Court quashes 7-year travel ban on ex-directors over firm’s GST debt

SHAH ALAM: The High Court has quashed a seven-year travel ban imposed by the customs department on three former company directors over alleged outstanding goods and services tax (GST) liabilities, ruling that the department acted unlawfully and without sufficient legal basis.

In allowing the trio’s judicial review application, Justice Evawani Farisyta Mohammad held that the travel ban was unlawful and unreasonable and breached the rules of natural justice.

The department had maintained the restriction for about seven years on the basis that the former directors were responsible for the company’s alleged GST liabilities.

In delivering her oral grounds, Evawani said Section 49 of the now-repealed GST Act 2014 did not authorise the department to automatically impose a travel ban merely because tax was allegedly outstanding.

Instead, she said, the department must first establish reasonable grounds, supported by evidence, that the individuals involved were about to leave or likely to leave Malaysia without paying the tax.

The judge found no evidence that the three applicants posed a flight risk, pointing out that they had permanent homes, families and businesses in Malaysia, and had continued to engage with the department throughout the dispute.

She also observed that the applicants had travelled overseas and returned to Malaysia after obtaining interim court relief, conduct that was inconsistent with any intention to evade the alleged tax liability.

The customs department argued that the travel ban was justified as the company owed GST. Relying on records from the Companies Commission of Malaysia, it contended that the applicants remained directors during the relevant period and could, therefore, be held liable for the company’s tax obligations.

However, the former directors said they had ceased all involvement in the company’s management and operations following a share sale in August 2016, before the GST liability arose.

Accepting that submission, the judge held that the applicants had resigned as directors in August 2016 and were no longer on the board when the relevant tax liability arose on June 13, 2017, when the relevant invoice was issued.

She further noted that the department’s bill of demand related to a later taxable period.

The court awarded the applicants RM10,000 in costs.

Lawyers Jeff Sum and Tan Wen Ying of Messrs Wong & Partners appeared for the applicants, while federal counsel Dzaqiff Shauqi represented the customs department.