' MUHAMMAD RAZA KHAN, J.---Through this constitutional petition, Messrs Saleem Cigarette Industry (Pvt.) Limited has challenged the order of the Assistant Collector Customs, Peshawar, dated 23-5- 2007, whereby the petitioner was directed not to remove any goods from his business premises till such time the amount of taxes recoverable from Messrs Imala Ghee (Pvt.) Limited is paid in full and simultaneously a direction was issued to the petitioner "not to sell, mortgage, lease or otherwise deal with all movable and immovable property belonging to him directly or indirectly except with the prior permission of the Assistant Collector (Customs) i,e, respondent No,1. The copy was endorsed to the Collector, Sales Tax and Federal Excise, Peshawar as well as to the Assistant Collector, ,Customs Anti-smuggling Division, Peshawar with the direction to impose embargo with effect from 23-5-2007, if the said defaulting unit failed to clear the outstanding liability.
2. This petition was admitted to regular hearing on 29-5-2007. The respondents put in their appearance through Mr. Hashimn Raza, Advocate and submitted written statement on 14-6-2007.
3. We have listened to the arguments of the learned counsel for the parties.
4. The learned counsel for the petitioner argued that the petitioner was a corporate body and it has got no concern with the respondent No,5 i,e, Messrs Imala Ghee (Pvt.) Limited. He pointed out that there was no outstanding liability of the respondents against the petitioner-Company and petitioner being neither a holding company of the respondent No,5 nor the petitioner was a Director or guarantor of the said defaulter-Company, therefore, neither the notice could be served nor an embargo could be imposed over the business transaction of the petitioner-Company. He referred to the provisions of the law as well to the case-law in support of his arguments.
5. The learned counsel for the respondents Nos.l to 4 has vehemently argued that the petitioner- Company was a sister concern of the respondent No,5 and the petitioner, being a juristic person, could be required- under the law as well as under the rules to discharge the outstanding liability of respondent No,5 failing which an embargo could be validly imposed by the respondents. He referred to clause (c) of subsection (3) of section 202 of the Customs Act whereby the appropriate officer can proceed to recover the outstanding amount "by attachment and sale of any immovable property of the guarantor, person, company, bank or financial institution where a guarantor or any other person, company, bank or financial institution fails to make payment under such guarantee, bond or instrument". By referring to the rules, the learned counsel argued that under rule 133, a person who is mentioned in the demand notice can be required to pay the outstanding amount and under rule 163 the share or interest of the defaulter in the property can be attached. In addition to the lengthy arguments justifying the legality of the impugned action, the learned counsel referred to a legal, defect relating to the maintainability of this petition. He referred to rule 144, whereby an objection can be filed against the order of attachment and also referred to another internal redressal mechanism whereby the departmental appeal under section 193 and revision under section 195-A of the Act can be availed by the aggrieved person. Thus by relying on the cases reported as 1997 SCM R 169, 2001 YLR 2696 and 1999 SCM R 1881, the learned counsel for the Customs Department argued that since the alternate remedies were available, therefore, the petition under Article 199 of the Constitution was not maintainable.
6. There can be no cavil to the arguments that Government dues, and more particularly the taxes, have to be recovered on priority basis from the person as well as the property of the defaulter or the guarantor. Since the notice dated 23-5-2007 was strongly worded indicating an indirect liability of the petitioner relating to the outstanding dues payable by the respondent No,5, we have anxiously inquired about the connection of the petitioner-Company with the defaulter/respondent No,5. It has been said on behalf of the respondents Nos.1 to 4 that since the petitioner-Company was having the knowledge of the pendency of litigation between Messrs Imala Ghee Mills Limited and the Customs Department before the Customs Excise and Sales Tax Appellate Tribunal, therefore, they have interest in the said company. It was also contended that the owners of the petitioner company were partly the owners of the company of respondent No,5. Therefore, they are liable to dissolve the liability outstanding against respondent No,5. This would not satisfy our query.
The term "sister concern" finds no mention either in the Company Law or in the Customs Act. There is a concept of ."subsidiary company" *and the "holding company" and there can also be a connection of an "associated company" or "associated undertakings" between two corporate bodies or Firms. In the former case, the "holding company", as per section 3 of the Companies Ordinance, 1984, directly or indirectly controls more than 50% of the voting power of a "subsidiary company", may be held liable for the liabilities against the "subsidiary company". Such an indirect responsibility cannot be fixed on an "associated company" or "associated undertakings" for the outstanding liability of one of them.
7. The perusal of the impugned notice would show that the entire business' activity and property of the petitioner company was put' under restraint merely for the reason that the so called "sister concern" was a defaulter. Under the Constitution, every person, or for that matter every juristic person, was entitled to own the property and business (subject to the legal restrictions) and such an owner can use, sell, transfer or otherwise transact in such property and business. Before placing a particular person under restraint, the functionaries of the State are required to establish not only the scope of responsibility of such person vis-a-vis the defaulter but they were also duty bound to ensure that such a person or juristic person cannot be put under an unconditional complete restraint. Issuing a notice on the personal beliefs, without such verification, shall amount to the misuse of authority which shall be amenable to the' constitutional jurisdiction of this Court.
8. Section 202 of the Customs Act lays down the procedure of recovery of Government dues. The relevant extract of the said provision is reproduced herein below:-- "202-Recovery of Government dues.--(1) When, under this Act or under any other law for the time being in force, which provides for any tax, duty or other levy being collected in the same manner as customs-duties are collected, a penalty is adjudged against, or notice or demand is served upon, any person calling for the payment of any amount unpaid which may be payable by way of penalty or by way of duty, tax or other levy or under any bond (guarantee) or other instrument executed under this Act or such other law or the rules made thereunder, the appropriate officer:--
(2) If the amount cannot be recovered from such person in the manner provided in subsection (1), the appropriate officer may serve upon the defaulter a notice in the prescribed form requiring him to pay the amount specified in the notice within such time as may be so specified.
