2025 (3) TMI 493 - HC - VAT / Sales Tax

Attachment of personal properties of directors of a company under the Gujarat Value Added Tax Act 2003 - lifting of corporate veil - HELD THAT - This Court finds that this very issue came up for consideration before the Division Bench of this Court in the case of MR Choksi 2004 (6) TMI 642 - GUJARAT HIGH COURT where it has been held As regards the faint plea of lifting the corporate veil as per the settled legal position the corporate veil is not to be lifted lightly. It is only when there is strong factual foundation for lifting the corporate veil that the question of examining the applicability of the principle of lifting such veil would be required to be examined. In neither of the two petitions raising the controversy the authorities have passed any specific order fastening the liability on the Directors personally much less any factual foundation has been laid to invoke the doctrine of lifting the corporate veil. Hence it is not necessary to dilate on the said principle any further. The present issue is no longer res integra and this Court has repeatedly and emphatically held that the personal properties of a Director cannot be attached to secure the dues of the Company. Besides there is no factual foundation whatsoever for this Court to lift the corporate veil and permit the respondents to go after the Directors of the Company whose dues the respondents seek to secure by way of the attachment in question. The impugned attachment orders dated 19.01.2013 17.02.2014 as well as attachment order dated 01.05.2015 are hereby quashed and set aside - Petition allowed.

Summary

The Gujarat High Court considered a case involving the attachment of personal properties of directors of a company under the Gujarat Value Added Tax Act, 2003. The key issues presented and considered in the judgment are:1. Whether the personal properties of directors can be attached for the dues of the company.2. The validity and legality of the attachment orders issued by the Respondent authorities.3. The interpretation of Sections 45 and 48 of the Gujarat Value Added Tax Act, 2003 read with Section 154 of the Bombay Land Revenue Code.4. The application of the principle of lifting the corporate veil in this context.In the detailed analysis, the Court examined the legal framework and precedents, including the provisions of the Gujarat Value Added Tax Act, 2003 and relevant case law. The Court interpreted the law, reasoning that there is no provision empowering tax authorities to hold directors personally liable for the company's tax dues. The Court emphasized that the corporate veil should not be lifted lightly and highlighted the lack of factual basis for attaching directors' personal properties in this case.Key evidence and findings included the submissions of the petitioner's counsel, Mr. Aditya J. Pandya, arguing that directors have separate legal existence from the company and that the attachment orders exceeded the mandate of the relevant statutory provisions. The Respondents contended that the attachment orders were justified due to non-payment of dues by the company.The Court applied the law to the facts by analyzing the provisions of the Gujarat Value Added Tax Act, 2003 and the Bombay Land Revenue Code in light of the specific circumstances of the case. Competing arguments were considered, with the Respondents asserting the validity of the attachment orders based on the company's outstanding dues.In its conclusions, the Court referenced previous judgments, including MR Choksi Vs. State of Gujarat, Different Solution Marketing (P.) Ltd. Vs. Assistant Commissioner of Commercial Taxes, and Manharlal Hirjibhai Virdiya Vs. Assistant Commissioner of Commercial Tax, which established that personal properties of directors cannot be attached to secure company dues. The Court quashed and set aside the attachment orders dated 09.01.2013, 17.02.2014, and 01.05.2015, ruling in favor of the petitioner. The judgment reiterated that there was no legal basis for holding directors personally liable for the company's tax obligations and emphasized the importance of upholding the separate legal identity of directors and companies.The significant holdings of the judgment include the core principle that personal properties of directors cannot be attached to secure company dues, as established by precedent and statutory interpretation. The final determination was in favor of the petitioner, leading to the quashing of the attachment orders in question.