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2019 Supreme(Bom) 168
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. Dharmadhikari, M.S. Karnik, JJ.
Purshottam Das Gupta – Appellant
Versus
Union of India – Respondent
Writ Petition No. 715 of 2019
Decided On : 15-02-2019
Prakash Shah, Jas Sanghavi, Suyog Bhave, Pradeep S. Jelty, Jitendra Mishra.
Headnote:
Customs Act - Excise Act - Section 3 - Partnership firm - Recovery of taxes - Company was incorporated and its name underwent a change sometime in nature of business and place from which company carried out its activities are mentioned in and then it is stated that company stopped its manufacturing activities and thereafter even petitioner ceased to be a Director of company - Reliance is placed upon documents and records available in office of Registrar of Companies State of Maharashtra which according to petitioner prove point that petitioner has no association with company - It is then alleged that there was an adjudication and stated to be into matter of recovery of taxes particularly customs duty - Held This conclusion must be clearly discernible from orders in adjudication proceedings in sense show cause notices must be directed to Director personally and in addition to corporate entity - Secondly such corporate entity together with Director must be heard and Director must be granted an opportunity to satisfy adjudicating Authority that insofar as company and its business is concerned Director may as a part and parcel of Board lay down broad policies and take decisions in relation thereto but day-to-day business is not discharged by him - That is carried out by other salaried persons duly appointed for that purpose - Responsibilities are fixed and it is they who have to discharge their obligations and duties by pointing out to persons in charge of finances or in management of finances so that liabilities of company can be met or dues payable by company can be paid - Writ petition succeeds
S.C. Dharmadhikari, J.
1. Rule. The respondents waive service. By consent, Rule is made returnable forthwith and the petition is taken up for hearing and final disposal. Heard counsel.
2. The senior citizen/petitioner before us was at one time a Director of a limited company, Sujata Verbatim Limited. The company has now changed its name and is now known as PDG Infotech Limited.
3. This company was incorporated on 24.12.1985 and its name underwent a change sometime in April, 2004. The nature of business and the place from which the company carried out its activities are mentioned in para 5 and then it is stated that the company stopped its manufacturing activities and thereafter even the petitioner ceased to be a Director of the company. Reliance is placed upon documents and records available in the office of the Registrar of Companies, State of Maharashtra, which, according to the petitioner, prove the point that the petitioner has no association with the company.
4. It is then alleged that there was an adjudication and stated to be into the matter of recovery of taxes, particularly the customs duty.
5. The fact that there were some legal proceedings became known to the petitioner only after he was confronted with a communication from the respondents.
6. He says that a demand notice dated 28.12.2018, copy of which is at Exhibit-A, was served on him under which the 3rd respondent directed him to pay outstanding dues of the company, amounting to Rs. 2,49,10,040/- along with interest and costs.
7. On failure to pay, it was stated that the respondents would resort to the power conferred by Section 142(1)(c)(ii) of The Customs Act, 1962 ("the Act" for short) r/w Rule 4 of The Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 ("the Rules" for short). The demand notice was received on 3.1.2019 and challenging this demand notice and claiming a declaration to the effect that, the dues of the company cannot be recovered from the petitioner even if it is outstanding, this writ petition is filed.
8. Mr. Prakash Shah, appearing on behalf of the petitioner, would submit that merely because the petitioner is associated with the company and has disclosed in the body of the petition the nature of the company's business and alleged activities and the details from where the business was carried, who was associated with him, does not mean that he was in any way liable to meet the outstanding dues and which could have only been claimed and recovered from the company. Asserting the position of a Director qua a company or a limited company, it is urged by Mr. Shah that unlike a partnership or a glorified partnership, the dues of the company cannot be recovered from its Director, for the company has an existence independent of the Director, in law. Unlike a partnership firm, which has no independent existence, the company has and there is enough material available in law which could buttress this submission.
9. Reliance is placed by Mr. Shah on the language of Section 142 of the Act and the relevant Rules and several Judgments of this Court and the Supreme Court compiled in a compilation handed over by him. The said Judgments are as under:-
1. S.L. Kirloskar vs. Union of India, (1993) 68 ELT 533 (Bom.)
2. Vandana Bidyut Chaterjee vs. Union of India, (2013) 292 ELT 6 (Bom.)
3. Suman N. Agarwal vs. Union of India, (2013) 289 ELT 281 (Bom.)
4. Sunil Parmeshwar Mittal vs. Dy. C. (Recovery Cell), C.Ex. Mumbai, (2005) 188 ELT 268 (Bom.)
5. A Division Bench Order of this Court dated 5.5.2009, passed in Civil Writ Petition No. 4117 of 2009, Chandrakant Bhalchandra Garware vs. Union of India and Others
6. Employees State Insurance Corporation, Chandigarh vs. Gurdial Singh and Others, (1991) Supp 1 SCC 204
10. On the other hand, Mr. Pradeep Jetly would submit that the communication at Exhibit-A does not allow any party, much less the petitioner, to raise a dispute about the dues of the company. The company owes to the Governm
