Corporate veil protects directors from company excise arrears absent express statutory personal liability.

Excise arrears and penalty owed by a company could be recovered only from the company, as the recovery machinery under the Customs Act and the 1995 Recovery Rules applies to the defaulter and not to directors or shareholders. In the absence of an express statutory provision fastening personal liability, and with no pleaded basis to lift the corporate veil, the former director and the gifted property could not be proceeded against for the company's dues. Private arrangements could not create enforceable tax liability against third parties. The recovery notices and attachment proceedings were therefore without jurisdiction and liable to be quashed.

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Issues: Whether arrears of central excise duty and penalty payable by a company could be recovered from its former director and from the property gifted by him to his daughter under the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995.

Analysis: The liability to pay excise duty attached to the manufacturer, namely the company, which was separately registered under the Central Excise Act, 1944. The recovery machinery under section 142 of the Customs Act, 1962, as applied to excise dues, and the Recovery Rules, 1995, authorised recovery only from the defaulter, meaning the person from whom government dues were recoverable. Since the arrears admittedly belonged to the company, there was no statutory basis to recover them from its directors or shareholders. The Act contained no provision comparable to section 179 of the Income-tax Act, 1961 or section 18 of the Central Sales Tax Act, 1956 fastening such liability on directors. The agreement between private parties could not create liability enforceable by the State, and there was no basis to pierce the corporate veil on the facts pleaded.

Conclusion: The recovery notices and attachment proceedings against the former director and the petitioner were without jurisdiction and could not stand.

Final Conclusion: The petition succeeded and the impugned demand and attachment notices were quashed, leaving the alleged excise dues recoverable only against the company in accordance with law.

Ratio Decidendi: Excise dues of a company cannot, in the absence of an express statutory provision or a legally established basis to lift the corporate veil, be recovered from its directors, shareholders, or transferees under the recovery machinery meant only for the defaulter.

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