1. By the instant application under Section 8 of the West Bengal Taxation Tribunal Act, 1987 which is of the nature of writ petition under Article 226 of the Constitution of India, the applicants have challenged the validity of notices issued by the Certificate Officer addressed to the applicant Nos. 1, 2 and 3 of whom the first two are the present directors and the third one is the erstwhile director of the applicant No. 4, a public limited company. For proper appreciation of the dispute we shall only refer to the relevant aspects of the lengthy text of the application as is before this Tribunal. The application reveals that the applicant-company (hereinafter referred to as "the company") has its registered office in Calcutta wherefrom it sells a part of its products, viz., rice bran oil, sal seed oil and mohua oil which are manufactured at its factory at Balasore, Orissa.
The business of the company is stated to have all along been in financial distress. For its business in Calcutta it was a registered dealer under the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act") and was subject to assessment under the Act. By amendment of the 1941 Act turnover tax was introduced by a new Section 6B effective from April 1, 1979. The company's gross turnover exceeded Rs. 50 lakhs during the accounting year ending on June 30, 1980 and the company became liable to pay tax from July 1, 1980 according to this section.
But the company challenged this section's constitutional vires and did not pay the tax. The CTO assessed, inter alia, turnover tax (in short "TT") from the financial year ending on June 30, 1981 and onwards. The assessment notices in respect of 1980-81 and 5 other years, viz., 1982-83, 1983-84, 1984-85, 1985-86 and 1986-87 were issued by the assessing officer. The writ application filed by the company was eventually transferred to this Tribunal and was dismissed on November 30, 1992. The company was served with notice by the assessing authority (CTO) directing the company to appear before him on January 15, 1992 and to show cause against the proposed imposition of turnover tax and interest thereon. The company alleges that after an adjournment it was never made aware of any further date and that since no demand notice was available with it (the company), it made application for copies of the same. The Assistant Commissioner by issue of 4 notices, all dated March 7, 1992 initiated suo motu revision proceedings to impose turnover tax and interest for 4 years form 1982-83, 1983-84, 1984-85 and 1985-86, and eventually levied turnover tax. Subsequently, demand notices all dated February 13, 1995 in form VII were issued.
Thereafter, the Certificate Officer (respondent No. 1) served on the company 6 certificates of demand together with vernacular notices under Section 7 of the Bengal Public Demand Recovery Act, 1913 (in short, "the 1913 Act"). Thereafter, the Certificate Officer (in short, "CO.") issued three notices, viz., No. 10392 dated January 14, 1997, No. 5307 dated September 10, 1997 and No. 19258 dated March 5, 1998. These notices are being challenged before this Tribunal by the company because they are addressed to the Directors, past and present. The company's contention is that it (the company) being a legal entity as well as certificate debtor in respect of the certificate cases can be proceeded against under the law and that its property may be attached and sold ; but the Directors, viz., applicant Nos. 1, 2 and 3, not being certificate debtors, cannot be proceeded against under the 1913 Act or under the Companies Act, 1956, by fixing responsibility on them.
Hence, the company prays for direction on the C.O. to cancel the impugned notices and for restraining him from taking any other step on the basis of the notices and from holding threat of arrest on the applicant Nos. 1 and 2.
2. We have heard Mr. S. Roy Chowdhury, learned advocate for the applicants, and Mr. M.C. Mukhopadhyay, learned State Representative, at length. At the first instance note may be taken of the fact that by this application the applicants do not seek any order for quashing the assessment or the certificate proceedings. They simply pray for quashing the three notices issued by the C.O. According to Mr. Roy Chowdhury, the three impugned notices issued in the name of one or more of the first three applicants are patently illegal. His plea is that the company is a distinct identity in the eye of law and can sue or be sued and can shoulder liability or own assets in its own name as a juristic person, independent of its shareholder as well as the directors who are nothing but functionaries for the company. He adds further that for the liabilities of the company none such director can be taken to task or threatened with criminal proceeding. He further adds that the Revenue is competent to proceed against the company if it is so inclined ; but there is no legal sanction for service of notices on the directors, by name (vide Notice No. 10392 dated January 14, 1997 and 19268 dated March 5, 1998) or even by designation (vide Notice No.5307 dated September 10, 1997), conveying an administrative fiat for personal appearance of the directors or carrying threat of arrest or of intimidation of criminal proceeding. He further contends that the individual liability of the shareholders, including the directors vis-a-vis, the company is limited to the extent of unpaid amount of share value held by them and no further. He points out that in the case of the company all shares arc fully paid up, leaving no room for calling upon the shareholders and for that matter, the directors, to shoulder any burden of the company.
