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TMI Blog1988 (8) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... 1039 of 1987, we repel the common contentions raised. The impugned show-cause notices have been issued in exercise of the powers conferred by section 11A of the Act. Under section 11 A, where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules with intent to evade payment of duty by such person or his agent, then proceedings can be initiated by issue of a show-cause notice. The notice is required to be served on the person chargeable with duty. Under section 3 of the Act, there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India. The duty is levied on the manufacturer or producer. Under rule 178 of the Rules, licences are granted in favour of named persons for the conduct of the business of the manufacture or production of excisable goods. Rule 7 of the Rules provides that every person who produces, cures or manufactures any excisable goods shall pay the duty or duties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or director or secretary or other principal officer of the corporation. It is only under rule 221 of the Rules that the person signing such a declaration, along with the corporation, becomes liable for the payment of all dues, charges, or penalties or confiscation incurred in respect of the trade or business to which the declaration relates. Mr. Soli J. Sorabjee invites our attention to the affidavit-in-rejoinder that none of the petitioners has signed any declaration under rule 221. There is thus no jurisdiction at the threshold to issue a show-cause notice to the directors for payment of dues and penalties. Counsel further submits that the stand of the respondents on lifting the corporate veil on the ground that the corporate entity cannot be considered to be the manufacturer or producer and it can also be persons who run that corporation through their will and brains who are the real manufacturers or producers who are alleged to have been indulging in nefarious activities like evasion of duties, is not sustainable. There is no specific provision in the Act or the Rules like section 179 of the Income-tax Act, 1961, or the Companies Act, 1956, such as sections 75, 95, 144, 145, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t its intention, beyond the fair and ordinary meaning of its language.' This court in Tolaram Relumal v. State of Bombay [1955] 1 SCR, at page 164; AIR 1954 SC 496, at pages 498, 499, speaking through Mahajan C.J., observed: 'It is not competent to the court to stretch the meaning of an expression used by the Legislature in order to carry out the intention of the Legislature.' " On the other hand, Mr. G. Ramaswamy, learned Additional Solicitor-General, submits that the show-cause notices have been issued under section 11A of the Act as the duty of excise has not been levied or paid or has been short-levied or short-paid by reason of fraud, collusion or wilful misstatement or suppression of facts, or contravention of any provisions of the Act and the Rules made thereunder with intent to evade payment of duty by Duncans and/or its directors and/or their agents. The act of the company under the control of the board of directors is the subject-matter of the show-cause notices. The show-cause notices have been issued against the company and its directors through whom the company conducts its affairs and who are responsible for all the misdeeds and contravention of law. He subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Central Excise Tariff Act, 1985. According to the procedure laid down in the Act and the Rules for the levy and collection of excise duty, the incidence of excise duty is on the manufacture or the production. The liability to pay excise duty as well as penalty is on the manufacturer or producer. Section 4 provides for the valuation of excisable goods for purposes of charging of duty of excise. Under sub-section (4)( a ) of section 4, an assessee means the person who is liable to pay the duty of excise under the Act and includes his agent. Rule 2( i )( ib ) defines assessee as any person who is liable for payment of duty assessed and also includes any producer or manufacturer of excisable goods or a licensee of a private warehouse in which excisable goods are stored. Rule 221 reads as under : "221. Responsibility of a corporate body for making declaration and obtaining licence. (1) Where any trade or business in respect of which declaration is required to be made by these rules, is carried on by a corporation, the declaration shall be under the seal of the corporation and signed by the chairman or some director of the corporation or by its secretary or other prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer to furnish a declaration in the form annexed thereto; rule 174 laying down the requirement to take out licence by any manufacturer, trader or person mentioned therein ; and rule 176 laying down the requirements of making an application for grant and renewal of licences in Form ( a ) or (1) and the declarations made thereunder. As provided in rule 221, any person signing a declaration, and also the corporation under whose seal the declaration is made, shall be liable for the payment of all duties charged and to all penalties and confiscations incurred, in respect of the trade or business to which the declaration relates. We are unable to accept the averment of the petitioners in the rejoinder that no declaration has been made by any of the petitioners. This is a question which has to be investigated and adjudicated upon by the adjudicating authorities. The requirement of rule 233A is the issue of show-cause notice before any penalty can be imposed on any person under the Rules. Rule 232A enjoins upon the Collector to publish names and other particulars of the person, inter alia , on whom penalty of Rs. 10,000 or more has been imposed by the Collector. In consonance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But, in certain exceptional cases, the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade. So it is permissible to lift the corporate veil of Duncans to determine whether a particular director could be proceeded against in pursuance of the impugned show-cause notice or whether he is liable for the payment of all duties charged and to all penalties incurred. We can only say that after the veil of the corporate entity is lifted, the adjudicating authorities will determine as to which of the directors is concerned with the evasion of the excise duty by reason of fraud, collusion or wilful misstatement or suppression of facts, or contravention of the provisions of the Act and the Rules made thereunder. So far as individual liability of a director to the payment of excise duty and penalty is concerned, no liability can be fastened on him unless the department is able to show as to how and to what extent a particular director is liable. We wish to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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