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Judgment
Swanikkannu, J.—Petition is for issue of a writ of certiorari calling for the records relating to the proceedings of the first respondent, the
Deputy Commercial Tax Officer, Nagercoil (Rural), Proceedings No. Nil dated November 20, 1982 and to quash the same. It is inter alia, stated
in the affidavit sworn to by the petitioner that Dharma Oil Mills P. Ltd. had their business at No.11/1, Venkatadri Naicken Street, Madras-12 ,
and it was an assessee in the file of the Deputy commercial Tax Officer, II, C.S.T. Zone IV, Madras-10. The petitioner was an ex-director of the
said company along with three other directors by name. A. Amirthalingam, Sankaran and Dharmar. One of the directors, Sankaran, sponsored the
said company. The company was also registered under the companies Act,1956 as a private limited company. The company was carrying on
business in oil and oil cakes within the jurisdiction of the Deputy Commercial Tax Officer, C.S.T. IV Zone , Madras -10. The company was
running the business for a very short period viz for one year from 1967 to 1968. The company was assessed to Central sales tax under assessment
No. CST 6665/67/68. Since the company incurred heavy loss from the inception itself, it was wound up and closed in the year 1968 itself. As the
company was managed by the then directors, Sankaran and Amirthalingam, the company''s accounts assets and liabilities were all entrusted with
those two directors after it became defunct. Subsequently, the petitioner went to his native place in the year 1968 and settled down there. In the
year 1974, nearly after a lapse of six years from the date on which they ceased to carry on the business, the petitioner was served with a C.S.T.
assessment including a final demand notice for the year 1967-68 demanding a sum of Rs. 3,835.43. It is seen from the assessment order that
similar copies of the order has also been sent to two other active directors, viz,Amirthalingam and Sankaran except Dhaarmar. The petitioner was
under the bona fide impression that the active directors to whom the accounts were entrusted at the time of closure would take necessary steps
including appeal. After nearly eight years, the first respondent, Deputy Commercial TAx Officer,Purasawalkam, Madras-7, initiated a distraint
order on October 4, 1982. Apprehending that coercive steps would be taken, the petitioner had moved the Government of Tamil Nadu for stay of
distraint proceedings and for permission to pay the actual dues in instalments. The second respondent, the Commissioner and Secretary to
Government, Commercial taxes and Religious Endowments, Government of Tamil Nadu, Madras, issued orders G.O. 875 dated October,15,
1982, permitting the petitioner to pay the tax dues of Rs. 5,757.11 in 15 equal monthly instalments. At the time of submitting his application for
payment in instalments,the petitioner had stated by mistake that he was a partner of the erstwhile company instead of a director. In the Government
order issued by the second respondent, the petitioner was directed to pay penal interest at 24% On the outstanding arrears till date of clearance
u/s 24(3) of the Tamil Nadu General Sales Tax Act. Subsequent to the order of the second respondent, the first respondent issued to the petitioner
the impugned order demanding payment of arrears of tax of Rs. 5,757.11 together with penalty of Rs. 13,011. Aggrieved by the said impugned
order of the first respondent, the petitioner has come forward with this writ petition.
The point for consideration is whether the relief prayed for by the petitioner can be granted.
In the counter-affidavit sworn to by the Deputy Commercial Tax Officer, nagercoil (Rural), it is inter alia, stated that even though the original
assessment order were duly sent by registered post with acknowledgment due and served on all the directors including the petitioner. It is common
ground that the company is one registered under the Companies Act, 1956, It is not a partnership concern. Appeal was preferred against the
assessment order TNGST No. 35298/67-68 dated February 14, 1960 before the Appellate Assistant Commissioner and the appeal was
dismissed on the ground that the appellant failed to produce the accounts before the assessing authority wilfully, even though sufficient opportunity
was given by the appellate authority.
A requisition was sent to the first respondent by the Commercial Tax Officer, Purasawalkam, to attach the movable and immovable properties
of the petitioner u/s 8 of the Revenue Recovery Act for the recovery of Central sales tax u/s 18 of the Central Sales Tax Act, 1956 since as an
active director, the petitioner was responsible for paying the arrears of sales tax. It is the case of the respondents that the petitioner moved the
Government and obtained a stay order to pay the arrears in 15 equal monthly instalments in G.O. Ms. No. 875, dated October 15, 1982. It is also
submitted on behalf of the Revenue by Mr. Lokapriya that one instalment was also paid by the petitioner in accordance with the said G.O. Ms.
No.875, dated October 15, 1982. In that G.O., it was also stipulated that penal interest at 24% on the outstanding arrears of tax till the date of
clearance of the arrears u/s 24(3) of the Tamil Nadu General Sales Tax Act, 1959, should be paid. Therefore, notice was issued to pay the arrears
of sales tax and penal interest in 15 monthly instalments. Arrears of sales tax and penal interest are recoverable as if they were arrears of land
revenue. It is also mentioned in paragraph 13 of the counter that the assessment order TNGST No. 35298/67-68 and CST No. 665/67-68 were
passed in the absence of accounts to the best of judgment by the Assessing Officer. Hence, u/s 18 of the Central Sales Tax Act, 1956, the
director, who was active till the date of closure of the company as stated by the petitioner, is liable to pay the arrears of sales tax and penalty for
his gross negligence.
Section 18 of the Central Sales Tax Act reads as Follows :
Not with standing anything contained in the Companies ACT, 1956 when any private company is wound up after the commencement of this Act,
and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be now
called upon to pay the tax as well as the penalty. This contention is untenable, because at any point of time, it has been proved that it was due to
misfeasance or breach of duty on his part in relation to the affairs of the company.
It is contended on behalf of the petitioner that incase of misfeasance or breach of duty only the petitioner can be compelled to pay the penalty or
the tax. Since he was not an active director, he cannot be now called upon to pay the tax as well as the penalty. This contention is untenable,
because at no point of time, it has been proved that it was due to misfeasance or breach of duty that he had been called upon to pay the tax
amount or penalty. All the directors were issued notice and he,as one among the directors, is liable to pay under the Act, Thus, we find that there is
no merit in the writ petition. Hence, it is dismissed. Under the circumstances, there is no order as to costs.