Muhammed vs. Deputy Tahsildar (Rr) - Kerala High Court, 14 February 2024

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH WEDNE AY, THE 14TH DAY OF FEBRUARY 2024 / 25TH MAGHA, 1945 WP(C) NO. 20363 OF 2022 PETITIONER/S: 1 MUHAMMED, AGED 62 YEARS, S/O.ALI MUHAMMEDKUTTY VEETILAYIL HOUSE, PUNNAYOORKULAM DESOM, PUNNAYOORKULAM VILLAGE, CHAVAKKAD TALUK, THRISSUR DISTRICT, PIN - 679561 2 VALSAN PANICKER, AGED 57 YEARS S/O. JANARDHANA PANICKER, MALANA HOUSE, AYIROOR DESOM, PONNANI TALUK, MALAPPURAM DISTRICT - 679 580, PRESENTLY RESIDING AT ASHRAMAM NAGAR, CHAMUNDESWARY ROAD, GURUVAYOOR VILLAGE, CHAVAKKAD TALUK, THRISSUR DISTRICT, PIN - 680101 BY ADV P.K.SAJEEV RESPONDENT/S: 1 DEPUTY TAHSILDAR (RR), HEAD QUARTERS, TALUK OFFICE, CHAVAKKAD, PIN - 680506 2 COMMERCIAL TAX OFFICER (LUXURY TAX), STATE GOODS AND SERVICES TAX DEPARTMENT, KERALA, COMMERCIAL TAX COMPLEX, AYYANTHOLE, THRISSUR-3 , REPRESENTED BY DEPUTY COMMISSIONER, PIN - 680003 BY ADV MS.RESHMITA RAMACHANDRAN, GP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NO. 20363 OF 2022 2 J U D G M E N T Petitioners are Chairman and Managing Director,

respectively,

of M/s.Vasthuhara Developers and Real Estate Limited. They have filed the present writ petition impugning Exts.P1 to P5 notices issued by the 1st respondent for recovery of arrears of tax under the provisions of the Kerala Value Added Tax Act, 2003 ('Act', for short). The said Company was a dealer on the rolls of the 2nd respondent having valid registration number. An inspection was carried out in the business premises of the said Company by the Intelligence Officer, Squad No.1, Commercial Taxes Department on 7.7.2015. The documents recovered show gross irregularities in the returns filed by the dealer. Assessment orders under Section 25(1) of the Act for the years 2011-12, 2012-13 and 2015-16 were completed and created

demands

of Rs.4,00,697/-, Rs.5,07,408/- and Rs.3,69,259/-, respectively, in respect of the three assessment years. Penalty

WP(C) NO. 20363 OF 2022 3 orders were also issued in respect of the assessment years 2011-12 and 2012-13 creating a demand

of Rs.50,336/-

and 1,01,772/-, respectively. The demand notices and assessment orders were served at the place of business of the registered dealer, M/s.Vasthuhara Developers & Real Estate Limited. However, the said Company failed to remit the tax, interest and penalty. Since the respondents were unable to recover the aforesaid tax, penalty and interest from the dealer, revenue recovery proceedings have been initiated against the Directors by virtue of Section 39 of the Act.

Learned counsel for the petitioners submits that notices under Section 34 of the Kerala Revenue Recovery Act, 1968 have been issued to the petitioners, though the petitioners are not at all personally liable for payment of arrears of the VAT, penalty and interest to be recovered from the Company. For recovery of tax and other statutory dues, proceedings have to be imitated against the Company first, and if the arrears of

WP(C) NO. 20363 OF 2022 4 tax and other statutory dues are not recovered from the Company, then only the Directors are held liable. He, therefore, submits that without proceeding against the Company at the first instance, issuance of notices under Section 34 of the Revenue Recovery Act against the petitioners is wholly illegal and are liable to be set aside.

On the other

hand,

Ms.Reshmita Ramachandran, learned Government Pleader, submits that under Section 39 of the Act, Directors of a private limited company are jointly and severally liable for the dues of the Company. Notices were issued to the Company for discharging the liabilities, but the Company failed to discharge the same and, therefore, revenue recovery proceedings are being initiated against the petitioners, by virtue of Section 39 of the Act.

Section 39 of the Act reads as under:

“39. Liability of Directors of a Private Company :- Where any tax or other amount recoverable under this Act from any private company, whether existing or wound up or under liquidation, cannot be

WP(C) NO. 20363 OF 2022 5 recovered for any reason whatsoever, every person who was a director of such company at any time during the period for which the tax or other amount is due under this Act shall be jointly and severally liable for the payment of such tax or other amount unless he proves that the non-recovery cannot be attributed

to any negligence, misfeasance or breach of duty on his part in relation to the affairs of the company. ”

It is not in dispute that M/s.Vasthuhara Developers & Real Estate Limited is a private limited company and the petitioners are its Chairman and Managing Director, respectively. Section 39 of the Act creates a joint and several liability of payment of tax and other amount recoverable from a company on its Directors in respect of a private company, unless the Directors prove that the non-recovery cannot be attributed to any negligence, misfeasance or breach of duty on their part in relation to the affairs of the Company. No such a plea has been taken by the

WP(C) NO. 20363 OF 2022 6 petitioners. As the petitioners are jointly and severally liable to discharge the tax liability under Section 39 of the Act, the statutory authorities are well within the powers to proceed against the petitioners for recovery of the dues of the Company against their personal assets. I find no error of law or juri iction in issuing the impugned notices. The writ petition has no merit and substance and the same is hereby dismissed. Pending interlocutory application, if any, in the present writ petition stands dismissed. DINESH KUMAR SINGH

JUDGE jg

WP(C) NO. 20363 OF 2022 7 APPENDIX OF WP(C) 20363/2022 PETITIONER EXHIBITS Exhibit P1OF THE NOTICE NO.2022/1274/08 DATED 12.03.2022 ISSUED BY THE 1ST RESPONDENT Exhibit P2OF THE NOTICE NO.2022/2425/08 DATED 12.03.2022 ISSUED BY THE 1ST RESPONDENT Exhibit P3OF THE NOTICE NO.2022/2440/08 DATED 12.03.2022 ISSUED BY THE 1ST RESPONDENT Exhibit P4OF THE NOTICE NO. 2022/2454/08 DATED 12.03.2022 ISSUED BY THE 1ST RESPONDENT Exhibit P5OF THE NOTICE NO.2022/2458/08 DATED 24.03.2022 ISSUED BY THE 1ST RESPONDENT Exhibit P6OF THE REPRESENTATION DATED 18.03.2022 GIVEN BY THE PETITIONERS TO THE 1ST RESPONDENT