Kerala VAT Act Empowers Taxing Authorities To Recover Tax Dues From Directors Of Private Company: Kerala High Court

The Kerala High Court has held that Section 39 of the Kerala Value Added Tax Act, 2003, empowers the taxing authorities to recover the tax dues from the directors of the private company if the company fails to make payment of the tax.

The bench of Justice Dinesh Kumar Singh has observed that when the taxing authorities could not recover the dues from the company, they issued notice for recovery of the said tax dues against the petitioners, who are the directors.

The petitioners are the directors of M/s Absar Buildwares Private Limited, a company registered under the provisions of the Companies Act. The company failed to make payment of the dues under the Kerala Value Added Tax Act, 2003.

The petitioner has challenged the imposition of tax dues imposed on them after the company failed to make payments under the Kerala Value Added Tax Act, 2003.

The petitioner contended that section 39 of the Kerala Value Added Tax Act, 2003, which holds directors jointly and severally liable for tax payments if the company fails to pay, unless they prove non-recovery was not due to negligence, misfeasance, or breach of duty on their part,.

Section 39 states that where any tax or other amount recoverable under this Act from any private company, whether existing, wound up, or under liquidation, cannot be recovered for any reason whatsoever, every person who was a director of such company at any time during the period for which the tax or other amount is due under this Act shall be jointly and severally liable for the payment of such tax or other amount unless he proves that the non-recovery cannot be attributed to any negligence, misfeasance, or breach of duty on his part in relation to the affairs of the company.

The court has dismissed the writ petition and upheld the recovery notices.

Citation: 2024 LiveLaw (Ker) 152

Counsel For Petitioner: E.C. Ahamed Fazil

Counsel For Respondent: Jasmine M.M.

Case Title: Firos C.A. Versus State Of Kerala

Case No.: WP(C) No. 10995 Of 2023

Click Here To Read The Order