2012 (4) TMI 42 - HC - Central Excise

Recovery Rules - father of the Petitioner during his life time had by a deed of Gift gifted a property to her daughter (petitioner)- a notice of demand was addressed to the Petitioner s father to pay Central Excise duty and penalty on the basis of a Certificate No.01/2011-12 dated 2 May 2011 else the procedure for attachment under the Recovery Rules 1995 would follow - the Petitioner was informed by notice that arrears of duty and penalty are recoverable from the Company; in the Municipal record the property stands in the name of the Petitioner s father and as she was in occupation of the said property - petitioner contented that neither she nor her father was a defaulter of Excise duty under Section 142 (1) and the notice itself which very clearly states that the arrears of duty and penalty are recoverable from the company - Respondents have filed an affidavit that an agreement exists Mukherjee Brothers and Kapoor family who together controlled the said company, the shares of the Kapoor family were transferred to Mukherjee Brothers provided that the Mukherjee family would be responsible to discharge the Excise duty liabilities of the said company -Held that - as per the Recovery Rules, 1995 Defaulter means any person from whom government dues are recoverable under the Act and in this case neither the Petitioner nor her father who was a Director of the company, were defaulters hence recovery rules will be applicable for the company - It is an undisputed position that duty and penalty are arrears of the company as per the agreement - allow the petition of assessee.

Issues Involved:

1. Validity of the Notice of Demand dated 9 May 2011.
2. Validity of the Communication dated 26 May 2011.
3. Validity of the Certificate No.01/2011-12 dated 2 May 2011.
4. Validity of the Communication dated 7 June 2011.
5. Validity of the Notice of Attachment dated 1 July 2011.
6. Validity of the Notice of Attachment dated 14 December 2011.

Issue-wise Detailed Analysis:

1. Validity of the Notice of Demand dated 9 May 2011:

The Petitioner challenged the Notice of Demand issued to her late father by the Assistant Commissioner of Central Excise, which sought recovery of Central Excise duty and penalty from the deceased. The Court noted that the liability to pay excise duty is on the manufacturer of goods, as per Rule 4 of the Central Excise Rules, 2002. Since the deceased and the Petitioner were not manufacturers, they could not be considered defaulters under the Recovery Rules, 1995. The Court held that the notice was without jurisdiction and quashed it.

2. Validity of the Communication dated 26 May 2011:

This communication directed the Petitioner to pay the dues of M/s. Verma Mukherjee Pvt. Ltd., the company where her late father was a director. The Court reiterated that the liability to pay excise duty is on the company, not its directors or shareholders. The Court found that there is no provision under the Central Excise Act to recover dues from the directors of a limited company. Consequently, the communication was quashed.

3. Validity of the Certificate No.01/2011-12 dated 2 May 2011:

Although the Certificate was not filed before the Court, the Court observed that any certificate to recover dues from the late Balram P. Mukherjee and his daughter was not sustainable. The Certificate was related to the company's dues, and since the recovery could only be made from the company, the certificate against the individuals was invalid.

4. Validity of the Communication dated 7 June 2011:

The Court did not specifically address this communication in detail but implied that any actions based on the invalid notices and communications were also without jurisdiction.

5. Validity of the Notice of Attachment dated 1 July 2011:

The Deputy Commissioner of Central Excise issued this notice to attach the property of the Petitioner and her late father. The Court held that the attachment was invalid as the property belonged to the Petitioner, who was not a defaulter. The attachment notice was quashed.

6. Validity of the Notice of Attachment dated 14 December 2011:

This notice aimed to attach the property at Plot No.113, Village Vadhavali, Chembur. The Court found that the property was gifted to the Petitioner before the issuance of the notice, and she was not liable for the company's dues. The notice was quashed.

Conclusion:

The Court allowed the petition, quashing the Notice of Demand dated 9 May 2011, the Communication dated 26 May 2011, the Notice of Attachment dated 1 July 2011, and the Notice of Attachment dated 14 December 2011. The Certificate No.01/2011-12 was not set aside as it was not filed before the Court, but the Court noted that any recovery from the deceased or his daughter was not sustainable. The petition was disposed of with no order as to costs.

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