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2022 (11) TMI 1271 - HC - VAT and Sales TaxRecovery of arrears of tax due from a private limited companyfrom the Directors of the company - Section 27 of the Andhra Pradesh Revenue Recovery Act, 1864 - HELD THAT - This Court had categorically held that tax due from a private limited company under the APGST Act can be recovered from the Directors of the company, only in terms of Section 16-B of the Act, i.e. when the company is in liquidation and not other wise. The stand of the respondent that since the 3rd respondent has been amalgamated with the 4th respondent, the same is to be deemed to be under winding up, does not appeal this Court for acceptance for the reasons that the amalgamation is undertaken, under Section 397 of the Companies Act, 1956, whereunder there would be transfer of assets and liabilities of the company being taken over by the other company with which it is being amalgamated and thus, it cannot be considered as deemed to be wound up. The procedure for winding up of a company is prescribed under Part II of Chapter XX of the Companies Act, and operates in a different field and cannot be considered same as in the case of amalgamation. In the light of the settled position of law as enunciated by this Court in MADDI SWARNA VERSUS COMMERCIAL TAX OFFICER, CHILAKALURIPET AND ANOTHER 2001 (6) TMI 795 - ANDHRA PRADESH HIGH COURT , this Court is of the view that the action of the 1st respondent in issuing the impugned notice of attachment in Form 5 dt.22.08.2007 under section 27 of the Act of 1864, cannot be countenanced. Petition allowed.
Issues involved:
Challenge to the impugned notice of Attachment in Form 5 under Section 27 of the Andhra Pradesh Revenue Recovery Act, 1864 for recovery of tax arrears from a company's director post his resignation. Analysis: 1. The petitioner filed a Writ Petition seeking a Writ of Certiorari to quash the notice of Attachment in Form 5 issued by the 1st respondent under the Andhra Pradesh Revenue Recovery Act, 1864, for recovering tax arrears from the 3rd respondent company for the year 2002-03 under the Central Sales Tax Act, 1957. The petitioner argued that he ceased to be the Director of the company before the tax arrears arose, and recovery from directors is only permissible in specific circumstances, such as during winding up proceedings. 2. The petitioner contended that the company's tax arrears were being sought to be recovered from him, even though the company had amalgamated with another company. The respondent argued that the amalgamation of the company would deem it to be wound up, allowing for recovery from directors. However, the Court noted that amalgamation does not equate to winding up as per the Companies Act, 1956, and recovery from directors is limited to specific scenarios. 3. Citing previous judgments, the Court emphasized that recovery from directors is permissible only when a company is in liquidation. The Court differentiated between winding up and amalgamation, stating that the latter does not automatically trigger recovery from directors. Relying on established legal principles, the Court held that the action of the 1st respondent in issuing the notice of attachment for recovery of tax arrears from the petitioner, as a former director, was not legally sustainable. 4. Consequently, the Court set aside the impugned notice of Attachment in Form 5 and granted relief to the petitioner. The Writ Petition was allowed, and any pending petitions were closed in light of the final order, with no costs imposed. The judgment clarified the legal position regarding recovery of tax arrears from directors of companies, emphasizing the necessity of specific circumstances, such as liquidation, for such recovery actions to be valid.
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