TaxTMI 
TaxTMI 
2005 (8) TMI 116
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....e Director of M/s. GTL on 21-2-1997. He resigned on 31-3-1998; whereas Mr. K.T. Shah, petitioner in another Writ Petition bearing No. 7024 of 2003 became Director of the said M/s. GTL on 27-7-1989 and ceased to be its Director on 19-8-1991 since his directorship was not confirmed and extended in the Annual General Meeting held on 19-8-1991. Thereafter, none of them had any concern with the said company - M/s. GTL. 3. Mr. S.P. Mittal was served with the copy of the show cause notice dated 29-1-1999 issued to M/s. GTL seeking to demand from him sum of Rs. 11,69,855/- Mr. S.P. Mittal replied to the said show cause notice vide his replies dated 3-2-1999 and 7-2-2000 inter alia; stating that he had resigned from M/s. GTL. He has nothing to do with the said company. The Commissioner confirmed the demand notice only against the company - M/s. GTL and directed recovery of Rs. 11,69,855/- of duty liability with interest and further imposed penalty of equal amount amounting to Rs. 11,69,855/-. 4. The Central Excise Department sometime in the month of July, 2000 demanded amount due and recoverable from the company - M/s. GTL along with penalty from the petitioner Mr. S.P. Mittal. He, th....
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....t none of the petitioners can be said to be the defaulters within the meaning of Section 2(6) of the Rules of 1995 which defines 'defaulter' means any person from whom Government dues are recoverable under the Act. In his submission, the alleged Government dues if any, recoverable from the company - M/s. GTL under the Excise Act were not recovery from any of the petitioners. 9. Mr. Nankani went a step ahead to submit that there is no provision either under the Excise Act or the Rules of 1995 or the Companies Act of 1956 for holding a former Director personally liable for the liability of the company. According to him, none of the petitioners could have been called upon personally to pay the alleged outstanding dues of the company M/s. GTL of which the petitioners were Directors in the past. 10. Mr. Nankani further submitted that on the date of issuance of the demand notice to Mr. S.P. Mittal, he was not even a Director of the said company - M/s. GTL. He further submits that no liability was fastened upon him by the Adjudicating Authority. No duty liability or penalty was confirmed against him as such there was no question of holding the petitioner - Mr. S.P. Mittal pe....
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....nalties, confiscation and procedure relating to offences and appeals subject to necessary modifications and alterations, as may be necessary with regard to duties imposed by Section 3 of the said Excise Act. He, thus, submits that for affecting recovery of the Government dues, the respondents could very well invoke the provisions of Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 against the petitioners. 14. Mr. Desai further contends that the former Directors of the defaulting company can also be asked to pay the Government dues recoverable from the defaulting company. He also placed reliance on Section 9AA of the Central Excise Act, 1944 to support the impugned action but could not take his submissions to the logical end. The Issue : 15. The issue in the present case, for determination is one of some potentional general significance in relation to the liabilities of the Directors of the company. Now, the question for consideration is; whether the former Director of the company could be held responsible and liable for payment of liabilities of the defaulting company, after ceasing to be a Director of that company. Statutory Pr....
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....r the control of the proper officer of such other officer of Customs. (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 thereunder as if it were an arrears of land revenue; or (ii) the proper officer may, on an authorisation by a Commissioner of Customs and in accordance with the rules made in this behalfs, distrain any movable or imm....
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....ficate - Where any Government dues are not paid by any defaulter, 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 the same to the Commissioner having jurisdiction over the place in which the defaulter owns any movable or immovable property or resides or carries on his business or has his bank accounts. 4. Issue of Notice - On receipt of the Certificate mentioned in Rule 3 above, the Commissioner may authorise any officer subordinate to him to cause notice to be served upon the defaulter requiring the defaulter to pay the amount specified in the Certificate within seven days from the date of the service of the notice and intimate that in default, such subordinate officer is authorised to take steps to realise the amount mentioned in the Certificate in terms of these rules." NOTIFICATION UNDER SECTION 12 18. Central Government issued a notification under Section 12 extending the provisions of the Customs Act, 1962 of the Central Excise Rules as under :- (1) Notification extending the provisions of Customs Act, 1962 to the Central Excise - In su....
