Director liability in excise notices depends on adjudication of each director's role before any personal penalty is fixed

In excise proceedings involving a corporate assessee, show cause notices may be issued to directors where the statutory scheme and allegations call for inquiry into their role in the alleged evasion. Rule 221 and related provisions may support liability for duties, penalties and confiscation arising from the business covered by the declaration, and the corporate veil may be examined where fraud, collusion, wilful misstatement, suppression or contravention is alleged. However, personal penalty cannot be imposed in the abstract; the department must establish, in adjudication, the extent of each director's responsibility. The opportunity to show cause satisfies natural justice at the notice stage.

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Issues: Whether show cause notices issued under the excise law could proceed against individual directors for alleged duty evasion and whether personal penalty could be fastened on them without first determining, in adjudication, the extent of each director's involvement and liability.

Analysis: The incidence of excise duty lies on the manufacturer or producer, but the statutory scheme also includes provisions dealing with corporate bodies, declarations, licences, removal of goods, demand for duty, and penalties. Rule 221 specifically makes both the signatory of a corporate declaration and the corporation liable for duties, penalties, and confiscations arising from the trade or business covered by that declaration. The notices were issued to enable adjudication on the allegations of evasion and on the question who was responsible for the contraventions. The corporate veil may be lifted where necessary to examine the reality behind the corporate form and identify directors concerned with fraud, collusion, wilful misstatement, suppression of facts, or contravention of the rules. At the same time, individual liability cannot be imposed in the abstract; the department must establish how and to what extent a particular director is liable. The opportunity to show cause satisfied the requirement of natural justice at this stage.

Conclusion: The challenge to the show cause notices failed. The directors could not avoid adjudication on the ground of want of jurisdiction, and their personal liability, if any, was left to be determined in the proceedings.

Final Conclusion: The writ petition was held not maintainable on merits and was dismissed after the Court upheld the validity of proceeding with adjudication against the directors.

Ratio Decidendi: In excise proceedings against a corporate assessee, directors may be proceeded against where the statutory scheme and the allegations justify inquiry into their role, but personal liability or penalty can be imposed only after adjudication establishes the extent of each director's responsibility.

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