Peruri Koteswara Rao vs. State Of Andhra Pradesh

Held

The Court held that the Tax Authorities lacked the jurisdiction to attach the personal property of the petitioner, a nominee director, for the tax liability of the assessee company. Section 25 of the VAT Act allows recovery of unpaid tax as arrears of land revenue but does not empower the authorities to attach the properties of an individual other than the defaulting assessee. The Court found that the petitioner, being a separate juristic person, had their property attached in violation of law. The Court distinguished this situation from Section 16-B of the Andhra Pradesh Goods and Services Tax Act, which deals with director liability upon company liquidation, a scenario not present here. Consequently, the attachment order dated November 19, 2020, was deemed wholly without jurisdiction and violative of Article 300-A of the Constitution of India. The Court found the revenue's arguments regarding delay and alternative remedy to be without merit. The ratio is that tax authorities cannot proceed against the personal assets of a director for a company's tax dues unless specifically empowered by law, such as in cases of liquidation under Section 16-B of the AP GST Act.

Facts

The petitioner, a nominee director of an assessee company, challenged an order of attachment dated November 19, 2020, issued by the 3rd respondent. This order purported to proceed against the petitioner's personal property to recover a tax liability of Rs. 1,31,12,222/- owed by the assessee company. The attachment was made under Section 25 of the Andhra Pradesh Value Added Tax Act, 2005, read with Section 27 of the Revenue Recovery Act, 1854. The petitioner argued that tax authorities lacked jurisdiction to attach personal property of directors for the company's tax dues. The revenue contended that the assessee company failed to pay the tax, the attachment order was valid, and there was a delay in challenging it, with an alternative remedy available. The court noted that the petitioner had no personal tax liability.

Key Issues

1. Whether the Tax Authorities had the jurisdiction to proceed against the personal property of a nominee director for the tax liability of the assessee company under Section 25 of the Andhra Pradesh Value Added Tax Act, 2005, read with Section 27 of the Revenue Recovery Act, 1854? Petitioner's contentions: The petitioner argued that the impugned attachment order was wholly without jurisdiction, as tax authorities are not empowered to proceed against the personal properties of directors for the company's tax dues. Reliance was placed on the decision in Sunil Kumar Agarwal Vs. The Commercial Tax Officer. Revenue's contentions: The revenue argued that the assessee company had failed to pay its tax liability, leading to the attachment order. It was also contended that there was a delay in challenging the order and that the petitioner had an alternative remedy under the Revenue Recovery Act. The revenue did not explicitly address the jurisdictional argument regarding personal property attachment.