TMI Blog1988 (8) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... vied or short-paid or erroneously refunded by reason of fraud, collusion or wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty by such person or his agent, then the proceedings can be initiated by issue of show cause notice. The notice is required to be served on the person chargeable with duty. Under Section 3 of the Act, there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India. The duty is levied on the manufacturer or producer. Under Rule 178 of the Rules, licences are granted in favour of named persons for the conduct of the business of the manufacture or production of excisable goods. Rule 7 of the Rules provides that every person who produces, cures or manufactures any excisable goods shall pay the duty or duties leviable on such goods. The time and manner of payment of duty is contained in Rule 9. If any excisable goods are, in contravention of sub-rule (1), deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties or confiscation incurred in respect of the trade or business to which the declaration relates. Mr. Soli J. Sorabjee invites our attention to the affidavit-in-rejoinder that none of the petitioners has signed any declaration under Rule 221. There is thus no jurisdiction at the threshold to issue show cause notice to the Directors for payment of dues and penalties. 4. The counsel further submits that the stand of the respondents of lifting the corporate veil on the ground that the corporate entity cannot be considered to be a manufacturer or producer and it can also be persons who run that Corporation through their will and brains who are the real manufacturers or producers who are alleged to have been indulging in nefarious activities like the evasion of duties, is not sustainable. There is no specific provision in the Act or the Rules like Section 179, Income-tax Act, 1961 or Companies Act, 1956 such as Sections 75, 95, 144, 145, 162(1), 220(3) etc. Reliance is placed on "Ramchandra v. State of Karala", 1984 (55) Co. Cases 590 wherein it was held that there is no provision of law which enables the Revenue to proceed against a Director of a Company personally for arrears of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature." 7. On the other hand, Mr. G. Ramaswamy, the learned Addl. Solicitor General submits that the show cause notices have been issued under Section 11A of the Act as the duty of excise has not been levied or paid or has been short-levied or short-paid by reason of fraud, collusion or wilful mis-statement or suppression of facts, or contravention of any provisions of the Act and the Rules made thereunder with intent to evade payment of duty by Duncans and or its Directors and/or their agents. The act of the company under the control of the Board of Directors is the subject matter of the show cause notices. The show cause notices have been issued against the company and its Directors through whom the company conducts its affairs and who are responsible for all the misdeeds and contravention of law He submits that the Court should lift the corporate veil as it is an evasion of the excise duty as was done in "The Commissioner of Income-tax, Madras v. Shri Meenakshi Mills Ltd.", A.I.R. 1967 S.C. 819 and "Asstt. Registrar of Companies v. Southern Machinery Works Ltd. and Others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility to pay excise duty as well as penalty is on the manufacturer or producer. Section 4 provides for the valuation of excisable goods for purposes of charging of duty of excise. Under sub-section (4) (a) of Section 4, an assessee means the person who is liable to pay the duty of excise under the Act and includes his agent. Rule 2(i)(ib) defines assessee means any person who is liable for payment of duty assessed and also includes any producer or manufacturer of excisable goods or a licensee of a private warehouse in which excisable goods are stored. Rule 221 reads as under :- "221. Responsibility of a corporate body for making declaration and obtaining licence. - (1) Where any trade or business in respect of which declaration is required to be made by these rules, is carried on by a corporation, the declaration shall be under the seal of the corporation and signed by the chairman or some director of the corporation or by its secretary or other principal officer. (2) Any person signing a declaration, and also the corporation under whose seal the declaration is made, shall be liable for the payment of all duties charged and to all penalties and confiscations incurred, in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application for grant and renewal of licences in form (a) or (1) and the declarations made thereunder. As provided in Rule 221, any person signing a declaration, and also the Corporation under whose seal the declaration is made, shall be liable for the payment of all duties charged and to all penalties and confiscations incurred, in respect of the trade or business to which the declaration relates. We are unable to accept the averment of the petitioners in the rejoinder that no declaration has been made by any of the petitioners. This is a question which has to be investigated and adjudicated upon by the adjudicating authorities. The requirement of Rule 233A is the issue of show cause notice before any penalty can be imposed on any person under the Rules. Rule 232A enjoins upon the Collector to publish names and other particulars of the person, Inter alia, on whom penalty of Rs. 10,000/- or more has been imposed by the Collector. In consonance with the principles of natural justice and the rule of audi alteram partem, the petitioners are being given an opportunity to show cause as to why they are not liable for payment of all duties charged and to all penalties incurred in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate entity and to pay regard to the economic realities behind the legal facade. So it is permissible to lift the corporate veil of Duncans to determine whether a particular Director could be proceeded against in pursuance to the impugned show cause notices or whether he is liable for the payment of all duties charged and to all penalties incurred. 12. We can only say this that after the veil of the corporate entity is lifted, the adjudicating authorities will determine as to which of the Directors is concerned with the evasion of the excise duty by reason of fraud, collusion or wilful mis-statement or suppression of facts, or contravention of the provisions of the Act and the Rules made thereunder. So far as individual liability of a Director to the payment of excise duty and penalty is concerned, no liability can be fastened on him unless the department is able to show as to how and to what extent a particular Director is liable. We wish to say no more at this stage. 13. Before parting with this case, we may note the contention of the petitioners that Section 9AA cannot be invoked in adjudication proceedings as it relates only to criminal proceedings. Section 9AA which w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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