TMI Blog2005 (8) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of definition. Under Section 6 no person can engage in the production or manufacture of any specified goods, included in the First schedule of the Act (now the new Central Excise Tariff) except under the authority and in accordance with the terms and conditions of a licence granted under the Act. If a person produces 'excisable goods' within the meaning of that expression, he has got to obtain a licence under Section 6 of the Act. Examination of the above provisions would unequivocally go to show that none of the provisions makes the former Director personally liable to pay excise duty. The Act does not impose any obligation or liability on the former Director to pay the arrears of excise duty. If that be so, even the subordinate legislation cannot bring such a person within its fold. The word 'defaulter' has also been defined to mean any person from whom Government dues are recoverable under the Act. Rule 3 deals with the issuance of recovery certificate; whereas, Rule 4 provides for issuance of notice. Notice is required to be issued and served upon a defaulter requiring him to pay the amount specified in the certificate issued under Rule 2(iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic existence, a former Director of the company cannot be held responsible for payment of the liabilities of the company in absence of any specific provision. No contrary provision to persuade us, not to take a view taken hereunder, was brought to our notice. Thus, we have no hesitation to hold and declare that petitioners herein cannot be held liable to pay outstanding dues of the central excise duty sought to be demanded from them. We, therefore, quash and set aside the impugned last demand notice dated 1st October, 2003 holding it to be without jurisdiction and without authority of law and make the rule absolutely in terms prayer Clause (a) and (b) with no order as to costs. - HON'BLE V.C. DAGA AND J.P. DEVADHAR, JJ. For the Appellant : Y.T. John and Ajay Panickar, Advs. For the Respondent : R.V. Desai, Sr. Adv. and P.S. Jetly, Adv. Judgment V.C. Daga, J. 1. Petitioners by these petitions are challenging demand notices dated 1st October, 2003 issued by the respondent No. 1 calling upon them to pay within seven days a sum of Rs. 28,21,710/- payable by the company M/s. Goldseal Telecommunication Ltd., Gurgoan ('M/s. GTL' for short) since they happened to be the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners were again served with the demand notices dated 14-8-2003 by the Central Excise Department calling upon them to pay Rs. 27,21,710/- payable by M/s. GTL. Both the petitioners again replied to the said notices denying their liability. In spite of the specific replies, respondent department again served demand notices dated 1-10-2003 to both the petitioners demanding from them the aforesaid sum payable by M/s. GTL and also threatened to attach their personal properties in the event of non payment. Both the petitioners again replied respective demand notices on 7-10-2003 denying their liability to pay. Since the sword of demand and attachment of their personal properties was hanging on their head, both of them chose to invoke the writ jurisdiction of this Court by separate petitions to challenge the action of the respondents. SUBMISSIONS : 6. Mr. V.S. Nankani, learned Counsel appearing for the petitioners while assailing the notices of demand issued to the petitioners submitted that the respondents ought not to have issued such repeated notices to the petitioners since they were not liable to discharge the liabilities of the defaulter company; namely M/s. GTL. 7. Mr. Nankani fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that so far as Mr. Mittal is concerned, he did file an appeal before the CEGAT to challenge the order of confirmation passed by the Commissioner dated 22-6-2000 against the company M/s. GTL since the demand was being pressed against him personally. While dismissing this appeal, the CEGAT recorded a specific finding that the show cause was issued only to M/s. GTL and that the impugned duty demand with penalty was confirmed only against the company - M/s. GTL, as such appellant Mr. S.P. Mittal had no locus standi to file appeal. The appeal was dismissed as misconceived. Mr. Nankani, thus, submits the above order operates as res judicata and binds the respondents. He further submits that the very same adjudication could be held good vis-a-vis second petitioner Mr. K.T. Shah being a person placed in the same situation. In this view of the matter, he submits that the respondents are estopped from demanding any duty much less penalty or any arrears of duty from the petitioners allegedly due and recoverable from the company - M/s. GTL. He, thus, submits that the notices issued by the respondents are liable to be quashed and set aside. 13. Per contra, Mr. R.V. Desai, learned Senio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence and shall be liable to be proceeded against and punished accordingly. Provided that nothing contained in sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prove the commission of such offence. 11-A(1) .. 12. Application of the provisions of Act 8 of 1878 to Central Excise Duties - The Central Government may, by notification in the Official Gazette, declare that any of the provisions of the Customs Act, 1962 (52 of 1962) relating to the levy of and exemption from customs duties, drawback of duty, warehousing, offences and penalties, confiscation and procedure relating to offences and appeals shall, with such modifications and alterations as it may consider necessary or desirable to adapt them to the circumstances, be applicable in regard to like matters in respect of duties imposed by Section 3. The Customs Act, 1962 142. Recovery of sums due to Government - (1) (Where any sum payable by any person) under this Act (including the amount required to be paid to the credit of the Central Government under Section 28B) is not paid - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- RULES OF 1995 2. Definition - In these