Sreekumar K. Nair v. Assistant Commissioner (Assessment) Commercial Taxes Special Circle, Thiruvananthapuram; Deputy Tahsildar RR Taluk Office, Thiruvananthapuram; District Collector, Thiruvananthapuram; Official Liquidator, Company Law Bhavan, Ernakulam

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN WEDNESDAY, THE 19[TH] DAY OF JULY 2023 / 28TH ASHADHA, 1945 WP(C) NO. 7969 OF 2015** ## **PETITIONER/S:** SREEKUMAR K. NAIR AGED 53 YEARS 8B, KAWDIAR MANOR, JAWAHAR NAGAR, THIRUVANANTHAPURAM BY ADVS. SRI.HARISANKAR V. MENON SMT.MEERA V.MENON ## **RESPONDENT/S:** 1 ASSISTANT COMMISSIONER (ASSESSMENT) COMMERCIAL TAXES SPECIAL CIRCLE, THIRUVANANTHAPURAM 695 002. 2 DEPUTY TAHSILDAR RR TALUK OFFICE, THIRUVANANTHAPURAM 695 001. 3 THE DISTRICT COLLECTOR THIRUVANANTHAPURAM 695 043. 4 OFFICIAL LIQUIDATOR COMPANY LAW BHAVAN, 3RD FLOOR, THRIKKAKKARA P.O. ERNAKULAM - 682 021. BY ADVS. SRI.K.MONI SRI.SAYED M. THANGAL, GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.07.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** **==> picture [39 x 11] intentionally omitted <==** ## **JUDGMENT** The writ petition is filed seeking to quash Ext.P1 revenue recovery notice issued by the third respondent, District Collector, Thiruvananthapuram. 2. The petitioner was the Executive Director of a company, viz., M/s Travancore Sulphates Ltd., a joint venture with the Kerala State Industrial Development Corporation Ltd., engaged in the manufacture and sale of ferrous sulphate from the waste effluent liquid let out by the Travancore Titanium Products Ltd., Thiruvananthapuram. According to the petitioner, he is only a salaried Executive Director of the said Company. When the Company was running in loss, for winding up the Company, an application as CP No.26/2002 was filed before this Court and as per the order passed by this Court on WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** 06.03.2007, the Company is under liquidation proceedings. The assessments of the said Company under the provisions of the Kerala General Sales Tax Act (for short, “the KGST Act”) and the Central Sales Tax Act (for short, “the CST Act”) were finalized. It is alleged that appeals were filed against the assessment orders and the appellate authority passed orders directing reassessment. However, proceedings were initiated by the third respondent against the petitioner under Section 65 of the Revenue Recovery Act with respect to the sales tax arrears of the Company. According to the petitioner, the petitioner being the Executive Director of a Public Limited Company, is not liable to be proceeded against the dues of the Company. The grievance of the petitioner is that the petitioner is being proceeded against under Section 65 of the Revenue Recovery Act as per Ext.P1 though it is brought to the notice of the second respondent that the WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** assessments have been set aside/modified pursuant to the appellate orders and that the company being under liquidation, he has no control over the company. It is in this context, the petitioner has approached this Court. 3. Heard the learned counsel for the petitioner and the learned Government Pleader. 4. The learned counsel for the petitioner submits that the petitioner, being the Executive Director of a Public Limited Company which is now under liquidation, cannot be proceeded against under Section 65 of the Revenue Recovery Act for realizing the arrears of the Company. It is submitted that the provisions of Section 26C of the KGST Act is applicable only in the case of a Director of a Private Limited Company and is not attracted when the Company is a Public Limited Company and the petitioner, being the Executive Director of a Public Limited Company, cannot be proceeded under the KGST Act and the revenue WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** officials have no authority to issue Ext.P1 notice under Section 65 of the Revenue Recovery Act. The learned counsel relied on decisions of this Court in **Punalur Paper Mills Ltd. & Another v. District Collector & Others** [1985 60 STC 193 Ker] and **Jose Kurian and Others v. Deputy Tahsildar (RR) Ernakulam and others** [2011 (4) KHC 879 (DB)]. 5. The learned Government Pleader, on instructions, submits that since a huge amount is due from the Company and the petitioner, being the Executive Director of the Company, can be proceeded against under Section 65 of the Revenue Recovery Act for recovering the dues of the Company and moreover, there is no evidence to show that the petitioner is a Director of a Public Limited Company. Section 26C of the KGST Act reads as follows: **“26C. Liability of Directors of a Private Company** : - Subject to the provisions of the Companies Act, 1956 (Central Act 1 of 1956) where any tax or other amount recoverable WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** under this Act from any private company, whether existing or wound up or under liquidation, cannot be 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.” 