TMI Blog2012 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of the Kapoor family were transferred to Mukherjee Brothers provided that the Mukherjee family would be responsible to discharge the Excise duty liabilities of the said company -Held that :- as per the Recovery Rules, 1995 “Defaulter” means any person from whom government dues are recoverable under the Act and in this case neither the Petitioner nor her father who was a Director of the company, were defaulters hence recovery rules will be applicable for the company - It is an undisputed position that duty and penalty are arrears of the company as per the agreement - allow the petition of assessee. - WRIT PETITION NO. 165 OF 2012 - - - Dated:- 13-2-2012 - DR. D.Y. CHANDRACHUD M.S. SANKLECHA, JJ. Mr. V. Sridharan, Sr. Advocate with Mr. Prakash Shah and Mr. Jas Sanghavi i/by PDS Legal for the Petitioner. Mr. Pradeep S. Jetly with Ms. Suchitra Kamble for the Respondents. ORAL JUDGMENT ( PER M.S. SANKLECHA, J.) Rule; with the consent of Counsel for the parties returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2 By this petition under Article 226 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On 9 May 2011 a notice of demand was addressed to the Petitioner s father, being a notice to defaulter in form Appendix II by the Assistant Commissioner of Central Excise. The aforesaid notice of demand was in terms of Section 142(1) (c)(ii) of the Customs Act, 1962 read with Rule 4 of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 (The Recovery Rules 1995) calling upon the Petitioner s father to pay Central Excise duty amounting to Rs.71,68,243/- and penalty of Rs.2500/- on the basis of a Certificate No.01/2011-12 dated 2 May 2011. The aforesaid notice called upon the Petitioner s father to pay duty along with interest thereon and penalty within seven days from the date of service of the notice, failing which recovery proceedings under the Recovery Rules, 1995 were threatened. d) Thereafter, on 26 May 2011, the Deputy Commissioner of Central Excise issued a notice to the Petitioner informing the Petitioner that there were arrears of Rs.71,68,243/- as duty and Rs.25000/- as penalty payable by the said Company of which the Petitioner s father was a Director. By the aforesaid notice, the Petitioner was informed that arrears of duty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een Mukherjee Brothers and Kapoor family who together controlled the said company, the shares of the Kapoor family were transferred to Mukherjee Brothers. The aforesaid agreement also provided that the Mukherjee family would be responsible to discharge the Excise duty liabilities of the said company and therefore justifies the present proceeding against the Petitioner and her late father the Late Balram P Mukherjee. The Affidavit also stated that a Notice of Attachment was served upon the Late Balram P. Mukherjee under the Recovery Rules,1995 on 6 December 2005 and therefore the Gift deed dated 20 September 2009 was void in law. However, the alleged Notice of demand served on 6 December 2005 was not produced before the Court. 5 On the aforesaid facts, it was submitted by Learned Senior Counsel appearing for the Petitioner that the action of the Respondents in seeking to attach the said property now belonging to the Petitioner and formerly belonging to her father the late Balaram P. Mukherjee to recover the dues of the company is without jurisdiction. This was so as the liability to pay the excise duty is on the manufacturer of goods who alone can be a defaulter in payment of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues. In this case, the defaulter, if any, was the said company and the proceedings under the Recovery Rules, 1995 could only be taken against the said company. The proceedings for recovery of Excise and Customs dues under the Recovery Rules, 1995 is to recover duty from the defaulter. It was on the basis of the aforesaid provisions of law that he contended that the proceedings against the Petitioner are without jurisdiction as neither she nor her predecessor-in-title to the said property namely her late father could be considered defaulters under the Recovery Rules, 1995. In support of his case Counsel has relied upon two decisions of this Court in Sunil Parmeshwar Mittal reported in 2005 (188) E.L.T. 268 (Bombay) and of Satish D.Sanghavi in Writ Petition No.2087 of 2006 Order dated 22 September 2009 where this Court has taken a view that a Director of the company which has failed to pay excise duty could not be held responsible and liable to discharge the liabilities of a defaulting company. 6 Mr. Pradeep Jetly, Counsel appearing for the Respondents submitted that the duty of Rs.71,68,743/- and penalty of Rs.25,000/-was arrears of the said company. However he contended that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Cases Page 521. 8 We have considered the submissions. It is an undisputed position that duty and penalty are arrears of the company. It was the company that was the person engaged in manufacture of goods and registered as manufacturer under Section 6 of the said Act and therefore obliged to pay excise duty. Further under the Act and the Rules, the person liable to pay duty is the person who manufactures the goods in terms of Rule 7 of the erstwhile Central Excise Rules, 1944 and Rule 4 of the Central Excise Rules 2002 as now existing. Therefore the obligation to pay duty is on the company. The Affidavit in reply dated 2 February 2011 filed by the Respondents states that the arrears being Rs. 71,68,243/- as excise duty and Rs.25000/- as penalty are dues of the Company. Therefore in terms of Section 142 of the Customs Act, 1962 as made applicable to the Central Excise Act, 1944 by virtue of a Notification issued under Section 12 of Central Excise Act 1944 the Central Government can recover sums due to it from the person who has not paid its dues. It is under Section 142 read with Section 156 of the Customs Act, 1962 that the Recovery Rules 1995 have been framed. In terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction. We are fortified in the view taken by us by two decisions of the Division Bench of this Hon ble Court in Sunil Parmeshwar Mittal reported in 2005(188) E.L.T. 268 (Bombay) and Satish D. Sanghavi in its order Writ Petition No. 2087 of 2006 dated 22 September 2009 where on similar facts it has been held that arrears of duty payable by a limited company cannot be recovered from its Director. Further, the reliance of the Respondents upon an agreement dated 21 March 2000 between Kapoor family and the Mukherjee brothers whereby all the shareholding of Kapoor family in the said company was transferred to Mukherjee brothers and under which the Mukherjee Brothers accepted their responsibility to discharge the Central Excise Liability in support of its case that the dues of the said company can be recovered from the late Balram P Mukherjee and/or his estate is not sustainable. Mr. Sridharan invited our attention to a decision of the Supreme Court in the matter of Deputy Commercial Tax Officer, Park Town Division, Madras and another Vs. Sha Sukraj Peerajee reported in (1968) Vol. XXI Sales Tax Cases Page 5 wherein the Supreme Court observed as under : But even on the assumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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