2014 (9) TMI 328 - HC - Customs

Recovery proceedings of customs duty - attachment of property (Flat) of sister company (Group company) - group assets - Held that - a closer look at the record would indicate that this is an attempt made by the Respondent No.1 to justify the issuance of the communication which is reproduced above. Even if now there is an attempt made to show that there is a Group of Companies and the import was for various Companies and which are sister concerns, what we find from the Order in Original is that therein a specific and distinct legal entity has been termed as Importer and that is not the Petitioner No.1. Infact M/s Surlux Medicare is stated to be the Importer. M/s Surlux Mediquip Limited has been referred to in the order of adjudication/ Order in Original. In such circumstances when the communication and all recovery measures are traceable to this Order in Original dated 31.05.2000, then, the contents thereof cannot be discarded or brushed aside by us. The connection between the Petitioner Nos.2 and 3 and with the alleged Group of Companies has not been established. It is in these circumstances that addressing the communication to the Respondent No.2 was not justified. The communication which we have reproduced above informs the Society that M/s Surlux Medicare is owner of the Flat No.58 and that has failed to pay penalty of ₹ 2 crore and Redemption Fine of ₹ 2.81 crore imposed by the order in original. That is how the recovery action under Section 142 of the Customs Act, 1962 has been initiated. - Writ Petition succeeds. The communication dated 29.05.2013 addressed by the Respondent No.1 to the Respondent No.2 is set aside. - Decided in favor of petitioner.

Summary

Issues:
- Writ of mandamus under Article 226 sought to withdraw a communication dated 29.05.2013 from the Commissioner of Customs.
- Dispute over ownership of a flat and transfer restrictions due to pending government dues against another entity.
- Interpretation of Order in Original dated 31.05.2000 and its implications on the present case.
- Justification of communication prohibiting property transfer based on connections between group companies.
- Examination of legal entities and their liabilities in recovery proceedings.

Analysis:
1. The petitioners sought a writ of mandamus under Article 226 to withdraw a communication dated 29.05.2013 from the Commissioner of Customs, preventing the transfer of a flat due to pending government dues against another entity. The petitioners argued that the communication was unjustified as it pertained to a different legal entity, M/s Surlux Medicare, not the petitioner, M/s Surlux Diagnostic Limited. The court examined the Order in Original dated 31.05.2000, which clearly identified M/s Surlux Medicare as the importer, not the petitioner, supporting the petitioners' claim that the communication was not applicable to them.

2. The respondents contended that the communication was justified based on the connections between the group companies, including M/s Surlux Medicare and M/s Surlux Mediquip Limited. They argued that these companies were under common management and had defaulted on government dues. However, the court found that the evidence presented did not establish a direct connection between the petitioner and the group companies to warrant the restrictions imposed by the communication.

3. The court analyzed the communication in light of the petitioners' ownership rights, supported by the share certificate issued by the Cooperative Housing Society. Despite claims of group assets and liabilities, the court emphasized the importance of establishing a clear link between the petitioner and the entities facing recovery proceedings. The court concluded that the communication was not justified in restricting the transfer of the flat owned by the petitioners, leading to the setting aside of the communication dated 29.05.2013.

4. To protect the rights of both parties, the court directed a temporary prohibition on the transfer of the flat for eight weeks, allowing the Respondent No.1 to initiate appropriate proceedings if permissible. The court kept all contentions open for further legal actions, ensuring a fair opportunity for both sides to present their case. The Writ Petition was allowed in favor of the petitioners, with no costs imposed on either party.