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2012 (12) TMI 802 - HC - CustomsTax defaulter - former director in the company - government dues under the Customs Act, 1962 - Held that - Considering the provisions of section 142 & Relevant Rules it is only the defaulter against whom steps may be taken under Rules. The defaulter is the person from whom dues are recoverable under the Act, which in the present case undoubtedly is the company. There is no averment that the company has been or is being wound up. In that case, there cannot be any question about the separate juristic personality of an existing company and its former director, the dues recoverable from the former cannot, in the absence of a statutory provision, be recovered from the latter. There is no provision in the Customs Act, 1962 corresponding to Section 179 of the Income Tax Act, 1961 or Section 18 of the Central Sales Tax, 1956 which enable the revenue authorities to proceed against directors of companies or such like third parties who are not defaulters - As decided in UOI vs. M.D. Lotlikar 1987 (11) TMI 24 - BOMBAY HIGH COURT the directors of any company, whether public limited or private, are not personally liable for the debts of the company unless the Company Court finds them guilty of any misfeasance or wrongs - Thus the impugned notices and action of the Customs authorities in the present case is at once in utter violation of Article 265 of the Constitution, as it seeks to recover tax dues of one from another, without authority of law. It also amounts to illegal deprivation of the petitioner s property, without authority of law, under Article 300-A of the Constitution of India - Writ allowed.
Issues:
1. Impugned notices issued by Customs authorities for recovery of dues from the company director's properties. 2. Ownership of the properties in question. 3. Legal authority to recover dues from a third party. 4. Compliance with procedural requirements in issuing recovery notices. Analysis: Issue 1: Impugned Notices The petitioner challenged the notices issued by Customs authorities for recovering dues from properties owned by the company director. The notices were issued under the Customs Act, 1962, and the Customs (Attachment of Property Defaulters for the Recovery of Government Dues) Rules 1995. The petitioner argued that the recovery of dues from her properties, after resigning from the company in 1993, was illegal and without proper authority. Issue 2: Ownership of Properties The petitioner asserted that she was the rightful owner of the properties in question, not the company. Despite the Customs authorities acknowledging her ownership, they argued that as a former director, she was still liable for the company's obligations. The petitioner contended that the notices incorrectly targeted her properties for recovering the company's dues. Issue 3: Recovery from a Third Party The petitioner's counsel highlighted the legal definition of a "defaulter" under the Act, emphasizing that recovery proceedings should only be directed at the actual defaulter, which, in this case, was the company. The absence of statutory provisions enabling recovery from third parties, coupled with the lack of proper notice and opportunity for the petitioner to respond, rendered the recovery actions unlawful. Issue 4: Compliance with Procedural Requirements The Court examined relevant sections of the Act and Rules governing recovery procedures. It was noted that recovery actions could only be taken against the defaulter as defined by the law. Citing precedents from various High Courts, the judgment emphasized that directors of companies are not personally liable for the company's debts unless specific legal provisions or agreements dictate otherwise. The Court concluded that the recovery notices and actions of the Customs authorities were unconstitutional and lacked legal authority. In conclusion, the Court ruled in favor of the petitioner, quashing the impugned notices dated 3.08.2012, 7.8.2012, and 8.8.2012. The judgment highlighted the violation of constitutional principles and the illegal deprivation of the petitioner's property without proper authority.
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