6. On going through the above provision, it is clear that the said provision is applicable only in the case of a Director of a Private Limited Company and is not applicable to a Director of a Public Limited Company. It is relevant to note that the fourth respondent, the Official Liquidator, has filed a memo dated 24.06.2016 before this Court, wherein it is stated that M/s Travancore Sulphates Limited was incorporated as a Public Limited Company under the jurisdiction of the Registrar of Companies, Kerala, on 17.11.1988 with Registration No.090531 of 1988 as per the provisions of the Companies Act, 1956. The memo filed by the Official Liquidator is not disputed by the WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** respondents. Moreover, all the records relating to the assessment of the petitioner Company are available in the office of the respondent or they could have obtained necessary documents from the Registrar of Companies. No documents were produced or called for by the respondents to controvert the case of the petitioner that he is a Director of a Public Limited Company. 7. Modes of recovery of tax are as prescribed under Sub-Section (2) of Section 23 of the Act, which reads as follows: ## “ **23. Payment and recovery of tax** :-(1)xxxxx xxxxxx (2) Any tax assessed or any other amount due under this Act from a dealer or other person may, without prejudice to any other mode of recovery, be recovered, (a) as if it were an arrear of land revenue: (b) xxxxxxxxxx xxxxxxxxx Provided that no proceedings for such recovery shall be taken or continued as long as such dealer or other person has, in regard to the payment of such tax or other amount, as the case may be, complied with an order by any of the authorities to whom he has appealed or applied for revision, under the provisions of this Act.” WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** 8. As per the afore provision, the Revenue authorities can initiate proceedings under the Revenue Recovery Act for recovery of the amount due under the Kerala General Sales Tax Act from the dealer or any other person. According to the respondents, the petitioner's Company is a Private Limited Company and hence, the petitioner being the Director of a Private Limited Company is liable to pay the amount due. It is thus the Revenue Recovery proceedings under Section 65 of the Revenue Recovery Act were initiated against the petitioner herein. This cannot be accepted since the Official Liquidator has already filed a memo before this Court to the effect that the Company of the petitioner is a Public Limited Company. 9. In **Punalur Paper Mills Ltd.** ( _supra),_ it has been held that, to be a defaulter under the Sales Tax Act, a dealer, who has been assessed to tax, should have failed to pay the said tax WP(C) NO. 7969 OF 2015 **==> picture [31 x 8] intentionally omitted <==** within the time stipulated in the notice of demand. In other words, until an assessee (dealer) is declared a defaulter, recovery proceedings cannot be initiated against the said person. No liability under the KGST Act has been finalised against the petitioner, who is a Director of a Public Limited Company, and there is no provision in the KGST Act to fasten the liability against the petitioner. Hence, the revenue authorities are not entitled to proceed against the petitioner for realizing the arrears of a Public Limited Company as per Section 26C of the KGST Act or Section 65 of the Revenue Recovery Act. Hence, on a consideration of the entire facts and circumstances of the case, I am of the opinion that there is no legal basis to substantiate the demand under Ext.P1 revenue recovery notice and it has to be set aside. Accordingly, the writ petition is disposed of, as follows; WP(C) NO. 7969 OF 2015 **==> picture [37 x 8] intentionally omitted <==** a)Ext.P1 notice is set aside. b)Respondents 1 to 3 are free to approach the fourth respondent, the Official Liquidator, for recovery of the arrears due from the Company or proceed against the Company or its assets, as permissible under the relevant provisions of law. ## **Sd/-** ## **SHOBA ANNAMMA EAPEN** **JUDGE** bka/- WP(C) NO. 7969 OF 2015 ..11.. ## **APPENDIX OF WP(C) 7969/2015** PETITIONER EXHIBITS EXT.P1 - COPY OF NOTICE ISSUED BY THE 3RD RESPONDENT DT.2-2-2005 EXT.P2 - COPY OF JUDGMENT IN WPC.NO.4599/2004 OF THIS HON'BLE COURT DT.12-2-2004 EXT.P2(A) - COPY OF JUDGMENT IN WPC.NO.10831/2004 OF THIS HON'BLE COURT DT.29-3-2004. EXT.P2(B) - COPY OF JUDGMENT IN WPC.NO.4537/2005 OF THIS HON'BLE COURT DT.09-02-2005.