SANTANU RAY Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners in this petition under articles 226 of the Constitution of India are directors of M/s Duncans Agro Industries Ltd (for called "Duncans") and have raised, in addition to the grounds of challenge as are in C W P No 1039 of 1987 -Duncans Agro Industries Ltd v Union of India, a further ground that there is no provision in the Central Excises and Salt Act, 1944 (hereinafter called "the Act"), or the Central Excises Rules, 1944 (hereinafter called "the Rules"), by which individual directors of a limited company can be made personally liable or responsible for the payment of excise duty or be subjected to penalties. For the reasons recorded in C W P 1039 of 1987, we repel the common contentions raised.

(2.) The impugned show -cause notices have been issued in exercise of the powers conferred by Sec. 11A of the Act. Under Sec. 11A, where any duty of excise has not been levied or paid or has been short -levied or short -paid or erroneously refunded by reasons of fraud, collusion or willful mis - statement 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 Sec. 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 Inda. The duty is levied on the manufacturer or producer. Under rule 178 of the Rules, licenses are granted in favor 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 livable on such goods. The time and manner of payment of duty is contained in rule 9. If any excisable goods are, in contravention of sub -rule (1), deposited in, or removed from, any place specified therein, the producer or manufacturer thereof shall pay the duty livable on such goods written demand made within the period specified in Sec. 11A of the Act by the proper officer, whether such demand is delivered personally to him, or is left at his dwelling house and shall also be liable for confiscation. Under rule 49 of the Rules, the duty chargeable is on removal of the goods from the factory premises or from an approved place of storage.

(3.) Mr. Soil Sorabjee, learned counsel for the petitioners, after inviting our attention to these statutory provisions, split up the challenge into two, namely, (1) with regard to the claim for duty from individual directors, and (2) with regard to the threat to impose personal penalty on individual directors. He says that a reading of these provisions shows that the liability, obligations and responsibility to pay excise duty is cast on the person who manufactures or produces any excisable goods and the expression "manufacturer" refers to a person who has been granted a license for the conduct of the business of manufacture or production of excisable goods. Under rule 174, the person who requires the license is a manufacturer and in this case it is Duncans who have obtained the license and they alone are chargeable to excise duty, if any. This is for the obvious reason that there can be no taxation by implication or without express authority of the law. The Act and the Rules constitute a self -contained code for the chargeability of excise duty and its recovery and it is, Therefore, not permissible to travel outside these for imposition and collection of excise duties and penalties. There is no question of applying any principle from the law of torts to fix a statutory fiscal liability. Ordinarily, it is only the manufacturer who is required to make an application for the grant of a license and the consequential declaration in the application for such license. Where the trade and business of manufacture is carried on by the corporation which is the manufacturer, the declaration that is required to be made is also to be countersigned by the chairman 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 -re -joiner that none of the petitioners has signed any declaration under rule 221. There is thus no jurisdiction at the threshold to issue a showcase notice to the directors for payment of dues and penalties.