NEW DELHI, DEC 27, 2012: THE petitioner was a director in the company 'Shri Ram Casting P. Ltd' ('the company'), and she resigned from the Board of the company on 2.4.1993. The petitioner was the owner of 3 properties viz. (i) Pitam Pura property, (ii) Wazirpur property and (iii) Mukherjee Nagar property.

She first received the impugned notice dated 3.8.2012 (addressed to the company, copy sent to her) wherein she was informed that government dues under the Customs Act, 1962 ('the Act') amounting to Rs. 74,78,225/- along with interest were to be recovered from the company, and that if the amount was not paid within prescribed period, steps would be taken in accordance with the provisions of the Customs (Attachment of Property Defaulters for the Recovery of Government Dues) Rules 1995 ('the Rules'). By the second notice dated 7.8.2012, the Sub-Register concerned in respect of the three properties was directed that the said properties, which belonged to the company, may not be allowed to be disposed of/transferred without the consent of the Respondent. The third notice dated 8.8.2012 (this time addressed to the petitioner) mainly repeated the contents of the first notice.

In the meanwhile, the petitioner, had sought to transfer by way of gift the Wazirpur property in favour of her sons, but she was informed by the sub-registrar that since certain proceedings for recovery of government dues were pending against the said property, the same could not be allowed to be transferred/disposed of.

The petitioner has therefore filed the present petition praying for quashing of the three notices.

The case of the petitioner was that she, and not the company, is the owner of the three properties. She resigned from the company in 1993. The properties were incorrectly described in the notice dated 7.8.2012 as belonging to the company. It was argued that after her resignation from the Board of the company, there is no question of any proceedings being started against her property for attachment of amounts due from the company. Petitioner's counsel relied on the definition of 'defaulter' as provided in the Act to contend that in the present case, the recovery of pending dues can only be from the company. It was also submitted that in the absence of any provision enabling recovery of the amounts due from a customs duty defaulter, from a third party, and in the absence of any proper proceeding putting such third party to notice about the proposed adverse order, and fair opportunity to respond to it, the recovery of such amounts is illegal and without authority of law.

Counsel for the Customs authorities did not dispute that the Petitioner is owner of the properties, and that the tax defaulter in this case was the company. However, it was argued that as director, the petitioner could not distance herself from the company's acts and omissions; she had to shoulder its liabilities. It was in furtherance of such obligation that the authorities acted within their jurisdiction in issuing the impugned notice, and informing the Sub-Registrar not to register any transfer or alienation of the petitioner's properties, which could satisfy the duty liability of the company.

The High Court looked into the provisions of Section 142 of the Customs Act and Customs (Attachment of Property Defaulters for the Recovery of Government Dues) Rules and observed that the provisions make it clear beyond doubt that it is only the defaulter against whom steps may be taken under Rules. The defaulter is the person from whom dues are recoverable under the Act, which in the present case undoubtedly is the company. There is no averment that the company has been or is being wound up. In that case, there cannot be any question about the separate juristic personality of an existing company and its former director; the dues recoverable from the former cannot, in the absence of a statutory provision, be recovered from the latter. There is no provision in the Customs Act, 1962 corresponding to Section 179 of the Income Tax Act, 1961 or Section 18 of the Central Sales Tax, 1956 which enable the revenue authorities to proceed against directors of companies or such like third parties who are not defaulters.

The Court was of opinion that the impugned notices and action of the Customs authorities is at once in utter violation of Article 265 of the Constitution, as it seeks to recover tax dues of one from another, without authority of law. It also amounts to illegal deprivation of the petitioner's property, without authority of law, under Article 300-A of the Constitution of India.

The impugned notices dated 3.08.2012, 7.8.2012 and 8.8.2012 are quashed. The Writ Petition is allowed.

(See 2012-TIOL-1049-HC-DEL-CUS)