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TMI Blog2016 (10) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery proceedings being taken against the assets of the company and not from the Directors personally. The claim of the department was based on the principle of 'lifting of the corporate veil' on an allegation that the revisionist had failed to truthfully discharge his duties and functions as a Director of the Company and that his management of its affairs was irresponsible. The application made by the revisionist refuting the contention of the department came to be rejected by the Deputy Commissioner on 13 January 2005. This order was taken in appeal before the Joint Commissioner (Appeals) which came to be dismissed on 31 March 2005. An appeal taken to the Tribunal also did not meet success and came to be dismissed on 7 January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enunciated in various judgements on the subject, while formulating the circumstances in which said the principle may be invoked, have gone on to hold that the creation of the corporate personality itself must be for the purposes of evading tax and committing illegalities. The said principle stands attracted in a case where the corporate personality is used as a ruse to play fraud upon the revenue and to evade payment of liabilities. The legal position in this respect was duly noted by the Division in R.K. Chhadda in the following terms:- "The legal position is, that in a case where the corporate personality has been obtained by certain individuals as a mask to prevent tax liability or to divert the funds of the Company for some illegal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or misrepresentation and, therefore, the legal personality of the corporate body should be ignored and the corporate veil should be lifted to find out the culprit and fix responsibility. " Bearing in mind the principles so laid down by the Division Bench, it is clear that the tests which have been evolved for the purpose of invocation of the principle is clearly not met in the facts of the present case. As noted above, the only allegation which was leveled against the revisionist was that he had failed to faithfully and dutifully discharge his duties and functions as a Director and that his conduct of the business of the Company was irresponsible. It was alleged that he had failed to obtain requisite forms as a result of which the dues of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced before us, that the company started production with fresh capital given by IFCI, only to defraud the secured creditors to avoid taxes and electricity dues. The directors of the company hiding behind the corporate veil made use of the corporate entity under the umbrella of BIFR to circumvent statutes, commit illegality and evade the liability of payment of taxes, central excise dues and electricity dues. The returns were not filed. The entire amount was utilised for personal gains. The directors used the State resources for enriching themselves. They robbed the coffers of the State while sitting in Delhi. The corporate veil under the patronage of BIFR was used as subterfuge to avoid payment of taxes. In the facts and circumstances we do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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