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P. Chockalingam Vs. Deputy Commercial Tax Officer, Nagercoil, (Rural), Kanyakumari District and Anothers - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Judge
Reported in[1990]68CompCas707(Mad)
ActsCentral Sales Tax Act, 1956 - Sections 18; Tamil Nadu General Sales Tax Act, 1959 - Sections 24(3)
AppellantP. Chockalingam
RespondentDeputy Commercial Tax Officer, Nagercoil, (Rural), Kanyakumari District and Anothers
Appellant Advocate M. Agni, Adv.
Respondent AdvocateR. Lokapriya, Adv.
Excerpt:
.....with penalty - active director of company till date of closure of company liable for payment of arrears of sales tax and penalty for gross negligence - held, petitioner one among directors of company at time of its closure - petition dismissed. - - 35298/67-68 dated february 14, 1960 before the appellate assistant commissioner and the appeal was dismissed on the ground that the appellant failed to produce the accounts before the assessing authority wilfully, even though sufficient opportunity was given by the appellate authority. 665/67-68 were passed inthe absence of accounts to the best of judgment by the assessing officer. reads as follows :not with standing anything contained in the companies act, 1956 when any private company is wound up after the commencement of this act,..........sales tax act, 1956 since as an active director, the petitioner was responsible for paying the arrears of sales tax. it is the case of the respondents that the petitioner moved the government and obtained a stay order to pay the arrears in 15 equal monthly instalments in g.o. ms. no. 875, dated ocotber 15, 1982. it is also submitted on behalf of te revenue by mr.lokapriya that one instalment was also paid by the petitioner in accordance with the said g.o. ms. no.875, dated october 15, 1982. in that g.o., it was also stipulated that penal interest at 24% on the outstanding arrers of tax till the date of clearance of the arrears under section 24(3) of the tamil nadu general sales tax act, 1959, should be paid. therefore, notice was issued to pay the arrears of sales tax and penal.....
Judgment:
ORDER

Swanikkannu, J.

1. Tpetition is for issue of a writ of certiorari calling for the records relating to the proceedings of the first respondent, the Deputy Commercial Tax Officer, Nagercoil (Rural), Proceedings No. Nil dated November 20, 1982 and to quash the same. It is inter alia, stated in the affdavit sworn to by the petitioner that DharmaOil Mills P. Ltd. had their businsess at No.11/1, Venkatadri Naicken Street, Madras-12 , and it was an assessee in the file of the Deputy commercial Tax Officer, II, C.S.T. Zone IV, Madras-10. The petitioner was an ex-director of the said company along with three other directors by name. A.Amirthalingam, Sankaran and Dharmar. One of the directors, Sankaran, sponsored the said company. The company was also registered under the companies Act,1956 as a private limited company. The company was carrying on business in oil and oil cakes within the jurisdiction of the Deputy Commercial Tax Officer, C.S.T. IV Zone , Madras -10. The company was running the business for a very short period viz for one year from 1967 to 1968. The company was assessed to Central sales tax under assessment No. CST 6665/67/68. Since the company incurred heavy loss from the inception itself, it was wound up and closed in the year 1968 itself. As the company was managed by the then directors, Sankaran and Amirthalingam, the company's accounts assets and liabilities were all entrusted with those two directors after it became defunct. Subsequently, the petitioner went to his native place in the year 1968 and settled down there. In the year 1974, nearly after a lapse of six years from the date on which they ceased to carry on the business, the peitioner was served with a C.S.T. assessment including a final demand notice for the year 1967-68 demanding a sum of Rs. 3,835.43. It is seen from the assessment order that simliar copies of the order has also been sent to two other active directors, viz,Amirthalingam andSankaran except Dhaarmar. The petitioner was under the bona fide impression that the active directors to whom the accounts were entrusted at the time of closure would take necessary steps including appeal. After nearly eight years, the first respondent, Deputy Commercial TAx Officer,Purasawalkam, Madras-7, initiateda distraint order on October 4, 1982. Apprehendingthat coercive steps would be taken, the petitioner had moved te Government of Tamil Nadu for stay of distraint proceedings and for permission to pay the actual dues in instalments. The second respondent, the Commissioner and Secretary to Government, Commercial taxes and Religious Endowments, Government of Tamil Nadu, Madras, issued orders G.O. 875 dated October,15, 1982, permitting the petitioner to pay the tax dues of Rs. 5,757.11 in 15 equal monthly instalments. At the time of submitting his application for payment in instalments,the petitioner had stated by mistake that he was a partner of the erstwhile company instead of a director.In the Government order issued by the second respondent, the petitioner was directed to pay penal interest at 24% On the outstanding arrears til date of clearance under section 24(3) of the Tamil Nadu General Sales Tax Act. Subsequent to the order of the second respondent, the first respondent issued to the petitioner the impugned order demanding payment of arrears of tax of Rs. 5,757.11 together with penaltly of Rs. 13,011. Aggrieved by the said impugned orderof the first respondent, the petitioner has come forward with this writ petition.

