2013 (1) TMI 644 - HC - Customs

Fraudulent claim of duty drawback - notice to show cause under Section 124 was not issued to the Petitioner - fine in lieu of confiscation and personal penalties on the noticee - Held that - The notice to show cause under Section 124 was not issued to the Petitioner. The order of adjudication dated 20 September 2007 was similarly not in respect of the Petitioner. The certificates that were issued under Section 142(1)(c) (ii) on 19 March 2010 were in the names of (i) Mehul Exports of which the proprietor is Nirmal 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 be Nirmal Agarwal. The Petitioner at the highest, as the affidavit in reply states, is one of the directors of Nisum Global Limited and of 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. As decided in Vandana Bidyut Chaterjee (2012 (4) TMI 42 - BOMBAY HIGH COURT), 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 Tax Act 1956 where the dues of a private limited company can be recovered from its directors. Whether the Petitioner is in breach of any of the provisions of the Income Tax Act 1961 is not an issue which falls for determination in these proceedings. Thus concluded that the action of the Revenue in seeking to issue a notice of demand dated 1 November 2011 upon the Petitioner and the levy of attachment to the extent of the interest of the Petitioner in flat 1501B are unlawful and would have to be set aside.

Summary

Issues Involved:
1. Validity of the notice of demand dated 1 November 2011 issued to the Petitioner.
2. Jurisdiction to issue the demand notice and levy attachment on the Petitioner's property.
3. Applicability of Section 142 of the Customs Act 1962 and the Customs (Attachment of Property of Defaulters for Recovery of Customs Dues) Rules 1995.

Detailed Analysis:

1. Validity of the Notice of Demand Dated 1 November 2011:
The Petitioner challenged the notice of demand dated 1 November 2011 issued under Section 142(1)(c)(ii) of the Customs Act 1962. The notice was issued to recover an amount of Rs. 6.69 Crores, which was confirmed by the Commissioner of Customs (Export Promotion) in an order dated 20 September 2007. The Petitioner argued that no show cause notice was issued to her under Section 124 of the Customs Act, and hence, the demand notice was without jurisdiction.

2. Jurisdiction to Issue the Demand Notice and Levy Attachment on the Petitioner's Property:
The Petitioner contended that the demand notice and subsequent attachment of her property were unlawful as she was not the person against whom the adjudication order was passed. The adjudication order was against Nisum Exports & Finance Private Limited, Nisum Global Limited, and Mehul Exports, and not against the Petitioner personally. The Petitioner, being a director of Nisum Global Limited and having a connection to Mehul Exports through her spouse, was not sufficient grounds for the Revenue to pursue recovery from her.

3. Applicability of Section 142 of the Customs Act 1962 and the Customs (Attachment of Property of Defaulters for Recovery of Customs Dues) Rules 1995:
The Court examined the provisions of Section 142(1) of the Customs Act and the related Rules. Section 142(1)(c)(ii) allows for the recovery of dues by distraining and selling the defaulter's property. The Court emphasized that the entire recovery process under Section 142(1) and the 1995 Rules is to be pursued against the defaulter, i.e., the person from whom government dues are recoverable. The Petitioner was not issued a show cause notice under Section 124, nor was she adjudicated as a defaulter. The certificates issued under Section 142(1)(c)(ii) were in the names of entities connected to her but not in her personal name.

The Court referenced previous judgments, including Sunil Parmeshwar Mittal v. Deputy Commissioner and Vandana Bidyut Chaterjee v. Union of India, which supported the view that recovery actions must be directed at the actual defaulter. The Court concluded that the action of issuing a demand notice and attaching the Petitioner's property was without legal authority.

Conclusion:
The Court held that the notice of demand dated 1 November 2011 and the attachment of the Petitioner's property were unlawful. The Petitioner was neither issued a show cause notice nor adjudicated as a defaulter. The certificates for recovery were not in her name, and thus, the actions taken by the Revenue were without jurisdiction. The Court set aside the demand notice and the attachment of the Petitioner's property, specifically flat 1501B.

Order:
The rule was made absolute in favor of the Petitioner, with no order as to costs. The judgment clarified that the order was confined to the Petitioner's grievance regarding the notice of demand and the attachment of her property, flat 1501B.