APHC010160882006 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3529] MONDAY, THE SECOND DAY OF FEBRUARY TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR WRIT PETITION NO: 26353/2006 Between: 1. SRI CHAKKA SRI RAMACHANDRA MURTHY, VIJAYAWADA., S/O. LATE CHAKKA SESHAGIRI RAO H.NO. 76-9-5, RAJESHWAR RAO STREET, BHAVANIPURAM, VIJAYAWADA-520012. ...PETITIONER AND 1. THE COMMERCIAL TAX OFFICER KRISHNA DIST ANOTHER, VIJAYAWADA, KRISHNA DISTRICT. 2. THE DEPUTY COMMERCIAL TAX OFFICER, SAMARANGAM CHOWDK, VIJAYAWADA-520001 KRISHNA DISTRICT. ...RESPONDENT(S): Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased toto issue an appropriate writ order or direction more particularly one in the nature of writ of Mandamus declaring the action of the respondents in attempting to recover the alleged arrears of sales tax pertaining to the defaulter company from out of the petitioner's properties by the impugned distained order in Form No. 1 dt. 10-8-2006 the provisions of Revenue Recovery Act as illegal, arbitrary High handed without authority of law and jurisdiction and set aside the same and declare that the respondents can not take any steps for recovery of alleged arrears of sales tax pertaining to the company where the petitioner is a Director from the properties of the petitioner 2 RRR,J & TCDS,J W.P.No.26353 of 2006 and pass such other order or orders as this Hon'ble Court may deem fit and proper in the circumstances of the case. IA NO: 1 OF 2006(WPMP 33863 OF 2006 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to grant stay of all further proceedings in pursuance to the distained order issued by the 2nd Respondent in Form No. I dt. 10-8-2006 pending disposal of the writ petition and pass such other order or orders as the Hon'ble Court may deem fit and proper in the circumstances of the case. Counsel for the Petitioner: 1. BHASKAR REDDY VEMIREDDY Counsel for the Respondent(S): 1. GP FOR COMMERCIAL TAX 3 RRR,J & TCDS,J W.P.No.26353 of 2006 The Court made the following Order: (per Hon’ble Sri Justice R. Raghunandan Rao) The petitioner was a Director of a private limited company named M/s. Padmalaya Wire Products Private Limited Company (herein referred to as the Company). 2. The Company was registered as an assessee, on the rolls of the 1st respondent. The assessment of the company, for the year 1995-1996, under the A.P.G.S.T. Act, had been initiated. The 1st respondent surprisingly issued notice, dated 23.03.1999, proposing levy of tax of Rs.2,74,412/-. There was no response to the various notices issued to the Company, notices were sent to the Directors of the Company also. As there was no response, the 1st respondent passed a best judgment order, on 31.03.1999, confirming the demand of Rs.2,74,412/-. 3. As no tax was paid by the Company, the 1st respondent issued notice, dated 06.07.2006, to the three Directors of the Company, calling upon them to pay arrears of tax within seven (07) days from the date of receipt of the notice. As there was no response to this notice also, the 1st respondent had issued a distraint order, in Form – I, dated 10.08.2006, under the provisions of Section 8 of the Andhra Pradesh Revenue Recovery Act II, 1864, for recovery of arrears of tax, amounting to Rs.2,72,397/-, for the year 1995-1996, which had become due as on 31.03.1999. 4 RRR,J & TCDS,J W.P.No.26353 of 2006 4. The petitioner has approached this Court, by way of the present Writ Petition, challenging the said distraint order. 5. It is the case of the petitioner that the Director of a Company, would not be liable to pay tax dues of the Company, arising out of the A.P.G.S.T. Act, unless the provisions of Section 16B are applicable. It is also the case of the petitioner that, the provision of Section 16B would permit recovery of taxes from the Directors of a private limited company, when such private limited company has been wound up and is in liquidation. The petitioner contends that, such a provision would not be applicable as the company is not in liquidation or it has been wound up. 6. The 1st respondent has filed a counter-affidavit. In the said counter-affidavit, the averment of the petitioner that, the company has neither been wound up nor is in liquidation, has not been denied. The only contention of the 1st respondent is that, the manufacturing unit of the Company, had been sold by a financial institution, for recovery of its dues and consequently, the Commercial Tax Department is seeking to recover its dues by taking steps against the Directors of the Company. 7. It is settled law that, a Company is a separate juristic person and the Directors of the Company cannot be equated with the Company. It is further settled law that, the dues of a Company incorporated, under the Companies Act, of 1913, 1956 or 2013, cannot be recovered from the Directors. However, Section 16B of the A.P.G.S.T. Act, provides for such recovery. This recovery 5 RRR,J & TCDS,J W.P.No.26353 of 2006 would be permissible, from the Directors of a private limited company, if the conditions stipulated in Section 16B are complied. 8. Section 16-B of the Andhra Pradesh General Sales Tax Act, 1957, reads as follows: “16-B. Liability of directors of private company in liquidation:- When any private company is wound up and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of the private company at any time during the period for which the tax is due, shall be jointly and severally liable for the payment of such tax, unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.” 9. A perusal of this provision would show that, the liability and payment of tax, by a private limited company can be shifted to the Directors only, in the event of the private limited company being wound up and being in liquidation. Even in the event of an Order of winding up being passed against the private limited company, the tax liability of the said company, can be recovered from the Directors only, if the said Directors are unable to demonstrate that the non-recovery, cannot be attributed to gross neglect, misfeasance or breach of duty, on the part of the Directors, in relation to the affairs of the Company. 10. In the present case, the specific averment of the petitioner that the company has not been wound up has not been disputed or denied by the 1st respondent. 6 RRR,J & TCDS,J W.P.No.26353 of 2006 11. In these circumstances, this Court would have to accept the said averment to be true and correct. 12. As the company has still not been wound up, the provisions of Section 16B of the A.P.G.S.T. Act would not be available and no steps can be taken against the petitioner, on the ground that, he is a Director of the said Company during the relevant period. 13. Accordingly, this Writ Petition is allowed and the impugned order of distraint, dated 10.08.2006, is set aside. There shall be no order as to costs. As a sequel, pending miscellaneous applications, if any, shall stand closed. ________________________ R. RAGHUNANDAN RAO, J _________________ T.C.D. SEKHAR, J Date:02.02.2026 KPV 7 RRR,J & TCDS,J W.P.No.26353 of 2006 144 THE HON’BLE SRI JUSTICE R. RAGHUNANDAN RAO AND THE HON'BLE SRI JUSTICE T.C.D.SEKHAR WRIT PETITION No.26353 of 2006 (per Hon’ble Sri Justice R. Raghunandan Rao) 02.02.2026 KPV