No Provision under Sales Tax Act to Fastening the Liability of the Company on its Director: Gujarat High Court lifts Attachment of Bank Account [Read Order]

The Gujarat High Court has held that there is no provision under the Sales Tax Act to fasten the liability of the Company on its Director and lifts the attachment of the Directors bank account.

The writ application is filed by the Director of the company namely M/s. Neha Exim Energy Private Limited. The company does not appear to be operational. To put it in other words, no commercial activities are being undertaken for many years. The company has been registered under the VAT Act. The company was assessed under Section 34 of the Act, 2003 for the period 2008-09 and demand was raised in the hands of the company. The company is the taxable entity for the purpose of the Act, 2003.

The applicant’s personal bank account maintained with the AMCO Bank, Girdharnagar Branch, Ahmedabad has been freeze pursuant to a letter addressed by the department to the Branch Manager. The department thought it fit to initiate the above action on the premise that the department has to recover Rs.1,58,65,840/- from the company.

Mr. Trivedi, the counsel appearing for the applicant submitted that for the purpose of recovering the dues of the company, the department could not have proceeded to attach a personal bank account of its Director. He would submit that it is the company that could be termed as the taxable entity for the purpose of the VAT Act, 2003.

The division bench comprising of Justice J.B Pardiwala and Justice Nisha M. Thakore while allowing the writ petition held that “Thus, unlike Section 179 of the Income Tax Act, 1961, there is no provision in the Sales Tax Act fastening the liability of the company to pay its sales tax dues on its Director”. Further held that, “the attachment on the bank account of the writ applicant is hereby ordered to be lifted. The bank shall permit the writ applicant to operate the bank account. It is needless to clarify that the dues which are payable by the company shall remain pending and it shall be open for the department to take appropriate steps against the company in accordance with law for the purpose of recovering its dues”.

NEHAL ASHWINKUMAR SHAH vs STATE OF GUJARAT

CITATION: 2022 TAXSCAN (HC) 112

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