2022 (12) TMI 1181 - HC - VAT and Sales Tax

Attachment of bank account of petitioner - recovery of outstanding taxes of a Company from the accounts of its individual Directors - HELD THAT - Admittedly, the assessment in the present case is in the name of the Company and throughout, it is the Company which has been treated as the Assessee and demands raised against it. While the impugned order notices that there is nothing wrong in the attachment of the Company s account, the grievance of the Petitioner that as an individual Director who has already resigned much prior to the impugned attachment, his individual account could not have been attached was not even addressed in the impugned order. Section 51 of the OVAT Act read with Rule 55 of the OVAT Rules provides a special mode of recovery of outstanding amount of tax, interest and penalty. Even these provisions do not authorize recovery of outstanding taxes of a Company from the accounts of its individual Directors. This Court is unable to sustain the impugned order in so far as the said order confirms the attachment of the Petitioner s individual Bank account notwithstanding his having ceased to be a Director of AEPL whose tax dues were sought to be recovered - impugned attachment order and the corresponding order of the Commissioner of Sales Tax, Odisha affirming it are hereby set aside - petition is disposed off.

Summary

Issues:
Challenge to attachment of bank account by Commissioner of Commercial Taxes under OVAT Act and CST Act.

Analysis:
The petitioner, an erstwhile Director of a company, challenged the attachment of his bank account by the Commissioner of Commercial Taxes under the Odisha Value Added Tax Act, 2005 (OVAT Act) and the Central Sales Tax Act, 1956 (CST Act). The demand raised against the company was sought to be recovered from the petitioner's individual bank account, despite him resigning from the company much prior to the attachment. The Sales Tax Officer mistakenly issued notice to the petitioner's bank account instead of the company's account. The petitioner informed the authorities of his resignation, and the company also confirmed his disassociation. The revision petition against the attachment was rejected by the Commissioner, leading to the present challenge in the High Court.

The High Court observed that the relevant provisions of the OVAT Act and rules do not authorize the recovery of outstanding taxes of a company from the accounts of its individual directors. The court highlighted that the company is a separate legal entity capable of being sued, and the assessment was in the name of the company, not the individual director. The court noted that the impugned order did not address the petitioner's grievance that his individual account should not have been attached after his resignation from the company.

Based on the analysis, the High Court held that the impugned attachment order and the Commissioner's order affirming it were set aside. The court directed the lifting of the attachment of the petitioner's bank account and instructed the concerned bank to allow the petitioner to operate his account immediately. The writ petition was disposed of accordingly, and an urgent certified copy of the order was to be issued as per rules.