TaxTMI 
TaxTMI 
TaxTMI 
The judgment rendered by the Madras High Court in the case of S. Hidayathullah @ Mannady Bharakath (Died) and others vs Versus The Commissioner of Customs, Airport Customs House, Chennai- 2025 (5) TMI 590 - MADRAS HIGH COURT -C. M. A. Nos. 3581 & 3582 of 2014 And MP. Nos. 1 and 1 of 2014 dated April 30, 2025 highlights the lack of enabling statutory provision in the Customs Act for recovery from deceased's representatives. The Court noted that such appeal abates due to absence of statutory recovery mechanism.
The core legal question considered by the Court includes inter alia, whether the demand imposed under the Customs Act, 1962 on a deceased assessee survives after his death; whether the appeal filed by the deceased assessee challenging the order abates upon his demise; and whether the Customs Department can proceed to recover said sums due to government from the legal representatives of the deceased assessee. Though Section 142 provides for the method by which the Department may recover dues, there is no enabling provision therein for the continuance of recovery in the hands of his legal representatives. Section 142 reads thus:
142. Recovery of sums due to Government.—
(1) Where any sum payable by any person under this Act, including the amount required to be paid to the credit of the Central Government under section 28B is not paid, —
(a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or
(b) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of Customs or such other officer of customs; or
(c) if the amount cannot be recovered from such person in the manner provided in clause (a) or clause (b)—
(i) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector on receipt of such certificate shall proceed to recover from such person the amount specified there under as if it were an arrear of land revenue; or
(ii) the proper officer may, on an authorisation by Principal Commissioner of Customs or Commissioner of Customs and in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person;
. . . . . . .
Section 142A has been inserted by Act 8 of 2011 providing for any liability under the Act to be a first charge upon the property of the assessee or the person, as the case may be. Section 142A reads under:
142A. Liability under Act to be first charge.—
Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assessee or any other person under this Act, shall, save as otherwise provided in section 529A of the Companies Act, 1956 (1 of 1956), the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993) and 2 [the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the Insolvency and Bankruptcy Code, 2016 (31 of 2016).
Neither the term ‘assessee’ nor the term ‘person’ has been defined under the Act. The terms have been used interchangeably as there are only two instances where the word ‘assessee’ has been used, the first is Section 127-I relating to the ‘Power of Settlement Commission to send a case back to the proper officer’ and the second in Section 142A extracted above.
The scheme of the Act thus contemplates recovery only as set out under Section 142 or Section 142A, read with the Rules. The power to recover sums due to the Government as set out in Section 142 is to be read along with the requisite Rules in this regard, being the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules 1995 (in short ‘Rules’). Said Rules define Government Dues to mean ‘duty, drawback, interest or penalty payable by any person under the Act’. It also defines the term ‘defaulter’ to mean any person from whom Government dues are recoverable under the Act. In said Rules as well, the term ‘person’ has not been defined and hence the inference to be drawn is that the term ‘the assessee’ or ‘the person’ would mean that individual upon whom the Order of adjudication has been passed and not any other person/individual.
Pre-2011, the Department could embark on recovery in the manner as set out under the Rules, in the case of those individual/person/assessee where Certificates had been drawn up as per procedure contemplated under the Rules. Post 2011, the demands raised after the date of insertion of Section 142A will be a charge on the property of an assessee.
Sections 142, 142A and the Rules are silent as to the impact of the recovery provisions in the case of demise of an assessee. Apex Court and Madras HC have held that the Legislature has consciously not provided for such a situation. Infact, Supreme Court held in Shabina Abraham’s case that the scheme of the Central Excise Act has consciously kept legal heirs away from the rigour of answering to liabilities under that Act. Subsequently, Madras High Court in the case cited supra has held that the Legislature has consciously not provided for such a situation. With this, the position stands settled that a demand under a fiscal statute, be it of tax, duty, interest or penalty, cannot be pursued by the concerned Revenue Department, except if the relevant Statute enables such pursuit and Customs Act doesn’t provide for clear, explicit and unambiguous recovery provision for recovery of duty/tax/fine/penalty/any sums due to Government in case of demise of the assessee/person/individual. Effect of death of person on recovery proceedings has also been discussed in Sangeeta Goyal Versus Commissioner of Customs (Exports) - 2024 (9) TMI 334 - DELHI HIGH COURT and Amandeep Singh Sehgal Versus Commissioner of Customs (Preventive) - 2019 (8) TMI 97 - DELHI HIGH COURT
Decision of Madras HC in the case of Chief Commissioner v. Kannan Karuppasamy (WA.No.792 & 793 of 2011, dated 12.07.2016) made it clear that penalty imposed on one person cannot be recovered from another. Penalty under Taxation statute, especially Customs Act are personal in nature, premised on the intention or omission on the part of the individual. Penalty, such as one imposed under Section 112/114/114AA/117 of the Act is a liability which is personal in nature and cannot be recovered as against the estate of the deceased person.
