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Company’s customs dues cannot be recovered from Directors

29th January, 2013

Relying on the definition of ‘defaulter’ in Indian Customs Rules for attachment of property of defaulters for recovery of government dues, a High Court in India (Delhi High Court) has held that the director and the company are separate juristic persons and therefore dues recoverable from the company cannot be recovered from a director. 

The Court noted that there is no provision in the Indian Customs statute corresponding to the provisions in other Indian statutes (Income tax Act, 1961 or the Central Sales Tax Act, 1956) which enable the revenue authorities to proceed against directors of companies or such third parties who are not defaulters. In this case, the Revenue Department had sought to recover dues of Customs duty from a former director. [Anita Grover – Judgment dated 3-12-2012 in WP (C) No. 5894/2012].

A similar order was passed by a different Indian High court (High Court of Bombay) on 9/10-1-2013 in the case of Suman N. Agarwal, where the court noted that no notice to show cause, under Section 124 of the Customs Act, was issued to the petitioner who was the spouse of the proprietor of the defaulting companies. The Court noted that the petitioner was also one of the directors of two of three entities involved, but that is not sufficient to follow the recoveries that are due and payable by the two companies in the hands of the petitioner.
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