Kerala HC: VAT Act Grants the Authorities the Power to Collect Tax Dues from the Directors of a Pvt Company

If the company fails to make payment of the tax then Section 39 of the Kerala Value Added Tax Act, 2003, authorizes the taxing authorities to retrieve the tax dues from the directors of the private company, Kerala High Court ruled.

When the taxing authorities were unable to recover the dues from the company, they issued a notice for the due tax recovery against the applicant, who are the directors, the bench of Justice Dinesh Kumar Singh noted.

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

The petitioner has contested the tax dues charge imposed on them post the company losses to complete payments under the Kerala Value Added Tax Act, 2003.

The applicant argued, that section 39 of the Kerala Value Added Tax Act, 2003, which jointly holds directors responsible for tax payments if the company is unable to file the payment until they provide evidence that non-recovery was not due to negligence, misfeasance, or violation of duty on their end.

As per Section 39 any tax or other amount recoverable under this Act from any private company, whether existing, wound up, or under liquidation, could not be recovered for any reason whatsoever, every individual who was a director of the same company at any time in the period for which the tax or other amount is left under this Act will be jointly accountable for the payment of these tax or other amounts till they furnish proof that the non-recovery cannot be assigned to any negligence, misfeasance, or breach of duty on his part concerning the affairs of the company.

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The writ petition was dismissed by the court and the recovery notices were upheld.