P. Chockalingam vs Deputy Commercial Tax Officer, Nagercoil (Rural), Kanyakumari District and Another

Swamikkannu, J.—The 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 20th November, 1982 and to quash the same. It is, inter alia,

stated in the affidavit sworn to by the petitioner that Dharma Oil Mills Private Limited had their business at No. 11/1, Venkatadri Naicken Street,

Madras-12, and it was an assessee on the file of the Deputy Commercial Tax Officer II, C.S.T. Zone IV, Madras-10. The petitioner was 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 Indian 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. Zone IV, 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 1074, 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 Central sales tax assessment including final demand notice for the year 1987-68 demanding the sum of Rs. 3,836.43. It is seen

from the assessment order that similar copies of order had also been sent to two other active directors, viz., Amirthalingam and Sankaran except

Dharmar. The petitioner was under the bona fide impression that the active directors to whom the accounts were entrusted at the time of enclosure

would take necessary steps including appeal. After nearly eight years, the first respondent, Deputy Commercial Tax Officer, Nagercoil (Rural), at

the instance of the Commercial Tax Officer, Purasawalkam, Madras-7, initiated distraint order on 4th October, 1982. Apprehending the coercive

steps that 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. Ms. No. 875 dated 15th October, 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 per cent. 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 the petitioner the impugned proceedings

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, Nagarcoil (Rural), it is, inter alia, stated that even though the original

assessment order was passed in 1969, the pre-assessment notice and the original assessment order were duly sent by registered post and

acknowledgment due and served on all the directors including the petitioner. It is common ground that the company is one registered under the

Indian Companies Act, 1956. It is not a partnership concern. Appeal was preferred against the assessment order TNGST 35298/67-68 dated

14th February, 1969 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.

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, 1959, since as an active

director, the petitioner, was responsible to pay 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 monthly equal instalments in G.O. Ms. No. 875 dated 15th October, 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 15th October, 1982. In that G.O. it was also stipulated that penal interest at 24 per cent. 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, a 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 it were an arrears of

land revenue. It is also mentioned in paragraph 13 of the counter that the assessment orders TNGST 35298/67-68 and CST 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 :

Notwithstanding anything contained in the Companies Act, 1956 (Central Act 1 of 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 recovered, then every person who was a director of the private company at any time during the period for which the tax is

due shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross

neglect, 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 in case 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 he had been called upon to pay the tax amount or

penalty. All the directors were issued notices 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.

Writ petition dismissed.