2. The point for consideration is whether the relief prayed for by the petitioner can be granted.

3. In the counter-affidavit sworn to by the Deputy Commercial Tax Officer, nagercoil(Rural), it is inter alia, stated that even though the original assessment order were duly sent by registered post with acknowledgment due and served on all the directors including the petitioner. It is common gorund that the company is one registered under the Companies Act, 1956, It is not a partnership concern. Appeal was preferred against the assessment order TNGST No. 35298/67-68 dated February 14, 1960 before the Appellate Assistant Commissioner and the appeal was dismissed on the ground that the appellant failed to produce the accounts before the assessing authority wilfully, even though sufficient opportunity was given by the appellate authority.

4. A requistion was sent to the first respondent by the Commercial Tax Officer, Purasawalkam, to attach the movabvle and immovable properties of the petitioner under section 8 of the Revenue Recovery Act forthe ecovery of Central sales tax under section 18 of the Central Sales Tax Act, 1956 since as an active director, the petitioner was responsible for paying the arrears of sales tax. It is the case of the respondents that the petitioner moved the Government and obtained a stay order to pay the arrears in 15 equal monthly instalments in G.O. Ms. No. 875, dated Ocotber 15, 1982. It is also submitted on behalf of te Revenue by Mr.Lokapriya that one instalment was also paid by the petitioner in accordance with the said G.O. Ms. No.875, dated October 15, 1982. In that G.O., it was also stipulated that penal interest at 24% on the outstanding arrers of tax till the date of clearance of the arrears under section 24(3) of the Tamil Nadu General Sales Tax Act, 1959, should be paid. Therefore, notice was issued to pay the arrears of sales tax and penal interest in 15 monthly instalments. Arrears of sales tax and penal interest are recoverable as if they were arrears of land revenue. It is also mentioned in paragraph 13 of the counter that the assessment order TNGST No. 35298/67-68 and CST No. 665/67-68 were passed inthe absence of accounts to the best of judgment by the Assessing Officer. Hence, under section 18 of the Central Sales Tax Act, 1956, the director, who was active till the date of closure of the company as stated by the petitioner, is liable to pay the arrears of sales tax and penalty for his gross negligence.

5. Section 18 of the Central Sales Tax.Act. reads as Follows :

'Not with standing anything contained in the Companies ACT, 1956 when any private company is wound up after the commencement of this ACt, and any tax assessed on the company under this Act for any period, whether before or in th course of or after ists liquidation, cannot be now called upon to pay the tax as well as the penalty. This contention is untenable,,because at ano point fo time, it has been proved that it was due to misfeasance or breach of dudty on his part in relation to the affairs of the company.'

6. It is contended on behalf of the petiotioner that incase of misfeasance or breach of duty only the petitioner can be compelled to pay the penatly or the tax. Since he was not an active director, he cannot be now called upon to pay the tax as well as the penalty. This contention is untenable, because at no point of time, it has been proved that it was due to misfeasance or breach of duty that he had been called upon topay the tax amount orpenalty. All the directors were issued notice and he,as one among the directors, is liable to pay under the Act, Thus, we find that there is no merit in the writ petition. Hence, it is dismissed. Under the circumstances, there is no order as to costs.


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