By TIOL News Service

CHANDIGARH, DEC 12, 2015: THE petitioner is at present a non-working Director of M/s Spectec Building Products Pvt. Limited. It is having two directors namely Palvinder Singh and the petitioner.

A SCN came to be issued in July 2008 demanding CE duty of Rs.33.5 lakhs and imposition of penalties.

The adjudicating authority, in September 2009, held that the company was liable to pay duty alongwith equivalent penalty and its directors were liable to pay penalty of Rs.3 lakhs each under Rule 26 of CER.

Thereafter, vide letter dated 11.11.2009, the petitioner informed the department that the business of the company stood closed and it had stocks and machineries to discharge the excise duty liability and that the amount may be recovered by attachment of properties. The petitioner & others also filed appeals before the Commissioner (Appeals) but the same was dismissed. In further appeal, the Tribunal directed the petitioner to make a pre-deposit of a sum of Rs.1 lakh towards penalty and further directed the company to make deposit of entire amount of duty alongwith 25% penalty within a period of eight weeks.

The petitioner complied with the order but as the company did not make the pre-deposit as ordered, the appeal of the company was dismissed by the Tribunal on 24.2.2012.

In February 2013, the department directed the company and its directors to deposit entire amount of duty alongwith 25% of duty as penalty. The petitioner informed the department in March 2013 that all the plant and machinery were under the charge of the Director Palvinder Singh.

Thereafter, Revenue apparently remained silent and it was only in March 2015 that the department asked the petitioner to deposit dues of the company i.e. duty amounting to Rs.33.50lacs plus interest and penalty of Rs.33.50lacs. The petitioner, in reply, submitted that he had already requested to recover the dues by attachment of stocks and plant and machinery in the premises of the company.

However, since the department was compelling the petitioner to pay the outstanding dues of the company, the impugned Petition was filed in the High Court.

The High Court, after considering the submissions, observed -

++ It is well settled that in the absence of any specific provision in the statute, the duty/penalty liability of the company cannot be recovered from the assets of its director. The Director is not personally liable towards liability of the company.

++ This court while delving into an identical issue in Subhash Goyal vs. State of Haryana and others, held that in the absence of taking any specific recourse to proceedings under Section 18 of the Central Sales Tax Act, 1956 and any valid order for effecting recovery of arrears of sales tax from the directors of a private limited company in liquidation, the proceedings relating to recovery of arrears of tax from the petitioner being a director were not permissible in law.

Holding that the action of the respondents in compelling the petitioner to clear the dues of the company cannot be sustained, the Writ Petition was disposed of.

Nonetheless,the High Court viewed that the respondents were at liberty to proceed against the company for clearance of its dues in accordance with law.

(See 2015-TIOL-2765-HC-P&H-CX)