Back
2013 Supreme(Bom) 59
High Court of Judicature at Bombay
D.Y. CHANDRACHUD & A.A. SAYED
Suman N. Agarwal
Versus
Union of India & Another
Writ Petition Nos.2347 of 2011 & 2586 of 2011
Decided on : 10-01-2013
For the Petitioner:Mayur Khandeparkar, Jamshed Ansari, Advocates.
For the Respondents:Jitendra B. Mishra, Advocate.
Headnote:CUSTOMS ACT, 1962 - Sections 124 and 142 - Recovery of dues.
Where recovery certificate under Section 142 of Act, was issued against companies of which petitioners are Directors and no notice was issued to petitioners therefore dues of Company cannot be recovered from its Directors. - The notice to show cause under Section 124 was not issued to the petitioner. The order of adjudication dated 20th September, 2007 was similarly not in respect of the petitioner. The certificates that were issued under Section 142(1)(c)(ii) on 19th March, 2010 were in the names of (i) Mehul Exports of the which the proprietor is Nurmal Agarwal, the spouse of the petitioner; (ii) Nisum Exports and Finance Private Limited of which the director is stated to be Nirmal Agarwal in the certificate; and (iii) Nisum Global Limited of which again the director is stated to the Nirmal Agarwal. The petitioner at the highest, as the affidavit in reply states, is one of the director of Nisum Global Limited not on Nisum Exports and Finance Private Limited. But that is not sufficient to follow the recoveries that are due and payable by the two companies in the hands of the petitioner who is a director. There is no provision in the Customs Act, 1962 similar to Section 179 of the Income Tax Act, 1971 or Section 18 of the Central Sales Act, 1956 where the dues of a private limited company can be recovered from its directors. A company which is a juristic entity has a status independent of its directors and share-holders. If in a given case, it is the contention of the Revenue that the entity of a corporate body is a mere shell which is being utilized to defraud the Revenue, a case for lifting the corporate veil has to be made out when notices of demand are issued to the company by making the director/shareholders liable to pay the dues. In the present case, no such exercise was carried out and as Court has noted neither was a notice to show cause under Section 124 issued to the petitioner nor was an order of adjudication passed against her. The certificate that was issued under Section 142(1)(c)(ii) was not issued to the petitioner. Hence, the action of addressing a demand to the petitioner on 1st November, 2011 under Section 142(1)(c)(ii) read with Rule 6 of the Attachment Rules and the consequential attachment are wholly without the authority of law.
(Dr. D.Y. Chandrachud, J.)
Rule, by consent made returnable forthwith. Counsel appearing on behalf of the Respondents waives service on behalf of the Respondents. By consent, both the Petitions are taken up for hearing and final disposal.
2. The Petitioner has sought to impugn in these proceedings under Article 226 the validity of (i) a notice to show cause dated 29 August 2005 issued by the Assistant Commissioner of Customs, Drawback Department; (ii) an order dated 20 September 2007 of the Commissioner of Customs (Export Promotion); and (iii) a notice of demand dated 1 November 2011 issued by the Assistant Commissioner of Customs, Special Recovery Cell. When the Petition came up for preliminary hearing on admission, an order was passed by this Court on 19 December 2011 recording the statement of the Petitioner that the challenge is being restricted only to the notice of demand dated 1 November 2011 (Exhibit C) and that the other reliefs in prayer (a) are not being pressed. The challenge before the Court is accordingly confined to the aforesaid limited extent.
3. A notice to show cause was issued on 29 August 2005 under Section 124 of the Customs Act 1962 to several entities and persons viz (i) Nisum Exports & Finance Private Limited; (ii) Nisum Global Limited; (iii) Mehul Exports; (iv) Nirmal Agarwal and (v) Mayur Vakharia. The gravamen of the notice was a fraudulent claim of duty drawback. No notice to show cause was issued to the Petitioner. The Petitioner is a director of Nisum Global Limited. Mehul Exports is stated to be the proprietary concern of the spouse of the Petitioner. An adjudication took place in pursuance of which an order was passed by the Commissioner of Customs (Export Promotion) confirming a demand in the amount of Rs.94.75 lacs against Nisum Exports and Finance Private Limited, in the amount of Rs.53.05 lacs against Nisum Global Limited and Rs.3.40 Crores against Mehul Exports. The adjudicatory order also imposed a fine in lieu of confiscation and personal penalties on the noticees. No order of adjudication was passed against the Petitioner since admittedly the notice to show cause was not issued against her.
4. On 1 November 2011 a notice of demand was issued to the Petitioner amongst others stating that under the order of 20 September 2007 which had been forwarded for recovery by the Assistant Commissioner of Customs, Drawback Recovery Cell to the Assistant Commissioner of the Special Recovery Cell, an amount of Rs.6.69 Crores was due together with interest. A certificate had been forwarded by the Assistant Commissioner of Customs, Drawback Recovery Cell under Section 142 (1)(c)(ii) of the Customs Act 1962 read with Rule 6 of the Customs (Attachment of Property of Defaulters for Recovery of Customs Dues) Rules 1995 specifying that the amount was to be recovered from the Petitioner. The Petitioner has sought to challenge the notice of demand as being without jurisdiction.
5. In the companion petition (Writ Petition 2586 of 2011)the Petitioner has sought to challenge a similar demand notice dated 1 November 2011 addressed to her on the basis of the order of adjudication passed against Nisum Global Limited in the amount of Rs.96.07 lacs. It has been stated that the Assistant Commissioner of Customs, Drawback Recovery Cell has forwarded the certificate to his counter part in the Special Recovery Cell under Section 142 (1)(c)(ii) read with Rule 6. Following the notice of demand, a notice of attachment has been levied both upon the Petitioner and her spouse Nirmal Agarwal. The notice of attachment has been addressed to the Petitioner and her spouse as directors of Nisum Exports and Finance Private Limited and as also in the name of Mehul Exports and Nisum Global Limited. The attachment has been challenged by the Petitioner in the companion petition.
6. In support of the challenge to the demand notice, Counsel appearing on behalf of the Petitioner submits that under Section 142 (1)(c)(ii) the mode of
