which authorises the Commissioner to obtain a personal/corporate guarantee from the directors of the company/promoters of the company for realisation of tax in relation to the company and no such personal guarantee has been furnished by the petitioner and therefore by no stretch of imagination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a company even though the company is a juristic person. The respondents have also taken shelter of the definition of dealer as defined under section 2(h) of the M. P. Commercial Tax Act, 1994 and their contention is that the petitioner being a director of a company, is covered under the definition of dealer and their action is in consonance with the statutory provision. The respondents have lastly stated in the return that the petitioner has submitted an undertaking to repay the outstanding dues on August 2, 2005 and therefore no case is made out in the peculiar facts and circumstances of the matter. The respondents have prayed for dismissal of the Writ petition. Heard learned counsel for the parties at length and perused the record. In the present case, it is an admitted fact that M/s. Mahesh Niranjan Jute Pvt. Ltd., is a company duly incorporated and registered under the Companies Act, 1956. The dues relating to non-payment of sales tax were assessed for the period with effect from April 1, 1998 to March 31, 1999 and an order was passed under the provisions of the M. P. Commercial Tax Act on August 30, 2002 raising a demand of ₹ 44,19,450. It is also an admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to goods; or (iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment, and every local branch of a firm or company situated outside the State; shall be deemed to be a dealer for the purpose of this Act. (b) The Central or a State Government or any of their departments or officers which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash or for deferred payment, or for commission, remuneration or for other valuable consideration, shall be deemed to be a dealer for the purposes of this Act. The company in question, M/s. Mahesh Niranjan Jute Pvt. Ltd., is registered as a dealer with the Sales Tax Department and is a dealer within the meaning of the term dealer as defined under section 2(h) of the M. P. Commercial Tax Act, 1994. The petitioner is certainly not a dealer , as defined under section 2(h) of the Act. Section 24A which came into force with effect from December 25, 2003 of the M. P. Commercial Tax Act, reads as under:- 24A. Furnishing of guarantee by the dealers:- (1) Notwithstanding anything contained in sections 22 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the director of the company that too by auctioning the personal property belonging to a director. In the case of Nishad Patel v. State of Kerala [1999] 113 STC 395 (Ker), the Kerala High Court while dealing with a similar problem has arrived at a conclusion that arrears of dues due from the company cannot be recovered from directors personally as a company is a legal entity distinct from its shareholders as well as its directors. In the case of Punalur Paper Mills Ltd. v. District Collector, Quilon [1985] 60 STC 193 (Ker), again while dealing with a similar controversy the Kerala High Court has held that arrears of tax cannot be recovered from the directors which are due to a company, specially in view of the fact that there is no provision under the Kerala General Sales Tax Act fastening tax liability of the company upon the director/managing director of the company. The Kerala High Court in the aforesaid case in para 11 has held as under (pages 196-197 in 60 STC):- 11. The Kerala General Sales Tax Act, as seen from the preamble, is one consolidating and amending the law pertaining to sales tax. It is axiomatic that white interpreting a consolidating Act, it must always b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recovered from a director except in the case of liquidation. The Madras High Court in the case of Chamundeeswari v. Commercial Tax Officer and P. R. Sridharan v. Commercial Tax Officer [2007] 6 VST 399 (Mad) while dealing with the matter of payment of sales tax and recovery from a director has held that in absence of specific statutory provision enabling recovery of tax due from company, from directors, no such recovery can be done against a director as a company is a legal entity by itself and dues, if any, have to be recovered from the company and not from the directors. The High Court of Punjab and Haryana in the case of Arun Kapoor v. Assistant Collector [2002] 128 STC 339 (P and H) while dealing with recovery of arrears of sales tax payable by the company from the directors has held that the directors are not liable personally for the amount due towards arrears of sales tax due to the company. The Punjab and Haryana High Court again in the case of Tikam Chand Jain v. State Government of Haryana [1987] 67 STC 388 (P and H) has taken a similar view holding that no recovery can be initiated against the director in absence of statutory provisions under the statute governin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alties and method of their collection and may also contain provisions to prevent pilferage of revenue. In a taxing statute there are three components, viz., subject of the tax, person liable to pay the tax ; and, the rate on which the tax is levied, as observed by the apex court in the case of State of Kerala v. Alex George [2004] 271 ITR 290 (SC) ; [2005] 1 SCC 299 and if there is any real ambiguity in respect of any of the aforesaid components by reasonable construction, there would be no tax in law as the person who is charged for paying the tax in case is not liable to pay the tax. The honourable Shri Justice G. P. Singh in Principles of Statutory Interpretation 12th Edition, 2010, while dealing with construction of taxing statutes and evaluation of statutes under the heading general principles of strict construction has observed as under:- (b) General principles of strict construction:- A taxing statute is to be strictly construed. The well established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means : 'The subject is not to be taxed without clear words for that purpose ; and also that every Act of Parliament must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing of language used in some earlier cases. The sooner this misunderstanding is dispelled, and the supposed doctrine given its quietus, the better it will be for all concerned, for the doctrine seems to involve substituting 'the uncertain and crooked cord of discretion' for 'the golden and straight metwand of the law' (see : JRC v. Duke of Westminster [1936] AC 1 (HL). In the same case Lord Wright pointed out that 'the true nature of the legal obligation' arising out of a genuine transaction 'and nothing else is the substance'. The above principle which is known as Duke of Westminster Principle is subject to the new approach of the courts towards tax evasion schemes consisting of a series of transactions or a composite transaction. In interpreting a section in a taxing statute, according to Lord Simonds, 'the question is not at what transaction the section is according to some alleged general purpose aimed, but what trans action its language according to its natural meaning fairly and squarely hits (see : St. Aubyn (LM) v. A. G. [1951] 2 All ER 473 (HL).' Lord Simonds call this 'the one and only proper test'. It is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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