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2001 (6) TMI 795 - HC - VAT and Sales Tax
Issues involved: Validity of notice issued by Deputy Commercial Tax Officer u/s 8 of A.P. Revenue Recovery Act and section 17-C of Andhra Pradesh General Sales Tax Act against director of private limited company for outstanding tax dues without company being wound up.
Summary: The High Court of Andhra Pradesh considered a case where a director of a private limited company challenged a notice issued by the Deputy Commercial Tax Officer demanding outstanding tax dues from the company. The main issue was whether the authorities could proceed against the personal properties of the director to recover tax dues without winding up the company as per the law. The company, formed for agro products business, faced losses due to market conditions and was unable to pay taxes for certain years. The notice demanded immediate payment of dues failing which the director's personal properties would be attached. The petitioner argued that the notice was illegal and violated the Companies Act, as the liability of shareholders is limited to their shares. The company not being in liquidation, the provisions of section 16-B of the APGST Act were not applicable, making the notice unauthorized. The Court held that section 16-B applies only when a company is wound up, and since the company in question was not in liquidation, the notice was invalid. Referring to a previous case, it was established that directors of a private limited company cannot be pursued personally for company debts unless under specific conditions as per the law. The respondents had not yet attached the director's personal properties but indicated intent to do so if the outstanding balance was not cleared from the company's assets. The Court concluded that the notice was without legal authority and hence invalid, ruling in favor of the petitioner. Therefore, the writ petition was allowed with no costs, emphasizing that the notice issued by the Deputy Commercial Tax Officer was unauthorized and invalid as the company was not in liquidation.
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