2007 (1) TMI 602 - HC - VAT and Sales Tax

Summary

Issues involved: Alleged recovery of trade tax dues against a company, liability of directors for outstanding dues, validity of circular issued by trade tax commissioner.

Alleged recovery of trade tax dues against a company: The petitioner, a former director of a company, submitted his resignation in 1975 and did not acquire any assets of the company. The recovery sought by the respondents pertains to the assessment years 1972-73 to 1976-77. The petitioner argued that the circular issued by the trade tax commissioner is contrary to Section 8 of the U.P. Trade Tax Act and cited relevant case laws to support his claim.

Liability of directors for outstanding dues: The court acknowledged that the petitioner resigned as a director in 1975 and did not possess any assets of the company. It was established that directors cannot be held accountable for outstanding dues of a company if they do not hold its assets. Precedents were cited where it was held that trade tax arrears of a limited company cannot be recovered from former directors.

Validity of circular issued by trade tax commissioner: The court found that the circular and notice in question, which targeted the petitioner, were in violation of the Trade Tax Act. The principle of law was reiterated that recovery from personal assets of a director is impermissible unless specifically provided by law, which was not the case under the U.P. Trade Tax Act.

Conclusion: The writ petition was allowed, and the circular issued by the trade tax commissioner was quashed. However, the respondents were permitted to pursue recovery against the company for the outstanding dues. No costs were awarded in the matter.