Shri. Mukesh Mulji Shah vs. The Deputy Commissioner , Central GST Range Iii And Ors.

Held

The Court held that the attachment of the petitioner's bank account for the recovery of the Rs. 2,00,000 penalty was not sustainable. The Court reasoned that once the order in original, which included the personal penalty of Rs. 2 lakhs on the petitioner, was set aside by the Tribunal, the Revenue could not pursue that demand by attaching the petitioner's bank account. The Court noted the undisputed retirement of the petitioner from the firm with effect from April 27, 1990. Therefore, the demand for the Rs. 2 lakhs penalty, which was part of the set-aside order, did not survive. The Court found that the respondents had not controverted the factual assertions made by the petitioner in their affidavit in reply. The Court directed the petitioner to pay the balance sum, as computed by his counsel, within three months, after which the attachment on his bank account would be raised. Failure to comply would result in attachment and sale of his immovable properties.

Facts

The petitioner, Mukesh Mulji Shah, a retired partner of M/s. Mukesh Dye Works, approached the High Court to lift the attachment on his bank account. The attachment was to recover a penalty of Rs. 2,00,000 levied on him as a partner under Section 209A of the Central Excise Rules, 1944. The petitioner contended that no show cause notice was issued to him in his individual capacity, no adjudication order was passed, and he had retired from the firm on April 27, 1990. He further argued that the firm had challenged an order in original, which was set aside by the Tribunal, rendering the demand of tax and consequently the penalty invalid. The Revenue stated that an amount of Rs. 4,74,000 had been adjusted from two bank accounts, with a balance of Rs. 7,76,708 outstanding, which the petitioner agreed to pay over six months.

Key Issues

1. Whether the attachment of the petitioner's bank account for recovery of a penalty of Rs. 2,00,000 is valid, considering the petitioner's retirement from the firm and the subsequent setting aside of the order in original by the Tribunal? (Question of law and fact, turning on the principles of partnership liability, validity of penalty, and effect of Tribunal's order). Petitioner's arguments: The petitioner argued that since he had retired from the firm prior to the alleged contravention or at least before the order in original was passed, and more importantly, since the order in original imposing the penalty was set aside by the Tribunal, the penalty could not be recovered from him. He also contended that no show cause notice was issued to him in his individual capacity. He relied on the fact that the firm's appeal challenging the order in original was allowed by the Tribunal, which extinguished the underlying demand and the penalty. Revenue's arguments: The Revenue's affidavit in reply indicated that an order in original was passed confirming a demand of Rs. 22 lakhs against the firm, which was initially dismissed in appeal by the Tribunal. They also stated that substantial amounts had been recovered from the firm and its assets, but a balance was still outstanding, including the penalty. The Revenue did not explicitly address the petitioner's arguments regarding his retirement or the setting aside of the order in original by the Tribunal in their submissions.