The main legal point established in the judgment is that ex-directors are not personally liable for tax arrears under the TNGST Act unless the company has been wound up, as per the provisions of Sections 19, 19-A, and 19-B.

Common Judgment : (S.J. Mukhopadhaya, C.J.)

The writ petition was preferred by the petitioners against notice in Rc. No.5735/95/A3 dated 17th Feb., 2004, issued by the 1st respondent, Commercial Tax Officer (FAC), Ambattur Assessment Circle, whereby it has been informed that the 2nd respondent, M/s.Vinayaka Garments (P) Ltd., (hereinafter referred to as the Company) who did business are in arrears of Rs.13,25,868/= for the year 1993-94 to 1995-96 under the Tamil Nadu General Sales Tax Act (hereinafter referred to as the TNGST Act) and Central Sales Tax Act (hereinafter referred to as the CST Act) and the petitioners being shareholders are liable to pay tax arrears. They have been asked to clear the entire arrears within a stipulated period.

During the pendency of the writ petition, interim order of stay was passed on 19th May, 2004, but at the instance of the 1st respondent, the same was modified by order dated 7th Sept., 2006 and conditional interim order was passed subject to payment of 25% of the amount demanded. The writ appeal has been preferred against the modified conditional interim order aforesaid.

2. According to the petitioners, they are the ex-directors of the company and, therefore, no demand can be made from them u/s 19 or 19-A of the TNGST Act. The impugned notice dated 17th Feb., 2004, directing the petitioners, the directors of the company, to pay the tax payable by the company is not sustainable in law under the CST and TNGST Act and tax dues payable by the company cannot be recovered from the directors even after their resignation.

The case of the petitioners is that the company was the dealer and assessee, which was liable to pay tax under the CST and TNGST Act. The 3rd petitioner already died during the pendency of the writ petition on 26th July, 2008, who earlier resigned from the company on 28th June, 1994. Petitioners 1, 2 and 4 resigned from the company on 16th Dec., 1996 out of whom petitioners 1 and 2 were not involved in the day-to-day administration of the assessee company as they were working on the technical side and petitioners 3 and 4 were not in any way involved in the administration of the company. After resignation of the petitioners from the assessee dealer company, the company continued with business and the company was never wound up or liquidated and, hence, requested the commercial tax officer to drop further proceeding. This matter was brought to the notice of the 1st respondent by reply dated 5th April, 2004, but in the meantime as the 1st respondent took steps to recover the amount, the writ petition was preferred.

3. Learned counsel appearing on behalf of the petitioners submitted that a Company having legal entity is separate from the directors. Section 19 of TNGST Act while makes it clear that even after a partner retires from the partnership firm, is liable to pay tax of the firm assessed or unassessed, which is payable at the time of his retiring, Section 19-A of the TNGST Act, on the other hand provides that whether a partnership firm or association of persons is dissolved, then every member of the association of persons or partners of the partnership firm shall be jointly and severally liable to pay the tax, even if the assessment is made after the dissolution. Therefore, partners in a partnership firm are made personally liable for the tax. Similarly, members, who continue as association of partners are personally liable in respect of tax and other dues, but both under TNGST Act and CST Act there is no enabling provision for charging tax or for recovery of such tax and other dues personally from the directors, if amount is payable by the company. Therefore, the petitioners, ex-directors are not liable to pay tax or dues payable by the company.

Further, according to the petitioners, the only provision which deals with liability of directors of company is Section 19-B of TNGST Act and Section 18 of CST Act, which are parimateria similar. But plain reading of such se