Directors can only be liable for tax dues if the company has no recoverable assets and negligence is proven; procedural fairness in claims against past Directors is essential.

JUDGMENT

The above writ petition is filed seeking to quash Exts.P2, P3 and P7 notices.

2. The brief facts necessary for the disposal of the writ petition are as follows:

M/s. Chakra Motors Pvt. Ltd. was a registered dealer for the purpose of sales tax with the commercial tax department of the 4^th respondent, since 2005. The petitioner was the Managing Director of the above said firm. In 2010 the petitioner was forced to resign from the company. Thereafter, Ext.P1 was submitted by the then Directors of the company for making necessary changes in the records with the Commercial Tax Department. It is submitted that the petitioner has ceased to have any connection with the running of the company since 2010. While so, Exts.P2, P3, P4 and P5 notices were issued to the petitioner as per the provisions of the Kerala Revenue Recovery Act, demanding sales tax dues for the year 2011- 12. Following the revenue recovery notices, the petitioner was served with Ext.P7 notice, wherein the petitioner was asked to show cause as to why the property in the name of the petitioner, which was transferred in the name of his wife, should not be proceeded for recovery of the amount due from company towards the sales tax arrears. The petitioner submits that even if he is treated as the Director of the company, the respondents cannot recover any money from the Director, without following the procedures as contemplated under Section 39 of the Kerala Value Added Tax, 2003 Act(hereinafter referred to as 'the KVAT Act'). The petitioner relies on the judgments inJose Kurian and Others v. the Deputy Tahsidar(Rr), Ekm. [ 2011 (4) KHC 879 ], Mohammed Harid T.S. v. District Collector, Wayanad and Others [2014 (2) KHC 257], the judgments of the Allahabad High Court in Writ Tax No.966 of 2008, of the High Court of Bombay in W.P.No.1672 of 2021 and also the unreported judgment of this Court in W.A.No.703 of 2024 and connected cases, in support of his contentions.

3. The specific case of the petitioner is that the respondents have not proceeded against the company and going by the mandates of Section 39 of the KVAT Act, the Director cannot be proceeded, until and unless proceedings have been initiated against the company for recovery of the amount. It is further submitted that the petitioner was not a Director of the company at the time during which the tax became due. It is in the said circumstances that the petitioner has approached this Court challenging the impugned notices and demands.

4. A detailed counter affidavit has been filed by the 3^rd respondent contending that they are well within their power under Section 39 of the KVAT Act to proceed against the petitioner, who is the Director of the company as he is jointly and severally liable for the dues of the company. It is also submitted that the dealer failed to remit the amount and arrears and there were no properties in the name of the dealer, to the knowledge of the revenue. Thereupon, the revenue was constrained to initiate revenue recovery steps against the petitioner, who has been a Director to the dealer company. It is further submitted that during the pendency of the claim, the petitioner transferred his assets in favour of his wife and going by Section 37 of the KVAT Act, the said transfer is void. It is also submitted that the petitioner himself has approached the Authorities with a request to permit him to settle the dues and has approached the Government seeking time to pay the amounts in instalments and the Government have granted permission to pay the due amounts in instalments. But the said