Excise, VAT & CST Case Laws, CENVAT Rulings & Updates

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Order Date – 08 July 2022

Facts –

The Petitioner, Meena Anand Suryadutt Bhatt, w/o late Shri. Anand S. Bhatt who was the non-executive director of TPI India Ltd (“TPI”) till 10.03.1999.
TPI had defaulted in its export obligation under the advance licences issued to it by not submitting the required documentation as alleged by the Respondent. As a result, they passed the impugned adjudication orders holding TPI as defaulter under Foreign Trade (Development and Regulation) Act, 1992 (“FTDRA” for short).
A show cause notice was being issued in favour of TPI and its directors for non-fulfillment of export duties which was not duly responded by them. On 18.05.2006 the firm fulfilled 100% export obligation and asked for redemption as per Public Notice No. 79. On 27.07.2007 a letter was sent to TPI to submit MODVAT Reversal Certificate but they failed to do so under rule 57A of Central Excise till date.
Therefore, ex parte order was being passed against TPI and its directors.
Aggrieved the Writ petition was being filed by the petitioner to set aside the order, since it was TPI who was given the fair opportunity to be heard and not the directors.

Issue –

Whether the penalty imposed on TPI India and its directors and ex-directors is maintainable?

Order –

The Court observed that here TPI is the accused person primarily. There is nothing in the impugned orders as to what the role of each director was and how Mr. Bhatt was a directing mind or will of TPI. This would run contrary to the principle of vicarious liability which requires detailing the circumstances under which a director of a company can be held liable.
Also, it was observed that even on the question of prejudice; the impugned order imposing the penalty on Mr. Bhatt could not be sustained, same view was taken in the case of similar facts Om Vir Singh V. Union of India.
Therefore, the court quash and set aside, the ex-parte impugned orders and issued a writ in the nature of Certiorari under Article 226 of the Constitution of India, and called for the records of the Petitioner’s case and after looking into the legality and the propriety thereof.