2022 (4) TMI 986 - HC - VAT and Sales Tax

Seeking to lift attachment of Bank Accounts - recovery of dues payable by the Company under the Act, 2003 - power of authority under the Value Added Tax Act, 2003 to attach any private movable or immovable property of a Director of a Company including the bank account of the Director - HELD THAT - This Court has made it very abundantly clear that 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 in-charge of the company responsible for the offence vicariously liable for the criminal action, for which, the company may have been charged. However, when it comes to recovering the dues from the company towards liability incurred under the Act, the Department cannot proceed against the individual Director of the Company. It is not in dispute that the bank account is the personal account of the Director. The attachment so far as the Current Account maintained with IDBI Bank, Durga Das Nagar, Pali, Rajasthan stands hereby lifted - Application allowed.

Summary

Issues:
1. Whether the private properties or individual bank accounts of a Director of a Company can be attached for recovering the dues of the Company under the Value Added Tax Act, 2003.

Analysis:
The writ-application under Article 226 of the Constitution of India sought various reliefs, including lifting the attachment on a bank account, quashing an impugned notice, and restraining authorities from taking recovery actions against the petitioner for alleged dues. The Court referred to previous judgments, emphasizing that the authority under the Value Added Tax Act, 2003 does not have the power to attach private movable or immovable property of a Director of a Company, including their bank account, for recovering dues payable by the Company under the Act. Section-86 of the Act holds persons in-charge of the company responsible for offenses committed by the company, but when it comes to recovering dues, the Department cannot proceed against individual Directors. The bank account in question was confirmed to be the personal account of the Director.

The Court highlighted that it had previously issued multiple orders on the attachment of private properties or bank accounts of Directors for recovering company dues. Citing specific cases like Different Solution Marketing Private Ltd. Vs. Assistant Commissioner of Commercial Taxes and Paras Shantilal Savla Vs. State of Gujarat, the Court reiterated that the Department lacks the authority to attach private assets of Directors for recovering company liabilities under the Act. The judgments emphasized that while Directors may be vicariously liable for company offenses, their personal assets are not subject to recovery for company dues.

In the final decision, the Court allowed the writ-application, lifting the attachment on the current account maintained with IDBI Bank. The judgment reiterated the principle that individual Directors cannot be pursued for recovering company dues under the Value Added Tax Act, 2003. The Court's decision was based on the clear distinction between the liability of a company and the personal assets of its Directors, affirming that the Department cannot proceed against individual Directors for recovering company liabilities. The writ-application was disposed of accordingly, providing relief to the petitioner regarding the attachment on the bank account.