Nitaben Harishbhai Shah vs. Office Of Assistant Commercial Tax Officer, Gujarat

Held

The Court held that the contentions raised on behalf of the respondent are without merit. The Court reiterated its previous decisions in M.R. Choksi v. State of Gujarat and other relied upon cases, stating that there is no statutory provision in the Gujarat Sales Tax Act, 1969, or the Gujarat Value Added Tax Act, 2003, that empowers sales tax authorities to fasten the liability of a company on its Director for payment of sales tax dues. Consequently, if it is not permissible to proceed against a Director for recovery of company tax dues, it would not be permissible to recover such dues from the property belonging to the wife of a Director. The impugned action of the respondent in attaching the petitioner's property was therefore found to be without any authority of law and not backed by any statutory provision. The Court concluded that the impugned attachment notice and order could not be sustained.

Facts

The petitioner, Nitaben Harishbhai Shah, challenged an order dated September 19, 2018, passed by the Assistant Commercial Tax Officer, Gujarat, attaching her property. The property was purchased by the petitioner on March 25, 2008, for Rs. 1,15,00,000/-. The attachment was for recovery of alleged outstanding sales tax dues of Shah Milk Processors Private Limited for the assessment year 2001-02, amounting to Rs. 14,83,009/- plus interest. The petitioner's husband was a Director of the company during the relevant period, and the property was sought to be attached for the company's dues. The petitioner contended that the authorities could not proceed against her, as she is the wife of a Director and the sole owner of the property, and there is no provision to recover company dues from a Director, let alone the Director's wife.

Key Issues

1. Whether the respondent authorities have the statutory power under the Gujarat Sales Tax Act, 1969, and the Gujarat Value Added Tax Act, 2003, to recover the dues of a private limited company from its Director, and consequently, from the property of the Director's wife. (Question of law) Petitioner's Arguments: The petitioner argued that there is no provision under the Gujarat Sales Tax Act, 1969, or the Gujarat Value Added Tax Act, 2003, empowering the authorities to recover the dues of a private limited company from its Director. Therefore, recovering such dues from the petitioner, who is the wife of a Director and the owner of the property, is without authority of law. Reliance was placed on M.R. Choksi v. State of Gujarat, C.V. Cherian v. C.A. Patel, Different Solution Marketing (P.) Ltd. v. Assistant Commissioner of Commercial Taxes, and Umesh Mohanbhai Garala v. Commercial Tax Officer. Respondent's Arguments: The respondent contended that Sections 53(3) and 86 of the Gujarat Value Added Tax Act, 2003, empower recovery of tax, interest, and penalty from any person who was or is a Director of the company, provided they cannot establish that the liability is not attributable to them. They also argued that the transfer of property in 2008, after the tax amount became due in 2001-02, is void against the State's claim under Section 47 of the Gujarat Value Added Tax Act, 2003, and recovery is permissible under Section 49.