3. Mr. Mukhopadhyay, however, disputes the above contentions. He argues that the company, albeit a juristic person, is after all a notional identity which requires a body--personnel to act or to react in connection with its business affairs. According to him, the Board of directors is such a body and hence the notices meant for such juristic person can be served on such directors. According to him, service of notice on one or more of the directors is an effective service. He adds that this company is under an assessed tax liability of Rs. 25,86,970 and is dodging the State's collection drive by all conceivable means and has rendered the Revenue's all attempts, in this regard, infructuous and that present application before this Tribunal is another calculated move to further delay or defeat the payment.
4. We have considered the contentions of the sides. We do not think that the company's view point can derive any support from the relevant statutory provisions. Section 51 of the Companies Act, 1956 (in short, "the 1956 Act") provides that a "document" may be served on a company or an "officer" thereof. Section 2(30) of this Act defines the expression "officer" to include, inter alia, any director. Again, in terms of Section 2(15) of the 1956 Act the expression "document" includes summons, notice, requisition order, other legal processes, etc., under this Act or any other Act. Thus, Section 51 read with Sections 2(15) and 2(30) makes it abundantly clear that a notice meant to be served on the company can be competently served on a director.
The impugned notice No. 5307 dated September 10, 1997 has been issued in the name of the company itself. Again, the impugned notice No. 19268 dated March 5, 1998 has been issued in the name of Mr. Bijoy Kumar Shatter describing him as the Managing director. It may be seen that in terms of Section 2(26) of the 1956 Act "a Managing director" is basically a director. It may be that Mr. Bijoy Kumar Bhatter at the time of service of this notice was not the Managing Director but one of the directors. But such technical mistake alone cannot vitiate the notice. After all, Mr. Bhatter is a director. However, in the notice dated January 14, 1997 Mr. Krishna Kumar Bhatter, Mr. Bijoy Kumar Bhatter, Mr. Sankar Kumar Bhatter and Mr. Ganeshlal Rathi have been described as the directors of the company. According to the company, excepting Bijoy Kumar Bhatter and Mr. Paritosh Chandra Chatterjee there is no other director. The others have either retired or died. But these are questions of fact. If such pleas are taken before the C.O., the said authority is competent to probe into the matter giving the company an opportunity of being heard and if necessary can modify the notice to keep the same in tune with the legal provisions. This Tribunal cannot enter into such factual aspects and to give a finding. At any rate such plea cannot be a legitimate ground for avoiding appearance of the company through competent representatives in pursuance of the notice and to contest the certificate proceedings.
5. As regards the company's objection as to the alleged threat of initiation of criminal proceeding and arrest of the addressee-directors, we do not find it altogether prohibited under the statute. Notice dated January 14, 1997 speaks of probable step of lodging the first information report (FIR). Notice dated September 10, 1997 speaks of lodging of FIR and issue of warrant. Bat "issue of warrant" does not mean warrant of arrest alone, it may also mean warrant of attachment of movable property under the 1913 Act. Section 22A of the 1941 Act provides that in case of commission of offence under that Act by a dealer if it is proved that such offence has been committed with the consent or connivance of or is attributable to any neglect on the part of the director, manager and other officers, etc., such director, manager or other officers shall be deemed to be guilty and shall be liable to be proceeded against and punished accordingly.
