Shri Noor Salim Rana vs. State Of Up And 3 Others

Held

The Court held that there is a complete lack of enabling law that allows the Central Excise Authority to recover any part of the demand raised against the Company from the personal assets of the petitioner. The Court reasoned that merely because a demand may have remained outstanding against the Company does not entitle the revenue to proceed with recovery from the personal assets of a director. The counter affidavit filed by the revenue did not provide any facts to infer that the Company, an independent juridical entity, was a shell operated by the petitioner for his own benefit. The Court further noted that the impugned order dated December 17, 2021, passed by the Assistant Commissioner, Central Goods and Service Tax, seeking to recover the company's dues from the petitioner, was non-speaking. Despite the petitioner's specific objections, the order provided no reason for recovering the company's dues from the petitioner's personal assets. Consequently, the order dated December 17, 2021, was set aside. The Court left it open to the Central Excise Authority to proceed strictly in accordance with law. The ratio decidendi is that recovery from personal assets of a director is impermissible without a specific legal provision or evidence of the company being a sham operated by the director.

Facts

The petitioner, Shri Noor Salim Rana, was the erstwhile Director of M/s Alankar Ispat (P) Limited, having resigned on August 7, 1998. Two orders dated August 28, 2014, were passed by the Central Excise Authority, raising a demand of Rs. 30,00,000/- in central excise duty and Rs. 10,00,000/- as penalty solely against the Company. The petitioner contended that no show cause notice was ever issued to him personally, nor was any demand levied against his personal assets. He argued that the Central Excise Act, 1944, does not contain any provision enabling recovery from a director's personal assets. The revenue, in its reply, did not dispute the lack of specific provisions but argued that dues should be recovered from entities or persons with a stake in the company, especially if the company had no assets. An order dated December 17, 2021, by the Assistant Commissioner, Central Goods and Service Tax, sought to recover the company's dues from the petitioner.

Key Issues

1. Whether the Central Excise Authority has the legal enablement under the Central Excise Act, 1944, to recover dues determined against a company from the personal assets of its former director, in the absence of a specific show cause notice to the director or personal guarantee. Petitioner's arguments: The petitioner argued that the Central Excise Act, 1944, lacks any provision that empowers the Central Excise Authority to recover dues from the personal assets of a director. He emphasized that no personal guarantee was provided by him for the company's dues and that no show cause notice was ever issued to him personally. He relied on specific pleadings in paragraphs 11 and 13 of the writ petition to support his claim. Respondent's (Revenue's) arguments: The revenue, while not disputing the absence of specific provisions, contended that if government dues are pending, they must be recovered from the entity or persons having a stake in such a company, particularly if the company itself has no assets. This was averred in paragraphs 18 and 20 of their counter affidavit.