rules, unless the context otherwise requires - (i) 'Act' means the Customs Act, 1962 (52 of 1962); (ii) 'Government dues' means any duty or drawback to be recovered from any person or any penalty payable by any person under the Act and has not been paid. (iii) 'Certificate' means the certificate required to be issued by an (Assistant Commissioner of Customs or Deputy Commissioner of Customs) under Clause (c) of sub-section (1) of Section 142 of the Act. (iv) 'Commissioner' means any person appointed as Commissioner of Customs or Central Excise under the Act. ((v) 'Proper Officer' means an officer subordinate to the Commissioner and not below the rank of Assistant Commissioner of Customs or Assistant Commissioner of Customs and Central Excise, who is authorised by the Commissioner for the purpose of attachment and sale of defaulter's property and for realising the amount mentioned in the certificate.) (vi) 'Defaulter' means any person from whom Government dues are recoverable under the Act. (vii) Other words or terms used in these rules shall have the same meaning assigned to them under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be levied. Thus, Section 3(1) is the only charging provisions under the excise law. No other provision either in the Act or the Rules, creates the charge nor can claim to have any ingredient of the incidence of the charge. In other words, Section 4 deals with the measure of valuation when the duty of excise is chargeable on any excisable goods with reference to value. Thus Section 3(1) operates only as charging section and Section 4 alone provides the measure of charge. It is the sole provision dealing with the basis and method of assessing the value of manufactured goods. 20. Section 6 provides that any person who is engaged in (a) the production of manufacture or any process of production or manufacture of any specified goods included in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), or (b) the whole purchase or sale (whether on his own account or as a broker or commission agent) or the storage any specified goods included in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), shall get himself registered with the proper officer in such manner as may be prescribed. Under Section 6, no person can engage in production or manufacture of any spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause why he should not pay the amount specified in the notice. Issuance of notice is condition precedent to a demand under sub-section 3(2). If this statutory requirement is not complied with, the demand would be in contravention of Section 11A. The decision under Section 11A is in the nature of an adjudication of disputed issue. Thus, the provisions referred to hereinabove are sufficient to understand the liability created by the Act and the Rules framed thereunder :- Consideration : 22. Having heard rival parties, having examined the relevant statutory provisions in the backdrop of the facts emerging from the record, one has to find as to whether the petitioners, former Directors of a company are liable to pay the dues of the company under the provisions of the Excise Act. In order to find answer to this question, one has to revert back to the provision of Section 3 of the Excise Act, the analysis of which makes it clear that it provides for levy and collection of the central excise duty as per the Rules framed under the Act. The section, thus provides for levy and collection. The word 'levy' has been a subject matter of judicial interpretation in the case of Ujagar Prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer Director to pay the arrears of excise duty. If that be so, even the subordinate legislation cannot bring such a person within its fold. 25. Let us not consider : whether the Rules of 1995 in any way makes a former Director liable to pay excise duty. If one turns to the provisions of the Rules of 1995, the word 'Government dues' is defined to mean any duty, drawback to be recovered from any person or any interest or penalty payable by any person under the Act and has not been paid. The word 'defaulter' has also been defined to mean any person from whom Government dues are recoverable under the Act. Rule 3 deals with the issuance of recovery certificate; whereas, Rule 4 provides for issuance of notice. Notice is required to be issued and served upon a defaulter requiring him to pay the amount specified in the certificate issued under Rule 2(iii) within seven days from the date of the service of the notice. As already stated 'defaulter' means a person from whom Government dues are recoverable under the Act. None of the provisions under the Rules of 1995 makes the former Director responsible to pay the dues of the Government. The absolute liability created u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company - M/s. GTL from the petitioner Mr. K.T. Shah; without there being any prior show cause notice and reasonable opportunity to him to put forth his representation, if any, as required under Section 11A(2) of the Excise Act, 1944. In this behalf, it is relevant to refer to the Judgment of the Apex Court in the case of Gokak Patel Volkart Ltd. v. Collector of Central Excise, Belgaum - 1987 (28) E.L.T. 53 (S.C.) = AIR 1987 SC 1161, wherein it has been held as under :- No notice seems to have been issued in this case in regard to the period in question. Instead thereof an outright demand had been served. The provisions of Section 11A(1) and (2) make it clear that the statutory scheme is that in the situations covered by sub-section (1), a notice of show cause has to be issued and sub-section (2) requires that the cause shown by way of representation has to be considered by the prescribed authority and then only the amount has to be determined. The scheme is in consonance with the rules of natural justice. An opportunity to be heard is intended to be afforded to the person who is likely to be prejudiced when the order is made before making the order thereof. Notice is thus a cond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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