Section 22 of the Act declares certain acts of a dealer or person as offences punishable with simple imprisonment or with fine or with both.
So, it is not correct to say that a director cannot be criminally prosecuted. The directors run the affairs of the company's business and hence non-payment of tax may be attributed to the neglect or connivance unless it is shown otherwise. So, if the applicants Nos. 1, 2 and 3 feel that they have no such liability in view of their role not being of the nature as stated in Section 22A(2), they can canvass the same before the C.O. or any higher forums under the 1913 Act and can be free of such liabilities if their contention is upheld by the said authorities. But without participating in the certificate proceeding they cannot straightaway come to this Tribunal.
6. Before we part with the matter we make a brief reference to the reported decisions on which Mr. Roy Chowdhury has relied in support of his contentions. The reported decisions are (i) Surinder Nath Khosla v.Excise and Taxation Commissioner, Punjab [1964] 15 STC 838 (P&H), (ii) Ramachandran v. State of Kerala [1984] 55 STC 209 (Ker), and (iii) Rameswar Agarwalla v. State [1955] 6 STC 397 (Cal). In the first case Surinder Nath Khosla v. Excise and Taxation Commissioner [1964] 15 STC 838 (P&H) it was held that the Managing Director of a limited company cannot be arrested for realisation of arrears of sales tax due under the East Punjab Sales Tax Act, 1948, from the limited company. This decision was made because the Sales Tax Act of that State did not contain any provisions whereby a shareholder or a Managing Director could be prosecuted for the liability of the company. But as we have seen that the 1941 Act contains specific provisions in Section 22A(2) whereby a director can be proceeded against for the liabilities of the company provided his role in running the affairs of the company is within the scope of any of those activities as enumerated in the Section. In the second case Ramachandran v. State of Kerala [1984] 55 STC 209 it was held by the High Court of Kerala that a director of a company could not be personally proceeded against for arrears of sales tax due from the company. This decision was in the context of the Kerala General Sales Tax Act, 1963 which did not contain any provisions permitting any proceeding against a director in the abovementioned circumstances. We have already seen that Section 22A(2) of the 1941 Act approves of such proceeding against a director in certain circumstances. This, however, does not mean that a director's own personal property is liable to be proceeded against, except to the extent of unpaid part of shares held by him.
7. The last reported decision Rameswar Agarwalla v. State [1955] 6 STC 397 is no doubt in the context of the 1941 Act. It was held by the Calcutta High Court that the Revenue authorities cannot proceed against a shareholder of a company for carrying of business by the company in contravention of Section 7(1) of the 1941 Act. Firstly, in the case before us we are not concerned with the shareholders in general but with some directors of the company who have a special role in running the affairs of the company. Secondly, this reported decision is dated March 30, 1954 when Section 22A was not yet incorporated into the 1941 Act. This section was made part of this statute with effect from April 1, 1978 [vide W.B. Taxation Laws (Amendment) Act, 1979]. Whether the applicant Nos. 1, 2 and 3 before us had the role, as contemplated in Section 22A(2), in order to be proceeded against for the liabilities of the applicant-company, and if it be so, whether they are still liable to be proceeded against under that section are the questions can be decided only after the applicant Nos. 1, 2 and 3 appear before the C.O.and make submissions in their defence. It is premature to say what would be the decision after hearing of the said applicants. Moreover, if there is eventually any decision against them, they can challenge it before the appropriate forum. Since issue of impugned notices is not impermissible under the law we do not find at this stage any ground to interfere.
8. In view of the discussions above we do not find any illegality in the notices, the first two of which, in fact, are just some communications urging the company and its directors to make payment and intimating the next probable actions to be followed. The last notice dated March 5, 1998 is only a letter in reply to the company's letter, clarifying certain points relating to a director's liability for a company's statutory obligations.
9. Accordingly, the instant application may be disposed of without exchange of affidavits.
In the result, the application is dismissed without any order as to costs.