Case Note & Summary
Suman N. Agarwal, a director of Nisum Global Limited, filed a writ petition under Article 226 of the Constitution challenging a notice of demand dated 1 November 2011 and consequent attachment of her flat issued under Section 142 of the Customs Act, 1962. The background involved fraudulent duty drawback claims by Nisum Exports & Finance Private Limited, Nisum Global Limited, and Mehul Exports, a proprietary concern of the petitioner's spouse. The revenue had issued a show cause notice dated 29 August 2005 to these entities and individuals but not to the petitioner. An adjudication order dated 20 September 2007 confirmed duty demands against those noticees, imposing penalties and fines, but no demand was confirmed against the petitioner. Subsequently, the revenue issued a demand notice to the petitioner alleging that a certificate under Section 142(1)(c)(ii) had been forwarded by the Drawback Recovery Cell, specifying the amount recoverable from her. An attachment was levied on flat 1501B, a property registered in the petitioner's name, as part of a composite flat also owned by her spouse and another individual. The petitioner argued that the demand was without jurisdiction as she was not the person by whom any sum was payable under the Act, having never been subjected to adjudication. The revenue contended that as a director, she was liable, and the property division was a device to avoid scrutiny. The core legal issue was whether recovery proceedings under Section 142 could be initiated against a person not adjudged a defaulter. The court analyzed Section 142(1)(c) and the phrase 'such person,' holding that it refers exclusively to the person from whom the amount is payable under the Act. The Customs (Attachment of Property) Rules, 1995, defined 'defaulter' as the person from whom government dues are recoverable, and the certificate under Rule 3 must name that defaulter. As no sum had been determined against the petitioner, the demand and attachment were without legal foundation. The court quashed the impugned notice of demand and attachment, affirming that recovery cannot be made from a person not adjudicated liable. The petitions were allowed, and the rule was made absolute in terms of the prayer.
Headnote
A) Customs Act – Recovery of Sums Due – Section 142(1)(c) – 'Such person' refers to the person by whom the sum is payable – The provision enables recovery of sums due under the Act from the defaulter only; it does not authorize recovery from directors or other persons who were not parties to the adjudication proceedings and against whom no demand has been confirmed. Held, the notice of demand and attachment against the petitioner were without jurisdiction as she was not the person from whom any sum was payable under the Act. (Paras 9-10) B) Customs Act – Attachment of Property – Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 – Rule 2(vi) defines 'defaulter' as person from whom government dues are recoverable – Certificate under Rule 3 must specify the amount due from the defaulter; Rules 4 and 5 only apply to the defaulter specified in the certificate. The Revenue cannot proceed against a person who is not the defaulter. (Paras 10)
Issue of Consideration
Whether under Section 142(1)(c) of the Customs Act, 1962 read with the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995, the revenue can issue a demand notice and attach property belonging to a person who was not the noticee in the show cause notice and against whom no adjudication order was passed confirming any dues.
Final Decision
The High Court allowed the petitions, quashing the notice of demand dated 1 November 2011 and the consequent attachment. The court held that the revenue could not proceed against the petitioner under Section 142 as she was not the person from whom any sum was payable, and no certificate had been issued against her as a defaulter. The demand and attachment were without jurisdiction.
Law Points
- Section 142(1)(c) of Customs Act 1962 permits recovery only from the person by whom any sum is payable
- recovery cannot be made from directors of a company unless they are personally liable under the Act
- the expression 'such person' refers to the defaulter
- attachment and demand notices without adjudication against the person are without jurisdiction
