V.R. Gopinathan v. District Collector (Adoor) & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON** ## **MONDAY, THE 21ST DAY OF MAY 2012/31ST VAISAKHA 1934** ## **WP(C).No. 4403 of 2007 (Y)** **---------------------------------------** **PETITIONER(S):** **------------------------** **V.R.GOPINATHAN, S/O.V.K.RAMAN, VATTAMIRAPPEL HOUSE, P.O.PARANTHEL VIA PANDALAM, PATHANAMTHITTA DIST.** ## **BY ADV. SRI.A.KUMAR** **RESPONDENT(S): ---------------------------** ## **1. THE DISTRICT COLLECTOR/AUTHORISED TALUK OFFICE, ADOOR.** **2. SALES TAX OFFICER, WORKS CONTRACT & LUXURY TAX, ALAPPUZHA.** **3. M/S.NTPC LTD., KAYAMKULAM.** **4. K.C.RAGHU, KANDATHTAYATH HOUSE, PARANTAL P.O., PANTHALAM PATHANAMTHITTA DISTRICT.** **5. THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT GOVT. SECRETARIAT, TRIVANDRUM.** **BY ADV. SRI.PHILIP T.VARGHESE BY ADV. SMT.A.SREEKALA** **R1 & R2 & R5 BY GOVERNMENT PLEADER SR.SUDHISH KUMAR** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19-03-2012, ALONG WITH WPC. 17106/2008, THE COURT ON 21/05/2012 DELIVERED THE FOLLOWING:** **tss** ## **W.P.(C) NO.4403/2007** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** ## **P1:- COPY OF THE CERTIFICATE OF INCORPORATION ISSUED BY THE REGISTRAR OF COMPANIES.** **P2:- COPY OF THE WRIT PETITION DT.D 19.10.2004 WP(C) 31038/2004** **P3:- COPY OF THE JUDGMENT IN WPC. 31038/2004 DTD. 21.10.2004.** **P4(12 NOS.) COPIES OF THE CERTIFICATE ISSUED BY NTPC.** **P5:- COPY OF THE NOTICE ISSUED BY THE FIRST RESPONDENT DTD. 25.11.2006.** **P6:- COPY OF THE STATEMENTS RELEVANT TO THE A.Y. 1999-2000.** **P7:- COPY OF THE SALE DEED NO.710/1997 OF THE SRO CHERIANNAD.** **P8:- COPY OF THE SALE DEED NO.645/1997 OF THE SRO NOORANAD.** **P9:- NOTICE OF SALE DTD. 13.8.2007.** ## **RESPONDENT'S EXHIBITS:-** **NIL** **//TRUE COPY//** **P.S. TO JUDGE** **tss** ## **P.R. RAMACHANDRA MENON, J.** .............................................................................. ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** ......................................................................... **Dated this the 21[st] May, 2012** ## **J U D G M E N T** Revenue recovery proceedings initiated and finalised by way of sale of the property belonging to the petitioner by invoking Section 26C of the KGST Act, being the Director of a 'Private Company', is under challenge in both these writ petitions, preferred by the very same petitioner with slight modifications in the main prayers and the nature of pleadings. 2. The petitioner was one of the Directors of the Company by name Raghul & Constructions Pvt. Ltd., having its registered office at Calcutta, as borne by Ext.P1 Certificate of Incorporation produced in the former case. The aforesaid Company had undertaken various civil engineering construction works with NTPC Ltd., Kayamkulam during the financial years 1997-98, 1998-99 and 1999-2000 for a total contract amount of Rs,1,70,38,203/- and the total sales tax due on the contract was **2** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** only Rs.3,43,932/-. By virtue of the mandate under the relevant provisions of law particularly Rule 22A, the awarder of the contract viz., NTPC, being a Public Sector Undertaking owned by the Government of India, was obliged to deduct the sales tax amount at source, to be remitted to the department and to issue proper certificates to the Contractor in Form 21C. According to the petitioner, though the amount was deducted by the NTPC/awarder of the contract, necessary certificates in Form 21C were not issued, under which circumstance, assessments were completed ex parte, creating huge liability, followed by demand notice in respect of the assessment years, as above. 3. Met with the situation, the Company and the petitioner together approached this Court by filing W.P.(C)No.31038 of 2004 seeking to set aside the revenue recovery notice produced as Ext.P3 series therein. The above writ petition was disposed of, as per Ext.P3 judgment in W.P.(C)No.4403 of 2007 (Ext.P1 in the W.P.(C)17106 of 2008), whereby the petitioners were directed to satisfy a sum of Rs.1,50,000/- each, for the three **3** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** different assessment years within one month; simultaneously directing the NTPC to verify the position and to issue Form 21 C certificate, if the same were still to be issued, subject to satisfaction of payment of the aforesaid amount of 'Rs.4.5.lakhs'. The certificate sought to be procured and produced by the petitioners in the said writ petition, was directed to be looked into by the assessing authority, to have the assessment reconsidered. It was made clear that the recovery proceedings would stand stayed for 'one month' and if the aforesaid amount of Rs.4.5 lakhs was paid within the stipulated time, the stay would continue, till revised orders were issued by the assessing authority and there after, recovery would be only in respect of the balance tax due under the revised orders. 