Case Laws
Acts
Notifications
Circulars
Classification
Forms
Manuals
Articles
News
D. Forum
Highlights
Notes
🚨 Important Update for Our Users
We are transitioning to our new and improved portal - www.taxtmi.com - for a better experience.
⚠️ This portal will be discontinued on 31-07-2025
If you encounter any issues or problems while using the new portal,
please
let us know via our feedback form
so we can address them promptly.
Home
2019 (3) TMI 310 - HC - CustomsLiability of petitioner/ Director for dues of the company - recovery of defaults of company - Section 142(1)(c)(ii) of The Customs Act 1962 r/w Rule 4 of The Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules 1995 - case of petitioner is that the dues of the company cannot be recovered from the petitioner even if it is outstanding. Held that - On perusal of section 142 of CA it is indicated that it enables recovery of sums due to Government. Now where any sum payable by any person would mean a sum due and payable to the Government even by an artificial person such as a company in this case. It is stated in the legal provision that where any sum payable by the person is not paid 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 officer or such other officer of Customs. Thus the provision enables deduction of money owing and payable by the Government to such person. That therefore means that appropriation and adjustment is possible as against the monies owed by the Government to such person. It is only because that person has not paid the sum payable to the Government that this power is conferred. The other way or manner of recovery is that the Assistant Commissioner of Customs or the Deputy Commissioner of Customs may recover or may require any other officer of Customs to recover the amount payable by detaining and selling any goods belonging to such person or if the amount cannot be recovered from such person in the manner provided in Clause (a) or Clause (b) of Section 142 then the Assistant Commissioner or the Deputy Commissioner can 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 arrears of land revenue. Then there are other miscellaneous Rules but what we find is that Section 142 r/w these Rules proceeds on the footing that dues can be recovered by terming even a company as defaulter. The word person therefore includes both a natural and artificial person. The question is not only this inasmuch as this aspect is clear by the provision itself and we have no doubt in our mind that a defaulter can be a company or any artificial person as well - The law requires a specific provision to be enacted in that behalf. Piercing of veil - separate corporate legal entity - Held that - In the present case according to Mr. Jetly the piercing of veil has been done and that is why notices have been issued. We are sorry we cannot accept his contention and for more than one reason. This conclusion must be clearly discernible from the orders in the adjudication proceedings in the sense the show cause notices must be directed to the Director personally and in addition to the corporate entity. Secondly such corporate entity together with the Director must be heard and the Director must be granted an opportunity to satisfy the Adjudicating Authority that insofar as the company and its business is concerned the Director may as a part and parcel of the Board lay down broad policies and take decisions in relation thereto but the day-to-day business is not discharged by him - Something more than this and proof of involvement not only in the day-to-day activities but all affairs will also have to be placed on record to establish the piercing of veil. The argument now built only on the basis of this principle and referred in the affidavit in reply is thus of no avail to Mr. Jetly. On that basis we cannot hold that the petitioner is also liable for the dues of the company. Dues of the company cannot be recovered from the petitioner personally. The demand notice to that extent is quashed and set aside. - Petition allowed.
|