20 August 2019
A private limited company couldn't pay the service tax due to the fact that it was into losses. The directors of the company has disclosed the service tax payable in the IT returns of every year and did not hide it. But did not file the service tax returns and pay it as the company did not had funds after paying for salaries and other monthly expenses. The directors also did not receive any compensation as salary or any other incentives from the company. In fact Directors have loaned the company to the extent possible to fund the operations of the company which is to pay the salaries and take care of admin costs to run the company. The loans are still payable to Directors. The company does not have any tangible assets. In this case Directors did not make any willfull fraud or default or any other fraud not to pay the service tax. This can be proved by the fact that they themselves did not benefit in form of salary or any other incentives from the company and they themselves incurred personal losses by lending the company to run the operations. The company just did not make enough profit to pay for service tax. In this case whether directors are personally liable for the payment of service tax, even though they have not committed willfull fraud to avoid paying service tax.