In view of above statutory provision, it appears that no purpose can be achieved in pursuing the appeals involving recovery from deceased person and same must be closed as abated. No effective opportunity can be granted to the deceased person in finalising such proceedings. Even, no effective opportunity can be granted to the other person to examine the evidences associated with the deceased person.
Question is whether the Custom Act allows imposition of duty/tax/penalty/fine on dead person. Question is whether the Custom Act allows assessment of duty on the Bills filed on behalf of dead person. Question is whether the Custom Act allows recovery of sums such as duty/tax/penalty/fine from dead person. An appeal does not automatically abate upon the demise of an assessee as it is a statutory right. There is no provision in the Customs Act, 1962 setting out the circumstances when an appeal filed by an assessee would abate, and therefore the question remains whether such appeal remains to be adjudicated in accordance with the appropriate legal provisions or otherwise. Section 306 of the Indian Succession Act, 1925 elucidates as to which causes of action would survive and which would abate, question remains whether said provision can be read into Customs statute for adjudication or recovery proceedings. Can appeal be abated when there is no provision for abatement on Custom statute or when statute is silent on the effect of demise of person. The provisions of the Income tax Act 1961, specifically provides for the procedure to be followed in the event of demise of the assessee, by bringing on record his legal representative/assessee under Section 161 thereof. There is no such corresponding provision under the Customs Act 1962. Can same be read into Custom statute by Courts or Executive? Recent decision of Madras HC clears air on many of such questions. Madras HC has held that many decisions cited by revenue have little bearing on proceedings in taxation statute and held that the matters before them relates to a fiscal enactment where the Statute must contain a specific and enabling provision to assess and recover tax/duty. Moreover, Madras HC instead of answering the questions as to whether there is a specific provision for abatement in Custom statute, has correctly reframed the question, i.e. Whether there is a provision enabling the continuance of proceedings including that of recovery, as against a legal representative of the deceased assessee.
Provisions covering eventualities such as demise of person are not in statute book and same can’t be read with additions or reign in any absurdity. In absence of clear provisions, same cannot be read into by means of any presumption or assumption. Any such exercise to continue any such proceedings will be exercise in utter disregard to settled sacred principles laid down by Apex Court in Safari case.Kind attention is also invited to Para 25 of recent Apex Court decision in the case of Chief Commissioner of Central Goods and Service Tax & Ors. Versus M/s Safari Retreats Private Ltd. & Ors. - 2024 (10) TMI 286 - Supreme Court dealing with interpretation of taxing statutes. The relevant extract has been reproduced hereunder:-
“RULES REGARDING THE INTERPRETATION OF TAXING STATUTES
25. Regarding the interpretation of taxation statutes, the parties have relied on several decisions. The law laid down on this aspect is fairly well-settled. The principles governing the interpretation of the taxation statutes can be summarised as follows : -
a. A taxing statute must be read as it is with no additions and no subtractions on the grounds of legislative intendment or otherwise;
b. If the language of a taxing provision is plain, the consequence of giving effect to it may lead to some absurd result is not a factor to be considered when interpreting the provisions. It is for the legislature to step in and remove the absurdity;
c. While dealing with a taxing provision, the principle of strict interpretation should be applied;
d. If two interpretations of a statutory provision are possible, the Court ordinarily would interpret the provision in favour of a taxpayer and against the revenue;
e. In interpreting a taxing statute, equitable considerations are entirely out of place;
f. A taxing provision cannot be interpreted on any presumption or assumption;
g. A taxing statute has to be interpreted in the light of what is clearly expressed. The Court cannot imply anything which is not expressed. Moreover, the Court cannot import provisions in the statute to supply any deficiency;
h. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly;
i. If literal interpretation is manifestly unjust, which produces a result not intended by the legislature, only in such a case can the Court modify the language;
j. Equity and taxation are strangers. But if construction results in equity rather than injustice, such construction should be preferred;
k. It is not a function of the Court in the fiscal arena to compel the Parliament to go further and do more;
l. When a word used in a taxing statute is to be construed and has not been specifically defined, it should not be interpreted in accordance with its definition in another statute that does not deal with a cognate subject. It should be understood in its commercial sense. Unless defined in the statute itself, the words and expressions in a taxing statute have to be construed in the sense in which the persons dealing with them understand, that is, as per the trade understanding, commercial and technical practice and usage.” (emphasis added)
The Apex Court held in Shabina Abraham’s case that the scheme of the Central Excise Act has consciously kept legal heirs away from the rigour of answering to liabilities under that Act. Subsequently, Madras High Court in the case cited supra has held that the Legislature has consciously not provided for such a situation. With this, the position stands settled that a demand under a fiscal statute, be it of tax, duty, interest or penalty, cannot be pursued by the concerned Revenue Department, except if the relevant Statute enables such pursuit and Customs Act doesn’t provide for clear, explicit and unambiguous recovery provision for recovery of duty/tax/fine/penalty/any sums due to Government in case of demise of the assessee/person/individual.
