The tax authorities cannot attach or auction the property of a non-dealer entity (such as an HUF) to recover the tax arrears of a company, even if the company's directors are members of that entity, in the absence of specific statutory provisions imposing such personal liability.

ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. Heard learned advocate Mr. Hiren Trivedi for the petitioners and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondents.

2. Rule returnable forthwith. Learned Assistant Government Pleader Ms. Shrunjal Shah waives service of notice of Rule for the respondent.

3. Having regard to the controversy arising in this petition which is in narrow compass, this matter is taken up for hearing with the consent of learned advocates for both the parties.

4. By way of present writ-petition preferred under Article 226 of the Constitution of India, the petitioner seeks prayer and directions to respondent authorities to lift and withdraw the attachment created by respondent No.5 (hereinafter referred to as ‘the respondent’ for short) under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as ‘the Act’) on property at regular Survey No. 31, Village: Trajpar, Taluka & District: Morbi (hereinafter referred to as ‘the property’ for short) owned by the petitioner.

6. The brief facts of the case are as under:

5.1. The property was purchased by Shri Dharamshi Nandlal Patel (HUF) (hereinafter referred to as ‘the HUF” for short) vide registered sale deed dated 26.2.1998. Subsequent to acquiring of the property, the HUF leased the property to one M/s. Radiant Floor Tiles Private Ltd., on annual lease of Rs. 50,000/- from 31.1.2004 for a period of 30 years. The Company to whom the lease was granted, was a dealer as specified under the provisions of the Act. Initially the Karta of the HUF of the property herein were Directors of the Company. Thereafter, the name of the Company was changed from Radiant Floor Tiles Pvt. Ltd. to Laurent Tiles Private Limited by issuance of fresh Certificate of Incorporation of Company issued by the Registrar of Companies on 4.4.2013. The Company had outstanding dues from A.Y. 2007-08 to 2012-13, 2016-17 and 2017-18, totalling to Rs.26,71,56,973.95/- .

5.2 Owing to the dues of the Company, notice was issued on 11.6.2015 for attaching the property as well as proposing to auction the sale. The notice specifically stated that the Company had not paid the outstanding dues despite of service of notice under Section 152 and Section 200 of the Gujarat Land Revenue Code, 1972 . In view of the said fact, the petitioners who are members of the HUF obtained the copy of the Village Form No. 7/12 on 9.9.2016 and found that there was an attachment created by the respondent under the provisions of the Act. However, Karta of the HUF i.e. Dharamshi Nandlal Patel expired on 5.1.2018 and the petitioners jointly applied for mutation of heirship entry in the record of rights for the land in question. The respondent authorities were aware about the heirship that was created on the property, which was interse communicated between the respondent authorities on 6.11.2019. In wake of such submissions, it was communicated by the respondent that a huge amount is outstanding and since petitioner No.4 was Director of the Company, he was liable for the dues of the Company and, therefore, mutation and heirship entry was objected by the State Tax Department. In wake of such facts, the petitioners communicated to the Department on 18.6.2022 that the respondent cannot hold the petitioners liable for the dues of the Company and property of the petitioners cannot be attached or auctioned under the provisions of the Act. Attention of the authorities was drawn towards to the fact that land in question is not of the ownership of the Company and, therefore, recovery cannot be made from the Director of the Company. In view of such facts,