S.88 Of CGST Act Can't Be Used To Recover Dues Arising Under Central Excise Act From Directors Of Liquidated Company: Andhra Pradesh HC

Section 88(3) states that the tax, interest or penalty of a private company, which has been wondup can be recovered from the directors of the company, subject to certain conditions, when such tax, penalty and interest is determined under the CGST Act.

A division bench of Justice R Raghunandan Rao and Dr Justice K Manmadha Rao observed, “This can only mean that tax, penalty or interest which had been determined under the CGST Act, alone can be recovered from the directors of private company which are under liquidation, subject to the condition set out in Section 88(3) of the CGST Act.”

The development comes in a petition filed by two directors of M/s. Kusalava Batteries Private Limited, which had been liquidated.

Since taxes and penalty levied against this company could not be recovered during liquidation process, the Excise Department issued notices to the Petitioners on the ground that they are directors in the liquidated company and would be liable to pay the dues of such company, by virtue of Section 88.

Petitions approached the High Court contending that Section 88 would not be available to the authority for recovery of the dues of the liquidated company, which have arisen under the Central Excise Act, 1944.

It was submitted that recovery under Section 88 could be carried out in relation to taxes and amounts levied or assessed under provisions of the CGST Act alone.

The Department on the other hand contended that provisions of Section 88 can be used for recovery of dues under the Excise Act also.

The High Court though disagreed, it proceeded to consider how the taxes due to the State are to be recovered in relation to liabilities raised under the Excise Act.

“Section 174 of the CGST Act, provides for that situation,” it remarked.

Section 174(2)(e) of the CGST Act provides for institution or continuation of the proceedings to recovery of tax, surcharge, penalty, fine, interest or forfeiture arising out of Excise Act, by utilizing provisions of the Excise Act.

“In the circumstances, it would be open to the respondents to initiate action, if permissible, under the provisions of the Act, 1944, against the petitioners. However, the provisions of the CGST Act would not be available for such recovery,” the Court thus ordered and set aside the impugned notices.

Appearance: Counsel for the Petitioner: Karan Talwar; Counsel for the Respondent(S): Kunuku Durga Prasad

Case title: Ravindra Muthavarapu v. The Superintendent Of Central Tax and Others

Case no.: WRIT PETITION Nos.17995, 17997, 18001, 18018, 18019 & 18024 of 2024

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