Directors of a company under liquidation cannot be held personally liable for tax dues unless specific statutory provisions exist; the doctrine of lifting the corporate veil requires substantial evidence of wrongdoing.

JUDGMENT

Heard Shri. Subham Agarwal, learned counsel for the petitioner and Shri. Ankur Agarwal, learned Standing Counsel for the revenue.

2. Present petition has been filed by the petitioner to resist the recovery of tax dues of the company M/S Global Brands Enterprise Solutions Private Limited (hereinafter referred to as the Company-under- liquidation) a duly incorporated company, under the Companies Act, 1956.

3. Upon hearing learned counsel for the parties and perusal of record, it transpires that the Delhi High Court appointed the Official Liquidator as the Provisional Liquidator of the Company-under-liquidation on 09.09.2013. In October, 2013 the Provisional Liquidator took over the assests of the Company-under-liquidation. Thereafter, on 17.02.2014, 28.03.2015 and 26.03.2016, the assessing authority of the Company- under-liquidation passed the first ex-parte assessment order against A.Ys. 2010-11, 2011-12, 2012-13. Details of the same as given in the Counter Affidavit filed by the revenue are as below:-

4. Thus, all assessment orders came into existence when the Provisional Liquidator had taken over. In such circumstances, it seems, the tax demand assessed against the Company-under-Liquidation remained outstanding. Since those demands were not satisfied, the assessing authority has issued recovery citation against the present petitioner to recover the tax dues of the Company-under-Liquidation from the personal assests of the petitioner. Such recoveries are being pursued against the petitioner on the strength of the fact allegation that the petitioner was the director of the Company-under-Liquidation, at the relevant time.

5. Upon such recoveries being pressed, the present petition was filed wherein interim protection was granted.

6. Submission of learned counsel for the petitioner is that the petitioner never incurred any vicarious liability to discharge the tax dues of the Company-under-Liquidation. Neither on a general principle in law, nor in the facts of the present case that liability may ever be enforced on the present petitioner under the U.P. VAT Act, 2008 and/ or the Central Sales Tax Act, 1956. The Company-under-Liquidation was duly incorporated and was real. It was not a proprietary enterprise of the present petitioner and the petitioner had not conducted himself in any manner vis-a-vis the affairs of the Company-under-Liquidation as may ever have allowed the revenue authorities to reach a conclusion that the petitioner was the real person who had done business in the name of the Company-under-Liquidation. The pleadings made in the writ petition are to the effect that the petitioner had conducted himself in accordance with law vis-a-vis the affairs of the Company-under-Liquidation. In paragraph No.15 of the Counter Affidavit it has been stated as below:-

"That the directors who had been managing the company were completely negligent in taking steps by participating in assessment proceedings or by taking legal recourse after obtaining assessment orders, but no care was taken to participate in the assessment proceedings and assessment order had been passed exparte. No steps were taken for recalling the orders or for filing appeal under Section 55 of the U.P. Value Added Tax Act."

7. Besides the above, no other special fact has been pleaded in the Counter Affidavit as may lead to an inference that the revenue authorities had lifted the corporate veil and had found the petitioner to be the real person who benefited from the business transactions of the Company- under-Liquidation. The law on the issue has