2023 (3) TMI 1271 - HC - Central Excise

Recovery of central excise duty or penalty - no personal guarantee for the dues of the company to the respondents - Shell company - existence of any enabling law as may allow the Central Excise Authority to recover any part of the demand from the personal assets of the petitioner - HELD THAT - There is no denying that there is complete lack of any enabling law that may allow the Central Excise Authority to recover any part of demand raised against the Company from the personal assets of the petitioner. Merely because such demand may have remained outstanding against the Company would not entitle the revenue to proceed to recover the same from the personal assets of Director of the Company. The counter affidavit also does not indicate any fact as may allow this Court to infer that the Company-an independent juridical entity against which dues have been determined was a shell operated by the present petitioner for his own benefit. Unless the revenue authority had looked through the constitution and functioning of the Company in accordance with law it may never have been enabled to claim the dues determined against the Company from the personal assets of the present petitioner. The order dated 17.12.2021 passed by the Assistant Commissioner Central Goods and Service Tax Division-I Muzaffar Nagar seeking to recover the dues of the Company from the petitioner is clearly non-speaking. Despite specific objection raised by the petitioner and despite taking notice of the same no reason has been noted in the impugned order to recover the dues of the Company from the personal assets of the petitioner. Petition allowed.

Summary

Issues involved:
The issues involved in the judgment are whether the Central Excise Authority can recover demands raised against a company from the personal assets of its director, and whether the order seeking to recover dues from the petitioner is valid.

Recovery of Demands:
The petitioner, an erstwhile Director of a private corporation, argued that no show cause notice was issued to him, and no demand was levied on him personally for central excise duty or penalty. The petitioner contended that there is no enabling law allowing the recovery of company's dues from personal assets of the director. The Court observed that there is a lack of enabling law for such recovery, and outstanding demands against the company do not entitle the revenue to recover from the personal assets of the director. The Court emphasized that the revenue authority must consider the company as an independent entity unless it can prove that the company was a shell operated by the director for personal benefit.

Validity of Recovery Order:
The order passed by the Assistant Commissioner seeking to recover dues from the petitioner was found to be non-speaking and lacked reasons for recovering from personal assets. Despite objections raised by the petitioner, the order did not provide justification for such recovery. Consequently, the Court set aside the order and directed the Central Excise Authority to proceed strictly in accordance with the law. The writ petition was allowed in favor of the petitioner.