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.... any specified goods, included in the first schedule of the Act (now the new Central Excise Tariff) except under authority and in accordance with the terms and conditions of a licence issued under the Act. This provisions makes requirement of licence of the Excise Act necessary for implementing the excise legislation effectively. 21. Section 9 provides for the offences and penalties. Sections 6 and 9 enact an absolute prohibition on the wholesale purchase or sale of excisable goods and, therefore, doing such business without licence is illegal. Section 9A states that the offences under the Excise Act are deemed to be non-cognisable. Section 9AA deals with offences committed by a company. This provision makes a distinction between the company and its Director the scope of which is as under :- "Sub-section (1) of Section 9AA contains a deeming provision and it states that if an offence is committed by a company, every person who is in charge of, and responsible to the company for the conduct of the business of the company, shall also be deemed to be guilty. The proviso to sub-section (1) enables a person in charge to prove that the offence was committed without his knowle....
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....r of judicial interpretation in the case of Ujagar Prints v. Union of India [1988 (38) E.L.T. 535 (S.C.) = AIR 1989 S.C. 516]. The term 'levy' has been understood as an expression of wide import so as to include both imposition of tax as well as its quantification and assessment. The same view is reiterated by the Apex Court in a subsequent Judgment in the case of Ashok Singh v. Asstt. Collector of Estate Duty [AIR 1992 SC 1756]. 23.The term 'collection' is a term used to denote a stage subsequent to the stage of 'assessment' as laid down by the Apex Court in the case of Central Excise v. National Tobacco Co. of India Ltd. [1978 (2) E.L.T. J416 (S.C.) = AIR 1972 S.C. 2563]. Thus, terms 'levy and collect' means to impose assess and collect duty under due authority of law. The expression 'levy and collect' are of widest significance and takes within its fold all the proceedings for raising money by the exercise of power of taxation. It means any step taken or any proceeding initiated for the ultimate purpose of determining the liability of the assessee and finally collecting tax from the person liable to pay such tax. As seen hereinabove,....
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.... to pay the dues of the Government. The absolute liability created under the Act and the Rules is of that person who is an assessee i.e. a person engaged in production or manufacture of any specified goods included in I schedule of the Act (now the new Central Excise Tariff). In this view of the matter, in our opinion none of the petitioners were and are liable to pay the alleged Government dues either under the provisions of the Act or Rules of 1995. 26. In view of the above findings it is not necessary for us to deal with the alternate contention raised by Mr. Nankani. However, since both the parties have addressed us on that aspect in detail, we propose to deal with the submission made in this behalf. Mr. Nankani, in our opinions, is perfectly justified in contending that the order passed by the CEGAT in the case of Mr. S.P. Mittal binds the respondents since a specific finding has been recorded by the Tribunal holding that the order of confirming duty and imposing penalty was only against the company and not against the Director Mr. S.P. Mittal. Consequently, his appeal was dismissed for want of locus standi. This order has been accepted by the Revenue. The order has become ....
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....udiced when the order is made before making the order thereof. Notice is thus a condition precedent to a demand under sub-section (2). In the instant case, compliance with this statutory requirement has not been made and, therefore, the demand is in contravention of the statutory provision. Certain other authorities have been cited at the hearing by Counsel for both sides. Reference to them, we consider, is not necessary." 28. Thus, notices issued to the petitioners were not only in breach of principles of natural justice but the same were in violation of section of Section 11A of the Excise Act. At this juncture, it will not be out of place to mention that even under the provisions of the Companies Act the petitioners are not liable to discharge the liability of the company, if any, of which they were Directors in the past. As soon as a company is incorporated, it constitutes an independent juristic person in the eyes of law as distinct from its members constituting it. Even private limited company consisting of only two members has, nonetheless, a separate legal entity. It is entirely different from its members. From the date of its incorporation a company is endowed with cert....