2016 (7) TMI 121 - HC - VAT and Sales Tax

Provisional attachment of personal property of the director in case of company - recovery of tax - Input tax credit - TIN number of the supplier was cancelled - GVAT - Held that - Sub-section (1) of section 45 of the VAT Act provides that where during pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, the Commissioner is of the opinion that for the purpose of protecting interest of the Government revenue, it is necessary so to do, he may order in writing attach provisionally any property belonging to the dealer. Thus, in the present case, dealer would be the company and not the directors. Section 86 of the Act pertains to the offence by companies and contains certain provisions where for the offence of the company, every person who at the time the offence was committed was in-charge of, and was responsible to the company for the conduct of the business of the company, as well as the company shall be deemed to be guilty of the offence. In essence, this provision makes the person incharge of the company responsible for the offence vicariously liable for the criminal action for which the company may have been charged. In the present case, we are not concerned with any such situation. The respondents have not disputed that the properties under attachment under the impugned order are the personal properties of the directors. Attachment order set aside - Decided in favor of petitioner.

Summary

Issues:
1. Validity of order attaching immovable properties for VAT dues of a company.
2. Claim of input tax credit by the company.
3. Legality of attaching personal properties of directors for company's dues.

Issue 1:
The judgment concerns the quashing of an order attaching immovable properties of petitioners for VAT dues of a company. The Assistant Commissioner attached properties due to possible tax, interest, and penalty dues of ?2.17 crores by the company. The petitioners argued that assessments were ongoing, and errors were made in raising demands before finalizing assessments. They contended that the company did not claim undue input tax credit and errors could be rectified. The counsel also argued against attaching personal properties for company dues, citing a previous court decision.

Issue 2:
The petitioners claimed that the company had not claimed any input tax credit wrongly and that errors in purchases could be rectified. The Assistant Commissioner raised demands without finalizing assessments, prompting objections from the petitioners. The Assistant Government Pleader defended the order based on discrepancies in purchases made by the petitioners. The court refrained from commenting on the input tax credit controversy while questioning the attachment of directors' personal properties.

Issue 3:
The court analyzed the legality of attaching personal properties of directors for company dues. Referring to a previous Division Bench decision, the court noted that statutory provisions did not empower tax authorities to hold directors personally liable for company tax dues. The judgment highlighted that the Sales-tax Act did not fasten liability on directors for company dues. The court also discussed the provisions of the VAT Act related to provisional attachment of property belonging to the dealer, emphasizing that the dealer would be the company and not the directors. Ultimately, the court set aside the impugned order, allowing the petition and disposing of the case.