TMI Blog2015 (11) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... rse to proceedings under section 18 of the CST Act and passing of any valid order for effecting recovery of CST from the directors of the private limited company in liquidation, the proceedings relating to recovery of arrears of CST from the petitioner are held to be not permissible in law. Further, the respondents have not shown that the amount of tax recoverable under the CST Act cannot be recovered from the company. It is also not shown as to what efforts were made to recover the arrears of CST from the assets of the company. Thus, recovery of CST from the petitioner is unsustainable. However, it shall be open for the respondents to proceed to recover the amount on account of CST after taking proper action under section 18 of the CST Act and considering the notification dated September 4, 1995 (annexure P11) issued under section 8(5) of the CST Act. Recovery of Surety - liability of the petitioner on account of non payment of the amount due from the principal where he had stood surety cannot be doubted. However, in the absence of any notice having been issued before serving annexure P9, the action cannot be legally sustained being violative of principles of natural justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide letter dated July 31, 2007 (annexure P6). The assessing authority issued notice dated October 10, 2013 (annexure P7) for recovery of outstanding sales tax dues of the company amounting to ₹ 88,30,010 under the Haryana VAT Act and ₹ 99,041 on account of the Central sales tax (CST) under the Central Sales Tax Act, 1956 (in short, the CST Act ) from the petitioner. The petitioner filed reply dated October 19, 2013 (annexure P8) to the said notice alleging that since the company is in liquidation, the sales tax dues cannot be recovered from him. Accordingly, respondent No. 3 issued summons dated November 18, 2013 (annexure P9) in pursuance of a surety which was given by the petitioner for recovery of ₹ 1,40,000 and dated November 21, 2013 (annexure P10) to the petitioner for the recovery of outstanding dues amounting to ₹ 89,29,051 relating to M/s. Bhagwati Wool tex Pvt. Ltd. on account of sales tax liability for the exemption period as arrears of land revenue. Hence, the present writ petition. The writ petition was contested by the respondents by filing two separate replies. Respondent Nos. 2 and 3 in the written statement pleaded that the petitioner had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sales Tax Officer, Ward No. 18, New Delhi [1987] 66 STC 252 (Delhi); (7) M. Ishwarlal Co. v. State of Madras [1973] 32 STC 377 (Mad);and (8) Varuni Biomass Energy Products Private Ltd. v. District Collector, Dindigul [2009] 19 VST 484 (Mad). 4. On the other hand, learned counsel for the Revenue supported the issuance of summons to the petitioner for recovery of the amount and relied upon section 18 of the CST Act which reads thus: 18. Liability of directors of private company in liquidation.-Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), when any private company is wound up after the commence ment of this Act and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then, every person who was a director of the private company at any time during the period for which the tax is due shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. 5. It was pleaded that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein or even under section 18 of the CST Act which provides for recovery from the director of a private limited company which is in liquidation under certain circumstances. 9. Similar view has been expressed in Mukesh Gupta v. State of Haryana [1996] 8 PHT 326 (P H), Tikam Chand Jain v. State Government of Haryana [1987] 67 STC 388 (P H); [1987] 62 Comp Cas 601 (P H), Arun Kapoor [2002] 128 STC 339 (P H), Om Parkash Walecha [2008] 16 VST 530 (P H); [2008] 145 Comp Cas 799 (P H) and Varuni Biomass Energy Products Private Ltd.'s case [2009] 19 VST 484 (Mad). 10. Therefore, in view of the above legal position, the recovery on account of sales tax liability under the Act or VAT Act of M/s. Bhagwati Wooltex Pvt. Ltd. relating to exemption period cannot be recovered from the petitioner. 11. Taking up issue No. (ii), examining the argument of learned counsel for the respondents regarding section 18 of the CST Act, it may be noticed that under section 18 of the CST Act, when any private company is wound up and any tax assessed on the company under the said Act cannot be recovered, then every person, who was a director of the private company at any time during the per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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