4. It is the admitted case of the petitioner that by virtue of financial constraints, the petitioner could not satisfy the condition imposed. But pursuant to the direction given by this Court, the NTPC issued Form 21C certificates. In the said circumstance, the first petitioner to Ext.P3 judgment, alone has chosen to **4** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** approach this Court by filing W.P.(C)4403 of 2007, without impleading the Company in the party array, challenging the constitutional validity of Section 26C to declare that the petitioner is not liable to be proceeded against in respect of the years 1997-98 and 1998-99 even by virtue of Section 26C; and also to intercept Ext.P5 recovery notice, simultaneously restraining from confirming the sale conducted on 10.01.2007 in the meanwhile and to direct the assessing authority to re-open the assessment for the year 1999-2000. 5. When the matter came up for consideration before this Court on 08.02.2007, the writ petition was admitted, also staying the confirmation of sale for a period of one month. The said order was extended by three months on 20.03.2007. Thereafter, when the matter came up for further consideration on 28.05.2007, the following interim order was passed: _“Petitioner has not complied with Ext.P3 judgment, whereunder, this Court directed payment of Rs.4.5 lakhs. In fact, on nonpayment, stay earlier granted got vacated and_ **5** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** _recovery should have been continued. The District Collector shall file a statement before this Court, as to why recovery was not continued, if in fact recovery proceedings were not pursued._ _If the amount of Rs.4.5 lakhs , in terms of Ext.P3 judgment, is not paid within a period of one week from today, the stay granted by this Court in this Writ Petition shall stand vacated. However the payment so made will be subject to result of this Writ Petition._ _Post the matter after a week_ .” Despite the specific direction given, as above, the fact remains that the aforesaid sum of Rs.4.5 Lakhs was never remitted by the petitioner. 6. A statement has been filed on behalf of the first respondent as to the sequence of events and the ongoing steps for realisation of the due amount, as the petitioner had not satisfied the amount directed to be paid by this Court. In the counter affidavit filed by the 4[th] respondent, it is stated that in the sale conducted on 10.01.2007, he came out to be the **6** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** successful bidder and deposited 15% of the due amount as specified. But later, he withdrew from the sale on coming to know that several other liabilities were also there and that the property itself was subject to mortgage in the State Bank of Travancore, Haripad, for a loan of Rs.22 lakhs and that the bank had obtained a charged decree in OA 222/04 of the DRT, Eranakulam. The property was also attached by the Tax Recovery Officer, Kottayam, for an amount of Rs. 81,46,864/- to clear off the tax arrears and that the sale proceedings were conducted by the revenue authorities without revealing any such facts . It is also pointed out that the relevant facts and figures have been suppressed from the part of the petitioner as well and that the writ petition is not liable to be entertained. 7. The petitioner in WP(C)No.4403/07 has filed IA.No.8955 of 2007, producing copies of 2 sale deeds bearing numbers.70/1997 of SRO, Cheriannad and 645/1997 of SRO, Nooranad, as Exts P7 and P8, contending that the aforesaid properties belong to the Company in which he was a Director and **7** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** that the said properties are liable to be proceeded against before proceeding against the personal property of the petitioner, which was subjected to sale on 10-01-2007. 8. During pendency of the above proceedings , since the 4[th] respondent in the writ petition backed out from the sale proceedings, the property was subjected to sale again, by issuing appropriate sale proclamation. In the said proceedings conducted on 19.09.2007, another person by name K.P. Adarsh, came out to be the successful bidder, who deposited the prescribed 15% of the sale consideration on the same day and on satisfying the balance, the sale was confirmed in his name . The factual position as above was published in the Kerala Gazette, vide Ext P8 (in W.P.(C) 17106 of 2008). It was on coming across Ext P8 notification, that the petitioner approached this Court by filing W.P.(C)17106/2008, wherein handing over of possession of the property to the third respondent/successful bidder has been intercepted pending disposal of the writ petition. 9. A detailed counter affidavit has been filed by the third **8** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** respondent /successful bidder, pointing out that the auction sale was actually conducted on 19.09.2007 and that there were 11 bidders, among whom the third respondent therein came out to be the successful bidder, who has satisfied the entire sale consideration. The lapse or failure on the part of the petitioner in effecting the deposit as directed by this Court vide Ext.P3 judgment in W.P.