Under Section 24(5) of the AP VAT Act, tax authorities must initially indicate the nature of the director's alleged gross negligence or misfeasance before the burden of proof shifts to the director.

The Court made the following Common Order: (per Hon’ble Sri Justice R. Raghunandan Rao)

As the three Writ Petitions arise out of the same issue and relate to the same company in liquidation, they are being disposed of, by way of this Common Order.

2. Heard Sri Karan Talwar, learned counsel for the petitioners and the Learned Government Pleader for Commercial Tax, appearing for the respondents.

3. The petitioners, in these Writ Petitions, are directors of a private limited company called M/s. Kusalava Batteries Private Limited. This company has been liquidated under the provisions of the Insolvency & Bankruptcy Code, 2016, by virtue of the Orders of the National Company Law Tribunal, Amaravati Bench, in C.P(IB) No.546/9/HDB/2018. During the course of liquidation, the commercial tax authorities had approached the Liquidator, by way of an E-mail, dated 30.10.2019, seeking recovery of Rs.24,14,944/- out of the amounts received on account of the liquidation of the company. The liquidator is said to have rejected the said claim on the ground that the claim has not been filed in the prescribed format and within the prescribed limitation. The liquidator, in the course of liquidation, had also filed IA(IBC) No.62 of 2021, setting out all the facts, including the fact that the claim of the sales tax authorities had been rejected by the liquidator. The liquidator had also stated that certain show-cause notices had also been received for recovery of money and the same had not been accepted. In any event, the National Company Law Tribunal, Amaravati Bench, disposed of this application, with permission being granted to the liquidator to dissolve the company.

4. The Deputy Assistant Commissioner (ST)-I, Krishnalanka Circle, Vijayawada, had issued a notice, dated 27.01.2021, under Section 24(5) of the Andhra Pradesh Value Added Tax Act, 2005 [for short “the AP VAT”], contending that a sum of Rs.24,14,944/- was due on account of the tax demands and called upon the petitioners herein, to clear the same within seven days from the date of receipt of the notice, failing which, action would be initiated for recovery. The petitioners had replied to the same by a letter, dated 05.02.2021. In this reply, the petitioners contended that the question of recovery under Section 24(5) of the AP VAT would arise only if the authorities could not recover the tax and a notice under Section 24(5) of the AP VAT Act, without exhausting all the avenues of recovery, was not permissible. Apart from this, the petitioners also contended that the directors of a private limited company cannot be required to make good the tax dues of the company unless the requirements of Section 24(5) of the AP VAT Act, namely inability to collect on account of gross negligence, misfeasance or breach of duty, are made out. No further action appears to have been taken by the authorities, after these objections were filed, till 18.09.2025. The 1^st respondent, on 18.09.2025, attached the back accounts of the petitioners, by issuing a notice under Section 29 of the AP VAT Act, to the 2^nd respondent, in which the petitioners are maintaining their bank account.

5. The petitioners being aggrieved by the said orders of attachment, have approached this Court, by way of the present set of Writ Petitions.

6. Sri Karan Talwar, learned counsel for the petitioners, essentially reiterated the aforesaid objections set out in their objection, dated 05.02.2021. He would contend that the tax authorities, having delayed filing the necessary claim applications, had shut themselves out of the liquidation process and the authorities cannot turn around and seek recovery from the petitioners. He would submit that the State cannot take advantage of its own mistakes and negligence and seek recovery from the petitioners. Apart from the above, the learned counsel for the petitioners would also contend that no steps can be initiated under Section 24(5) of the AP VAT Act unless and until a prima facie case, setting out the