A director challenged tax proceedings seeking personal liability under Section 26 C of the KGST Act, arguing the company's assessment was pending appeal and he had resigned prior to the section's inception.
Writ petition disposed of without prejudice; challenge to Section 26 C left open.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON
TUESDAY, THE 6TH DAY OF MARCH 2012/16TH PHALGUNA 1933
WP(C).No. 5833 of 2004 (T)
PETITIONER :
RAMADAS MENON, A 12 CHOICE GARDEN, JANATHA ROAD VYTTILA, COCHIN - 682 019.
BY ADV. SRI.PREMJIT NAGENDRAN
RESPONDENT(S):
1. THE STATE OF KERALA,
2. THE SALES TAX OFFICER (WC & LT), ERNAKULAM.
3. THE DEPUTY TAHSILDAR (R.R.), ERNAKULAM.
4. M/S.SAMEEKSHA HOUSE AND HOMES PVT.LIMITED REPRESENTED BY IS MANAGING DIRECTOR,
VYTTILA, COCHIN – 19.
R1 TO R3 BY SPL.GOVT. PLEADER SRI. SOJAN JAMES
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 06-03-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
Mn
...2/-
WP(C).No. 5833 of 2004 (T)
APPENDIX
PETITIONER'S EXHIBITS:
EXT.P3 : PHOTOCOPY OF THE ASSESSMENT ORDER NO. 23280190/95 96 TO 98-99, DATED 25.03.2003.
RESPONDENT'S EXHIBITS : NIL
//TRUE COPY//
P.A. TO JUDGE
Mn
P.R. RAMACHANDRA MENON, J.
W.P.(C). 5833 of 2004
Dated this the 6th day of March, 2012
JUDGMENT
Petitioner is a Director of the fourth respondent Company
and is before this Court challenging the steps taken by the respondents to have the liability of the fourth respondent realised by proceeding against the petitioner and his assets. This is for the reason that he was a Director of the fourth respondent company and such a course is sought to be sustained by placing reliance on the power conferred by virtue of Section 26 C, which was brought into force with effect from 1.4.1999.
W.P.C. No. 5833 of 2004 -2-
holding the Directorship of the fourth respondent Company). Besides challenging the constitutional validity of Section 26 C, the petitioner contends that the said provision does not have any retrospective operation and can be pressed into service only with effect from 1.4.99. That apart, there is a case of the petitioner that, even going by the contents of the said provision, proceedings against a Director will stand only if the amount due cannot be realised from the assets of the Company. Since such a finding has not rendered by the concerned respondent, this cannot be made applicable in the case of the petitioner, submits the learned counsel.
23.2.2004, the following interim order was passed:
“Urgent notice.
A writ petition (W.P.(C) No.3285/04) filed by the 4th respondent Company was disposed of by directing the appellate authority before whom the appeal was pending to dispose of the stay petition and
W.P.C. No. 5833 of 2004
-3-
keep in abeyance further proceedings till orders are passed in the stay petition. It is for the liability of the 4th respondent the petitioner is also sought to be proceeded against on the ground that the petitioner was a director of the 4th respondent company. The petitioner challenges the provisions of Section 26 C of the K.G.S.T Act. Similar writ petitions are pending. In the circumstances, without prejudice to the right of respondents 1 to 3 to proceed against the 4th respondent subject to the judgment rendered today in the writ petition mentioned above, if the petitioner remits a sum of Rs. 1,00,000/-(Rupees one lakh only) within one month towards the demand order Ext.P3, further proceedings against the petitioner will be deferred until further orders.”
From the above order, it is quiet evident that the assessment itself has been challenged by the fourth respondent Company by filing an appeal before the statutory authority, which was directed to be disposed of in respect of the KGST proceedings as per the judgment passed by this Court in W.P.(C) No.3285/2004 on the same date, when the interim order was passed, i.e., on
W.P.C. No. 5833 of 2004
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23.2.2004. This shows that the assessment proceedings have not become final and no material is brought on record to arrive at any inference to the contrary. That apart, another learned Judge of this Court, by judgment dated 19.3.2008 in O.P.1527/2003 has held that, before invoking the power under Section 26C, the liability is to be got adjudicated quantifying the extent, giving an opportunity of hearing to the Director concerned. This being the position, this Court finds that the step taken by the respondents 1 to 3 against the petitioner by virtue of having been a Director of the fourth respondent Company, till he resigned the Directorship on 25.5.97, is premature. The proceedings against the petitioner can be pursued and finalised only in accordance with the relevant provisions of law, also taking note of the observation made by this Court as per judgment in O.P. No.1527/2003, and subject to the decision directed to be passed vide the judgment in W.P.(C).No.3285/2004 preferred by the fourth respondent company, which pertains to the challenge against the very same Ext.P3 assessment for the year 95-96 to 98-99.
W.P.C. No. 5833 of 2004
-5-
P.R. RAMACHANDRA MENON, JUDGE.
Kp/-
3 issues framed by the court
Whether proceedings against a director are premature when the company's assessment remains under appeal.
Whether Section 26 C of the KGST Act applies retrospectively to a director who resigned before its commencement.
Whether the tax authority must realize liability from the company before proceeding against the director personally.
Ramadas Menon
The State of Kerala
The Sales Tax Officer (WC & LT), Ernakulam
The Deputy Tahsildar (R.R.), Ernakulam
M/s. Sameeksha House and Homes Pvt. Limited
P.R. Ramachandran Menon
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
