Directors' liability for tax dues is determined based on the type of company (private or public) as per relevant provisions in tax laws and Company Law.

JUDGMENT :

The writ petition is filed seeking to quash Ext.P1 revenue recovery notice issued by the third respondent, District Collector, Thiruvananthapuram.

2. The petitioner was the Executive Director of a company, viz., M/s Travancore Sulphates Ltd., a joint venture with the Kerala State Industrial Development Corporation Ltd., engaged in the manufacture and sale of ferrous sulphate from the waste effluent liquid let out by the Travancore Titanium Products Ltd., Thiruvananthapuram. According to the petitioner, he is only a salaried Executive Director of the said Company. When the Company was running in loss, for winding up the Company, an application as CP No.26/2002 was filed before this Court and as per the order passed by this Court on 06.03.2007, the Company is under liquidation proceedings. The assessments of the said Company under the provisions of the Kerala General Sales Tax Act (for short, “the KGST Act”) and the Central Sales Tax Act (for short, “the CST Act”) were finalized. It is alleged that appeals were filed against the assessment orders and the appellate authority passed orders directing reassessment. However, proceedings were initiated by the third respondent against the petitioner under Section 65 of the Revenue Recovery Act with respect to the sales tax arrears of the Company. According to the petitioner, the petitioner being the Executive Director of a Public Limited Company, is not liable to be proceeded against the dues of the Company. The grievance of the petitioner is that the petitioner is being proceeded against under Section 65 of the Revenue Recovery Act as per Ext.P1 though it is brought to the notice of the second respondent that the assessments have been set aside/modified pursuant to the appellate orders and that the company being under liquidation, he has no control over the company. It is in this context, the petitioner has approached this Court.

3. Heard the learned counsel for the petitioner and the learned Government Pleader.

4. The learned counsel for the petitioner submits that the petitioner, being the Executive Director of a Public Limited Company which is now under liquidation, cannot be proceeded against under Section 65 of the Revenue Recovery Act for realizing the arrears of the Company. It is submitted that the provisions of Section 26C of the KGST Act is applicable only in the case of a Director of a Private Limited Company and is not attracted when the Company is a Public Limited Company and the petitioner, being the Executive Director of a Public Limited Company, cannot be proceeded under the KGST Act and the revenue officials have no authority to issue Ext.P1 notice under Section 65 of the Revenue Recovery Act. The learned counsel relied on decisions of this Court in Punalur Paper Mills Ltd. & Another v. District Collector & Others [1985 60 STC 193 Ker] and Jose Kurian and Others v. Deputy Tahsildar (RR) Ernakulam and others [2011 (4) KHC 879 (DB)].

5. The learned Government Pleader, on instructions, submits that since a huge amount is due from the Company and the petitioner, being the Executive Director of the Company, can be proceeded against under Section 65 of the Revenue Recovery Act for recovering the dues of the Company and moreover, there is no evidence to show that the petitioner is a Director of a Public Limited Company. Section 26C of the KGST Act reads as follows:

“26C. Liability of Directors of a Private Company: -Subject to the provisions of the Companies Act, 1956 (Central Act 1 of 1956) where any tax or other amount recoverable under this 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 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.”

6. On going through the above provision, it is clear that the said provision is applicab