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UMESH MOHANBHAI GARALA Versus COMMERCIAL TAX OFFICER AND 2

2016 (7) TMI 774 - GUJARAT HIGH COURT

Attachment of personal property of the employee / nominal director of the company - recovery of dues - GVAT - With persuation of Mr.Sunil Kakkad, had agreed to become nominal director of the company in the year 2007. However, it is the case of the petitioner at no point of time, the petitioner had any share holding in the company nor even was drawing salary from the company. The petitioner had also stated that he was not even in charge of day to day affairs of the company. As per the say of the .....

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hich would indicate that the petitioner has remained no longer as a director of the company and cannot be held responsible and therefore, could not be proceeded with by way of attachment of property. - It emerges that the challenge in the petition appears to be just and proper. No material is brought on record to permit lifting of corporate veil. In fact no such case has been put forth before us by the respondents. The petitioner's personal property could not have been attached by the impugn .....

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es. The case of the petitioner petitioner is that the petitioner was working as a Computer Engineer in one associate company of Mr. Sunil Kakkad named as Sai Infosystem (India)Ltd. And while the petitioner was working with said Mr.Sunil Kakkad, who lateron floated a company in the name of Power Infocontrol and Service Pvt.Ltd. With persuation of Mr.Sunil Kakkad, had agreed to become nominal director of the company in the year 2007. However, it is the case of the petitioner at no point of time, t .....

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r Infocontrol and Services Pvt.Ltd. by Commercial Tax Officer. Pursuant thereto, the respondent nos.1 and 2 authorities have issued notice on 26.5.2015 to the said company and as per the say of the petitioner, a copy of the said notice came to be forwarded to the petitioner. It was pointed out by the petitioner that at the relevant point of time, i.e. from 2007 to 2011, the petitioner was associated as nominal Director of the company had never participated in the activities of the company. Still .....

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iated. Since notice had been posted to the address of the petitioner, upon an apprehension that the property of the petitioner will be attached, the petitioner approached this Court by way of filing Special Civil Application No. 21109 of 2015 and prayed to set aside the impugned notice which was issued under section 152 of the Bombay Land Revenue Code. After hearing the petitioner, this Court passed the following order on 23.12.2015: 1. Petitioner has challenged two notices dated 26.05.2015 and .....

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notices to suggest that the recovery are sought to be made against the petitioner personally or, through any of his private properties. Both the notices are addressed to the company. Merely because it is also endorsed to the petitioner or, in one such communication, his name is written in the bracket would not permit us to presume that the department is in the process of proceeding petitioner's personal property. 3. The petition is disposed of accordingly. If such a situation arise in future .....

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oner only on 23.12.2015 whereby the property of the petitioner was attached for the recovery of VAT dues. It was observed in the order impugned in the petition that despite issuance of the notice under sections 152 and 200 of the Land Revenue Code, the petitioner has not deposited the amount stated in the notice, as a result of which, the order was passed. It is in the background of these facts that the petitioner has approached this Court for seeking quashment of the said order dated 14.12.2015 .....

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tioner has never actually worked as a director nor participated in the company's affairs and therefore, the petitioner's liability for the said VAT dues has not accrued. Pursuant to the notice having been issued on earlier occasion, a representation was also filed by the petitioner wherein it was clarified that the petitioner has never actually worked as a director nor has taken any part in day to day affairs of the company. Learned counsel drew our attention to the fact that in any case .....

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e VAT Act. Even a person who has been defined under section 2(15) of the VAT Act also is not referring to a director and therefore, in absence of any such indication in the definition also, director cannot be held responsible in his personal capacity. He further contended that under the provisions of the VAT Act, right from sections 49 to 59, none of the provisions empower the authority to fix liability of the director personally and therefore, the order passed by the respondent authority is wit .....

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, learned Assistant Government Pleader submitted that huge tax demand to the tune of more than ₹ 158 crores is recoverable from the petitioner company. It was pointed out that the petitioner was actively associated with the company as a director. It was also pointed out in the affidavit-in-reply that the petitioner signed certain documents relating to bank transactions. It is also pointed out that when name of the company was changed, at the relevant point of time, the petitioner has put h .....

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harge of the affairs of the company and was rightly held liable and responsible for the outstanding tax dues and for that purpose, order of attachment of the property is just and proper. It was also pointed out by the learned Assistant Government Pleader that that as on date also, even status of the company is shown as active and therefore, the order in question passed by the authority is just and proper. He has contended that simply because the petitioner is taking a stand that he was not in da .....

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company is not to be presumed as a dealer who can be proceeded with by the authority. Resignation has also been reflected in form no.32 which would indicate that the petitioner has remained no longer as a director of the company and cannot be held responsible and therefore, could not be proceeded with by way of attachment of property. The respondents may however, argue that the liability which arose during the period when the petitioner was the Director, cannot be avoided simply because he resi .....

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e sale of goods effected by the company cannot be fastened on the director personally. Relevant portion of the judgment reads as under: 8. Coming to the second controversy involved in Special Civil Application No.243 of 1991 and also in Special Civil Application No.7578 of 1991, Mr Hasurkar and Mr Mankad, learned counsel for the petitioners have submitted that since the Company and its Directors are separate legal entities, the liability of the Company to pay sales-tax on sale of goods effected .....

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n its Directors Reliance is placed on the decisions in Desirajur Vennkatakrishna Sarma, In re, (1955) 25 Company Cases 32, Kundan Singh vs. Moga Transport Co.(P.) Ltd. & Ors., (1987) 62 Comp. Cases 600 and in Tikam Chand Jain vs. State Government of Haryana & Anr., (1987) 62 Comp. Cases 601. 8. Learned counsel for the petitioner has also drawn our attention to another decision of this Court delivered on 12.2.2014 in the case of Radhey Mohan Sharma vs. Deputy Commissioner of Income Tax (O .....

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