1997 (8) TMI 488 - AT - VAT and Sales Tax

Issues Involved:

1. Applicability of Section 9D of the Rajasthan Sales Tax Act, 1954.
2. Applicability of Sections 16(3)(h), 16(4), and 16(5) of the Rajasthan Sales Tax Act, 1954.
3. Liability of the petitioner as a director of a public limited company.
4. Validity of the notice dated September 13, 1990 (annexure 8).

Issue-wise Detailed Analysis:

1. Applicability of Section 9D of the Rajasthan Sales Tax Act, 1954:

The Tribunal had previously ruled that Section 9D, which imposes joint and several liability on directors of private companies for unpaid tax, penalty, or interest, does not apply to directors of public limited companies. The petitioner argued that since the respondent company was a public limited company, Section 9D should not be invoked against him. The Tribunal reaffirmed that Section 9D is specifically tailored for private companies and does not extend to public companies. This was a significant point because the Tribunal had earlier restrained the respondents from invoking Section 9D against the petitioner.

2. Applicability of Sections 16(3)(h), 16(4), and 16(5) of the Rajasthan Sales Tax Act, 1954:

The petitioner contended that Sections 16(3)(h) and 16(5) should be read in conjunction with Section 9D and are not independently applicable. However, the Tribunal clarified that Section 16(5) can be invoked independently of Section 9D. Section 16(5) holds directors, managers, secretaries, or other officers of a company liable if an offence is committed with their consent, connivance, or due to their neglect. The Tribunal noted that these provisions apply to both private and public companies, thereby making the petitioner liable under Section 16(5) if all its conditions are met.

3. Liability of the Petitioner as a Director of a Public Limited Company:

The Tribunal examined whether the petitioner, as a director of a public limited company, could be held liable under Sections 16(4) and 16(5). The Tribunal emphasized that Section 16(5) applies to any company, including public companies, and not just private companies. The Tribunal concluded that the petitioner could be proceeded against under Section 16(5) if it is proven that the offence was committed with his consent, connivance, or due to his neglect. This interpretation aligns with the legislative intent to hold responsible individuals accountable, irrespective of the company's public or private status.

4. Validity of the Notice Dated September 13, 1990 (Annexure 8):

The petitioner argued that the notice dated September 13, 1990, should be quashed as it was inconsistent with the Tribunal's earlier ruling that Section 9D does not apply. The Tribunal, however, maintained that the notice was valid and that the petitioner should respond to it. The Tribunal provided the petitioner an opportunity to challenge the notice before the assessing authority, who would then decide on the merits of the case. The Tribunal held that the petitioner would have full opportunity to contest the notice, and any liability would be determined based on the evidence and provisions of the Act.

Separate Judgments Delivered:

- The Chairman dismissed the review petition, emphasizing that Section 16(5) applies to public companies and that the petitioner must respond to the notice.
- The Technical Member disagreed, arguing that if Section 9D does not apply, the petitioner should not be required to respond to the notice. He opined that the notice should be quashed.
- The Judicial Member concurred with the Chairman, highlighting that Sections 16(4) and 16(5) apply to all companies and that the petitioner could be held liable if the conditions under these sections are met.

Conclusion:

The review petition was dismissed, with the Tribunal reaffirming that the petitioner, as a director of a public limited company, could be held liable under Section 16(5) of the Rajasthan Sales Tax Act, 1954. The petitioner was directed to respond to the notice dated September 13, 1990, and the assessing authority was tasked with determining the petitioner's liability based on the evidence presented. The Tribunal's decision underscores the applicability of Sections 16(4) and 16(5) to both private and public companies, ensuring that responsible individuals can be held accountable for offences committed by the company.

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