Dept. Should Have Approached Official Liquidator to Recover Sales Tax Dues of Company Under Liquidation | HC

Case Details: Smt. K. Malathi v. State Tax Officer (Inspection-Group IV) - [2023] 156 taxmann.com 555 (Madras)

Judiciary and Counsel Details

• • Krishnan Ramasamy, J.
  • G. Natarajan for the Petitioner.
  • T.N.C. Kaushik and A.G. Satyanarayana for the Respondent.

Facts of the Case

The petitioner was a director of company which had been ordered to be liquidated by the National Company Law Tribunal (NCLT). The department conducted inspection at the premises of company and issued SCN under Section 74 containing various allegations and demand for recovery of input tax credit.

The petitioner did not file any reply and the department passed ex parte orders, demanding huge taxes, interest and penalties. She filed writ petition and contended that she had no locus standi to represent company after order of liquidation was passed by NCLT.

High Court Held

The Honorable High Court noted that the company was under liquidation and the right course available for department was to file appropriate claim before Official Liquidator. However, the new cause of action would arise to recover tax dues from ex-directors of company in liquidation if there were no funds available with company in liquidation.

Therefore, the Court held that the action taken by department in passing impugned order of demand in name of company, which was in liquidation and served to petitioner was not sustainable and liable to be set aside.