1968 (10) TMI 97 - HC - VAT and Sales Tax

Summary

Issues:
1. Quashing of assessment orders under the Punjab General Sales Tax Act.
2. Recovery of sales tax from members of a cooperative society.
3. Liability of members of a cooperative society for debts of the society.

Analysis:
The judgment addressed three petitions seeking to quash assessment orders under the Punjab General Sales Tax Act for the years 1958-59, 1959-60, and 1960-61. The petitioner, a cooperative society, raised concerns regarding the recovery of sales tax from its members. The court noted that the society's members have limited liability as per the Co-operative Societies Act, 1912. The court highlighted that the liability of members is restricted to contributing to the assets of the society to the extent of their undertaken liability. The judgment emphasized that recovery proceedings initiated by the tax authority against the members for the sales tax levied on the society were not permissible under the law.

The court referenced a previous Division Bench decision stating that in cases of limited companies, the managing director cannot be held personally liable for the company's tax dues. The court extended this principle to cooperative societies, emphasizing that members are distinct from the society entity and cannot be held accountable for the society's tax obligations. Therefore, the court concluded that the members of the petitioner-society cannot be compelled to pay the sales tax through coercive methods such as property attachment, sale, or arrest.

The judgment partially allowed the petitions by holding that the members of the cooperative society are not responsible for the payment of the sales tax imposed on the society. It prohibited the recovery of sales tax from the members through coercive means. However, the court dismissed other reliefs sought in the petitions, advising the petitioner to pursue remedies available under the Act. Each party was directed to bear its own costs due to the partial success of the petitions.

In summary, the judgment clarified the limited liability of members in a cooperative society, ruling that they cannot be held personally liable for the society's tax obligations. It emphasized that recovery of sales tax from members through coercive methods is impermissible, providing guidance on the legal recourse available to the petitioner under the law.