(C)No.31038 of 2004, has also been referred to, stating that the petitioner is not entitled to have any relief, the matter having become final. It is also stated that the Company run under the name and style “Raghul & Construction Pvt. Ltd” is a sham one for the purpose of tax evasion and it is none other than the petitioner, who is behind the said Company and that the corporate veil has to be lifted to ascertain the actual facts and figures. It is also stated that the proceedings have been finalised by the Revenue Department and the title of the property has been passed on to the said respondent on satisfying the entire sale consideration as specified. 10. The respondents 2 and 4 have filed a counter affidavit, **9** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** wherein it is stated that the petitioner was the Managing Director of M/s. Rahul Construction (P) Ltd., Sankaramangalam and an application for registration under the KGST and CST Act was made in 1998, stating that the business was started by the Company on 15.08.1996. Though the application was proceeded with, there was no response from the petitioner and the Company. Since they did not respond to the notice, registration was not granted. Though the Company had started business, no monthly or annual returns were filed as to the business transactions, inspite of the work contract awarded by the NTPC Ltd., Kayamkulam. Though Form 50 notices were issued in the name of the Director as well as Company for production of Books of Accounts, all the notices were returned with the endorsement 'unclaimed and hence returned to the sender'. It was for non-cooperation from the part of the Company/Director that the assessment had to be finalised for the period 1997-98, 1998-99 and 1999-2000 and these assessment orders have become final, creating the tax liability of Rs.14,39,614/-, Rs.28,02,822/- and ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** ## **10** Rs.,1,94,577/- for the assessment years 1997-98, 1998-99 and 1999-2000 respectively. Necessary revenue recovery notices were issued on the same day, ie. 31.05.2004, which made the petitioner to approach this Court along with the Company by filing W.P.(C) No. 31038 of 2004, challenging the revenue recovery proceedings, which led to Ext.P3 judgment in the former case , i.e. W.P.(C) 4403 of 2007 (Ext.P1 in the latter case). Since no payment, as directed by this Court, was effected by the petitioner, further proceedings were pursued. This being the position, the challenge raised in this writ petition is not liable to be entertained. It is also pointed out that though the sale conducted on 19.09.2007 in favour of the third respondent in W.P.(C)No.17106 of 2008, was challenged by by one Sunil by filing W.P.(C)No.29375 of 2007, the said writ petition was dismissed as withdrawn on 19.12.2007 and thereafter, the sale was confirmed by the RDO on 21.02.2008, followed by Ext.P8 notification dated 08.04.2008 produced in the latter case (ie W.P. (C) 17106 of 2008) ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** ## **11** 11. With regard to the contention raised by the petitioner referring to the inapplicability of Section 26C of the KGST Act in respect of the assessment years 1997-98 and 1998-99, stating that the said provision has been brought into effect only from 01.04.1999, it is stated that the idea and understanding of the petitioner is quite wrong and misconceived. It is stated that the petitioner has no case that during the period in which arrears accrued, he was not a Director. As on 01.04.1999, there were arrears due to the Government and as the said arrears were not paid as on 01.04.1999, Section 26C of the KGST Act is stated as applicable. The petitioner was a Director during the period of arrears and continued as such, even after 01.04.1999. The reliance sought to be placed by the petitioner on the decision reported in _**Nishad Patel vs. State of Kerala**_ **(1998 (2) KLT 793)** is stated as not applicable to the case in hand for the reasons stated in paragraph '7'. 12. Coming to the very first prayer in the former case, ie. in W.P.(C)No.4403 of 2007, to declare Section 26C of the KGST **12** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** Act as ultra vires to the Constitution, absolutely no ground in this regard has been raised by the petitioner any where in the writ petition, as to the legislative incompetence, if any or otherwise as to why the same is unconstitutional and ultra vires to Article 14 or 19(1)(g) of the Constitution of India, but for contending that the said provision is not applicable to the petitioner, having no retrospective operation. 13. During the course of hearing, the learned Counsel for the petitioner has also made a submission that, before invoking Section 26C, a finding has to be arrived at that the amount cannot be recovered from the Company or its assets, without which no proceedings can be pursued. Reliance is also sought to be placed on the decision rendered by a Division Bench of this Court reported in **2011(4) KHC 879** _**(Jose Kurian and others**_ ## _**v. Deputy Tahsildar(RR).