Khalid Buhari Vs Assistant Commissioner of CGST and C.Ex (Madras High Court)
Imagine waking up to find your personal bank account frozen because the company you direct owes GST. For many directors of private companies, this nightmare is a constant threat under the GST regime. However, a recent landmark ruling by the Madras High Court has sent a clear message: Personal liability is not a reflex; it’s a last resort.
The Case: Khalid Buhari vs. Assistant Commissioner of CGST
The petitioner, a Director of M/s. Trans Car India Private Limited, found his personal bank account attached via Form GST DRC-13. The department invoked Section 89 of the GST Act to recover the company’s unpaid tax dues directly from him.
The petitioner’s argument was simple: The law doesn’t allow the department to jump straight to a Director’s personal wallet without following due process.
The Legal Friction: Understanding Section 89
Section 89 is a powerful tool. It states that if a private company cannot pay its tax dues, every person who was a Director during that period is jointly and severally liable.
But—and this is a big “but”—the law provides a statutory “escape hatch.” A Director is not liable if they can prove that the non-recovery of taxes cannot be attributed to their:
1. Gross Neglect
2. Misfeasance
3. Breach of Duty
The Court’s Verdict: No Opportunity, No Recovery
The Madras High Court observed that the department failed to give the Director a chance to explain himself. Liability under Section 89 is not automatic or absolute. The Court ruled that:
