2025 (8) TMI 340 - AT - Customs

Power of Attorney Holder Not Liable After Principal's Death Under CESTAT Procedure Rules, 1982

The CESTAT Chennai held that a power of attorney (POA) holder acts only as an agent of the principal and is not the beneficial owner. The POA terminates ... Power of Attorney Holder - beneficial owner or not - Liability of sole proprietorship remains/continues even after the death of its proprietor or not. Power of Attorney Holder is the beneficial owner - HELD THAT:- A power of attorney is an instrument by which a person is authorised to act as an agent of the person granting it. As per the judgment of the Hon’ble Supreme Court in State Of Rajasthan & Ors vs Basant Nahata [2005 (9) TMI 620 - SUPREME COURT], the power of attorney is a document of convenience. It is executed by the principal in favour of the agent. In the light of the above judgment it is clear that the power of attorney (donee) in exercise of his power under such power of attorney only acts in place of the principal (donor) subject of course to the powers granted to him by reason thereof. Any act of infidelity or breach of trust is a matter between the donor and the donee. In this case however the donor i.e. Hanif Thara, sole proprietor of M/s Unik Traders himself, has been absolved of any wrongdoing. Hence reviving the case on the power of attorney (donee) after the donors death, will not be legal and proper, especially when there are no adjudged dues - Hence a general power of attorney, in the normal course, gets terminated by death of the principal even by application of law. It is found that while the OIO was issued to (1) M/s Unik Traders (IEC 0791011917) and (2) Shri Asif Thara, Power of Attorney Holder, only M/s Unik Traders have been made respondent to the appeal as seen from Sl. No. 4 of Form No. C.A. – 5. Hence the power of attorney holder has not been made to answer on behalf of a proprietorship firm, even as per the departments own Appeal Memorandum and it cannot now be done by way of submissions during the hearing. Liability of M/s Unik Traders after the death of its proprietor - HELD THAT:- The proceedings against the deceased person/ respondent proprietary firm abates as per rule 22 of the CESTAT (PROCEDURE) RULES, 1982 - reliance can be placed in the case of S. Hidayathullah @ Mannady Bharakath (Died) and Ors Vs The Commissioner of Customs, Airport Customs House, Chennai [2025 (5) TMI 590 - MADRAS HIGH COURT] where it was held that 'For the aforesaid reasons, we are of the considered view that the appeals abate. In the absence of a mechanism under the Act prior to 2011 for enforcement of the demand of duty, penalty, interest or any other sum payable by an assessee or a person under Customs Act, 1962, the demands raised under orders dated 24.10.2002 lapse. If at all, the department could only have pursued the demand by way of civil suit, which is not possible at this distance of time.' Appeal disposed off. ISSUES: Whether the Power of Attorney holder can be treated as the beneficial owner and thus as the respondent in appeal proceedings originally against the sole proprietor.Whether the liability of a sole proprietorship firm continues after the death of its proprietor for customs duty and related penalties.Whether appeal proceedings can continue against the legal representatives or successors-in-interest of a deceased sole proprietor under the Customs Act and related procedural rules. RULINGS / HOLDINGS: Power of Attorney holder acts only in place of the principal subject to the powers granted and cannot be treated as the beneficial owner for purposes of continuing appeal proceedings; submissions outside the scope of the original SCN or Memorandum of Appeal cannot be entertained.'A general power of attorney, in the normal course, gets terminated by death of the principal' under Section 201 of the Indian Contract Act, 1872, thus the power of attorney holder cannot step into the shoes of the deceased proprietor for continuing proceedings.Liability for customs duty rests with the importer or exporter as defined under the Customs Act, and entrusting responsibility to others does not transfer legal liability.The appeal against a deceased sole proprietor abates under Rule 22 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 unless an application for continuance by legal representatives is made within the prescribed time.In absence of statutory machinery provisions under the Customs Act to proceed against the estate or legal heirs of a deceased person, proceedings cannot be continued against them; this aligns with the Supreme Court's holding that 'no proceedings can be initiated or continued against a dead person.' RATIONALE: The Court applied Section 2(3A), 2(26), 12, 46, 47, 142 of the Customs Act, 1962, Rule 22 of the CESTAT (Procedure) Rules, 1982, and Sections 1A and 2 of the Power of Attorney Act, 1882, along with Section 201 of the Indian Contract Act, 1872.Precedents relied upon include the Supreme Court judgment in State of Rajasthan & Ors vs Basant Nahata, which clarifies the nature and limitations of power of attorney; the Supreme Court judgment in Shabina Abraham vs Collector of Central Excise and Customs, which establishes that tax proceedings cannot be continued against deceased persons in absence of statutory provisions; and the Karnataka High Court decision in New Sharada Industries, which was distinguished on grounds of statutory context and applicability.The Court emphasized that 'what cannot be done directly, is not permissible to be done obliquely/indirectly,' rejecting attempts to revive proceedings against a deceased proprietor through the power of attorney holder when no adjudged dues exist.The Court recognized the settled legal position that liability for customs duty is personal to the importer/exporter and does not automatically extend to legal heirs without enabling statutory provisions.The Court followed judicial discipline by adhering to binding Supreme Court and High Court precedents, as well as its own coordinate bench decisions, thereby affirming the abatement of appeal proceedings on the death of the sole proprietor in absence of continuation applications by legal representatives.