**_ 14. In that case, the relevant assessment years were 1990-1991 to 1992-93 and the 'prospective nature of Section 26C' was specifically contended, which, question however, was ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** ## **13** not considered and left out, observing that, in the absence of any finding that the amount cannot be recovered from the Company, the proceedings taken against the Directors without arriving at such a finding was liable to be intercepted. This Court finds that the petitioner cannot make use of the said judgment. That was a case when the Court was approached at the time of issuance of notice under the Revenue Recovery Act. In the instant case, the petitioner had approached this Court earlier and suffered Ext.P3 judgment and the condition imposed therein was admittedly never complied with. There was no challenge against Sec.26C in the earlier round of litigation and above all, the sale held on 19.09.2007 and the confirmation by the RDO ordered on 21.02.2008 are not specifically subjected to challenge. As such no relief can be extended to the petitioner. 15. True, there is a decision rendered by this Court reported in **2007 (4) KLT 538 (Kassim vs. Sales Tax Officer),** holding that the said provision is not retrospective. The said decision, though was subjected to challenge in appeal, **14** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** the same happened to be dismissed pursuant to the dismissal of the petition to condone the delay in filing the appeal. Section 26C clearly says that, where any tax or other amount recoverable under the 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 a 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. The said provision takes care of an existing Company as well as a Company already wound up or under liquidation, though the said provision was introduced only w.e.f. 01.04.1999. In the case of a Company already wound up as on 01.04.1999, the authorisation given by the provision to have the amount recovered from the Director, can only be in respect of the business conducted prior to the order of winding up, i.e., in respect of the period prior to 01.04.1999, which by itself is a clue to show that the provision is retrospective in application. Similarly, the liability is cast **15** ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** upon every person who was a Director of such a Company at any time during the period for which the tax or other amount is due under the Act. This is also a pointer to the effect that the Statute only mandates the requirement that the concerned person should have been a Director of the Company at any time during the period for which the tax fell due, which condition is also satisfied in the instant case as the petitioner was a Director of the Company in question during the period for which the tax fell due. 16. In the said circumstance, this Court respectfully disagrees to follow the above decision. To consider the question, particularly as to whether the provision is retrospective or not, normally it has to be referred to a Division Bench. But considering the fact and circumstances, this Court does not propose to follow such a course and the said issue is left open, to be considered and dealt with in a proper case, as the petitioner herein is not entitled to have any relief even otherwise. 17. By virtue of the conduct and proceedings so far, it ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** ## **16** remains a fact that the sale was conducted on 19.09.2007 and it was confirmed by the RDO on 21.02.2008, which is not under challenge, but for the challenge raised against the subsequent notification dated 08.04.2008 produced as Ext.P8. In other words, without challenging the sale held on 19.09.2007 and the confirmation by the RDO on 21.02.2008, the petitioner cannot successfully challenge Ext.P8 Gazette Notification dated 08.04.2008. That apart, the fact remains that there was no successful challenge to the applicability or otherwise of Sec.26C of the KGST Act in the earlier round of litigation, i.e. in W.P.(C) No.31038 of 2004 which culminated in Ext.P3 judgment dated 21.10.2004. 18. In the above facts and circumstances, this Court does not consider this case as a fit one to exercise the discretionary jurisdiction and to intercept the sale proceedings held on 19.09.2007 and confirmed on 21.02.2008, which rather remains unchallenged . Both the writ petitions fail and they are dismissed accordingly. It is made clear that this will not bar the petitioner ## **W.P.(C) Nos.4403 OF 2007 & 17106 OF 2008** **==> picture [13 x 9] intentionally omitted <==** from pursuing other appropriate proceedings against the Company or its assets or against the other Directors, if the same is sustainable, in accordance with law. **P.R. RAMACHANDRA MENON, JUDGE.** lk