2007 (2) TMI 609 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of notice issued to petitioner for alleged arrears of sales tax, surcharge, and penalty.
2. Liability of director of a company for dues of the company.
3. Legal entity status of a company and recovery of dues.

Analysis:
1. The petitioner filed a petition challenging a notice dated September 22, 2003, demanding payment of Rs. 19,19,058.78 for alleged arrears of sales tax, surcharge, and additional sales tax. The petitioner, a former director of the company in question, argued that the company ceased operations in 1997-98, and the notice wrongly held the petitioner liable for the dues. The petitioner feared property distraint and filed the petition to set aside the notice.

2. The court considered previous judgments, including the case of Sri George J. Mathew v. Commercial Tax Officer and Chamundeswari v. Commercial Tax Officer, which clarified the liability of directors for company dues. The court emphasized that a company is a separate legal entity capable of being sued or suing on its own. The court cited various high court cases to support the principle that dues from a company should be recovered solely from the company and not its directors.

3. Relying on the legal entity status of a company and the precedent set by previous judgments, the court held that the notice demanding payment from the petitioner, a former director, was invalid. The court set aside the notice, emphasizing that company dues must be recovered from the company itself, not from its directors. The writ petition was allowed, and no costs were imposed in this case.