The position under the Income Tax Act, 1922 was also the same until Section 24B was introduced by the Income Tax (Second Amendment) Act of 1933. Prior to the introduction of the aforesaid Section, the Bombay High Court had occasion to deal with a similar question in Commissioner Of Income-Tax Versus Ellis C. Reid - 1930 (10) TMI 16 - BOMBAY HIGH COURT. A Division Bench of the Bombay High Court noticed the definition of 'assessee' contained in Section 2(2) of the 1922 Act which definition stated that '`assessee' means a person by whom income tax is payable'. The Division Bench went on to say that the words 'or by whose estate' are conspicuous by their absence in the said definition. The Division Bench then went on to say that there appears to be nothing in the charging Section to suggest that a man who has once become liable to tax can avoid payment of tax by dying before such tax has been assessed or paid. Given the aforesaid decision of the Bombay High Court, the legislature was quick to amend the Income Tax Act, 1922 by inserting Section 24B which reads as “Section 24B : Tax of deceased person payable by representative”. The correct position is that apart from section 24B no assessment can be made in respect of the income of a person after his death. Pursuant to the 12th Law Commission Report, a new Income Tax Act was passed in 1961 which contained elaborate provisions for assessment of deceased persons after they die. The anomalies left by Section 24B of the 1922 Act, as pointed out in the certain Supreme Court judgments, were sought to be rectified in the new provisions contained in the 1961 Act. Sections 159 and 168 of the Act are apposite in this regard. The provisions of the Income tax Act 1961, specifically provides for the procedure to be followed in the event of demise of the assessee, by bringing on record his legal representative/assessee under Section 161 thereof. There is no such corresponding provision under the Customs Act 1962.
CONCLUSION
Customs Act provides for specific provision in respect of assessment, refund, confiscation, penalty, adjudication, appeal, recovery. What is the use of adjudication order or appeal proceedings if there is no substantive provision in statute for recovery of dues from legal heirs. Customs Act provides for issuance of Notice for non levy and short levy. In absence of any substantive provision in statute for aspects like recovery of dues on demise of person or re-assessment after demise of person or issuing notice to legal heirs or imposing penalties on legal heirs, many such proceedings may not stand judicial scrutiny.
In view of law settled by Apex Court and Madras HC, the very survival of various Notices/Adjudication/Appeal proceedings will remain in question. Such proceedings involving recovery by means of attachment of property, reassessment or imposition of penalty on legal heirs etc may not stand judicial scrutiny. The very proceedings may at the most be termed as nothing but as one without jurisdiction, without the authority of law given the glaring absence of any substantive provision in statute book. Fiscal statute has to be clear, explicit and unambiguous. Cost of unwarranted litigation and the financial burden should be avoided.
It may be noted that as discussed supra, given the aforesaid decision of the Bombay High Court, the legislature was quick to amend the Income Tax Act, 1922 by bringing in Section 24 B. Section 159 and 168of IT Act, 1961 provides for clear, explicit and unambiguous statutory provisions. Section 93 of CGST Act, 2017 provides that if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act. Section 302 of Draft IT Bill 2025 provides that where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Despite series of decisions by Constitutional Courts, no amendment has been made in Customs statute. This leads us to an inescapable conclusion, as rightly pointed out by Apex Court, that the scheme of the Customs statute has consciously kept legal heirs away from the rigour of answering to liabilities under said Act.