The petitioners are aggrieved with the revenue recovery proceedings initiated against them for realization of sales tax dues of the 3rd respondent Company. Admittedly, the revenue recovery proceedings are initiated, for dues of the 3rd respondent for the assessment year 1994-95. The petitioners contend that the 1st petitioner was merely a power of attorney holder of the 3rd respondent Company and that the 2nd petitioner, who was one of the Directors of the Company, had retired in the year 1986, long before the assessment year, on which the said default is said to have been committed. The petitioners further aver that the 3rd respondent Company itself is under liquidation and hence no recovery proceedings could be initiated against the 3rd respondent Company. 2. The State has filed a counter affidavit, in which it is contended that the 1st petitioner, as the power of attorney holder and the 2nd petitioner, as the Director; are liable to the dues of the 3rd respondent Company. The State has an alternate contention that the petitioners were the sureties to the security bond executed before the sales tax officer as provided in Form No.6 of the Appendix to the Rules. The security bond is said to be for an amount of Rs.2,00,000/-. In fact, this Court, while passing an interim order, directed the petitioners to satisfy the amounts as indicated in the surety bond and it was on such condition that an interim stay was granted. The petitioners submit that such direction has been complied with.
3. Evidently, the 1st petitioner, in his capacity as a power of attorney holder of the 3rd respondent Company cannot be proceeded against for recovery of the sales tax dues of the 3rd respondent Company. The 2nd petitioner was a Director of the respondent Company and Section 26C could be said to have enabled the department to proceed against a Director, for defaulted arrears of a private limited company. However, in the present case, the specific contention of the petitioners is that, the 2nd petitioner retired as Director from the 3rd respondent Company, in the year 1986 itself. The petitioners have also produced Ext.P9, which would indicate the retirement of the 2nd petitioner from the Company as on 31.07.1986. The sales tax arrears of the 3rd respondent Company having fallen due, long after the retirement of the 2nd petitioner, she also cannot be said to be a person against whom recovery could be validly carried on.
4. However, in the status of sureties, the petitioners are liable, but only to the extent of the amounts, for which the surety bond was executed. Admittedly, even as per the counter affidavit, it was for an amount of Rs.2,00,000/-, a surety bond was executed. According to the learned counsel for the petitioner the said amount has been paid up, in compliance with the interim order dated 01.10.2012. If such payments have been made, necessarily no further proceedings can be initiated against the petitioners 1 and 2 for the sales tax arrears due from the 3rd respondent Company. It is also pertinent that as per Ext.P5, 3rd respondent is under liquidation, in which event, the charge under Section 26B of the KGST Act, pales into insignificance; as has been held in Assistant Commissioner (Assessment), Kollam and others v. Official Liquidator, High Court of Kerala and another in [2014 (1) KHC 233].
5. The Writ Petition hence stands allowed, on condition of the petitioners having deposited an amount of Rs.2,00,000/-, as per the interim order dated 01.10.2012. If such amounts have not been deposited, the proceedings can be continued only to the extent of Rs.2,00,000/- and not anything further. Needless to say the State can proceed with its remedies before the official liquidator and as provided under the Companies Act, 1956.
The Writ Petition is allowed. No costs.
Sd/-
K. VINOD CHANDRAN, JUDGE SB // True Copy // P.A To Judge.