(3) If the amount referred to in the notice under subsection (2) is not paid within the time specified therein or within the further time, if any, allowed by the appropriate officer, the appropriate officer may proceed to recover from the defaulter the said amount by one or more of the following modes, namely:---
(a) attachment and sale of any movable or immovable property of the defaulter; and
(b) .......
(c) may recover such amount by attachment and sale of any movable and immovable property of the guarantor, person, company, bank or financial institution, where a guarantor or any other person, company, bank or financial institution fails to make payment under such guarantee, bond or instrument."
9. A bare perusal of the aforesaid provision would show that the demand notice has to be served on the person who was liable to pay such amount either as the principal or as an agent or who may be liable under a guarantee or any other instrument. By thorough scanning of the entire record, we could not trace the responsibility of the petitioner with regard to the outstanding amount payable by respondent No,5. Admittedly, there is no amount directly outstanding against the petitioner in this regard. Respondent No,5 is exclusively liable for the said amount, subject to the adjudication by the appropriate forum. The petitioner- company was neither an agent of the respondent No,5 nor a guarantor for the payment of such liability. There is no instrument whatsoever to hold the petitioner-company liable in this behalf. Therefore, the demand of the liability of another corporate body from the petitioner-company was prima facie, illegal and without jurisdiction.
10. The petitioner-company being a corporate body, could be directly a shareholder of respondent No,5 or it could regulate the affairs of respondent No,5 through a nominated/ representative Director but there is no proof that any shares of the respondent No,5 were ever purchased by the petitioner-Company or that petitioner-Company had ever been on the panel of Directors of respondent No,5. Had it been so, D the respondent could be, remotely justified in issuing the impugned demand notice. However, the contesting respondents have not been able to prove that the respondent No,1 has made any effort to verify the said status of the petitioner-company with regard to respondent No,5.
11. The extract from Form No,29 and the other documents of both the petitioner and the respondent No,5 show that the petitioner-company, was being managed by the Directors and the Chief Executive who have no nexus with the Directors of the respondent No,5. At the most, we could detect that two of the share-holders of the petitioner/company are the share-holders in the company of respondent No,5. Even these facts were provided by the learned counsel for the petitioner (which could not be rebutted by the contesting respondents), that two share-holders of the petitioner-company namely Faisal Saleem and Asad Saleem have 8959 E and 47420 shares respectively, out of the total shares being 545750 issued by the respondent No,5. The voting power of each of such share holder is less than 10% of the respondent No,5. Therefore, both the corporate bodies do not fit in even as "Associate Companies" or "Associate Undertakings" merely to justify the term "Sister concern". Even if such a relationship is established, the associated shareholders can never be held responsible for the liability of any of the corporate bodies.
12. The responsibility of a share-holder, in a company limited by shares, is restricted to the extent of the unpaid' amount of the share capital purchased by him. He can be called upon to pay the unpaid amount of the share capital. However, if the entire share capital is paid up by a share- holder, he is entitled to the benefits attached with the number of shares purchased by him and his liability shall be limited to the extent of his investment in the share capital.
13. In the circumstances of the case in, hand, if the company Lt. Respondent No,5 suffers a loss, it will be proportionately shared by each of the share-holders, including the said two share-holders.
Thus, the maximum loss of the said individual share-holder shall be to the extent of the amount invested by him in the share capital by purchasing a particular number of shares. But they cannot be held liable for a single penny beyond the amount of the said shares. Although the point of responsibility of such share-holder is not a point in issue in this petition but the position is being high-lighted to stress that the maximum liability which can be imposed on the said two persons, being individual G share-holders of the respondent No,5, cannot exceed the value of their shares. In such a situation, the demand of the entire outstanding liability of the respondent No,5 from the petitioner-company was not only illegal but issuance of the impugned demand notice in the name of the petitioner-company was the gross misuse of authority and a demonstration of an authority not vested in the respondent No,l.
14. There is no doubt that the contesting respondents, are the earning hands of the Government and, therefore, extraordinary latitude is extended to them by the Government to facilitate the revenue generation but in pursuit of such an endeavour, the exercise of authority to the extent of illegality shall be counter-productive to the very concept of civilized society. The placement of embargo and restraint, as depicted through the impugned order, unfortunately displays, the unbridled exercise, of authority over the citizens by those who are on the other side of the table.
Such a barbarious action cannot be conceived even in the H most uncivilized societies. Corporate bodies are regulated by well recognized principles throughout the world. The Corporate bodies have independent juristic personalities governed by their Directors, who are trustees of the capital of the share-holders. They cannot be held liable for the liabilities of the share-holders and vice versa. In such a situation, it will be illogical to presume that the corporate body, being the independent juristic person, may be held responsible for the liabilities of another corporate body without establishing a connection between the two. The petitioner does not control the respondent No,5 nor is guarantor thereof. There is no undertaking or instrument to make the petitioner responsible for liabilities of the respondent No,5:
15. Before parting with the judgment it shall be imperative to touch the arguments of the learned counsel for the respondents relating to the concept of alternate remedy. Under section 193 of the Customs Act, an aggrieved person can file an appeal to the Collector (Appeals) within thirty days of such decision or order. This section has been referred to in the written statement of the respondents without realizing that such remedy has been expressly barred with regard to the notice under section 202. Since the impugned notice purports to have been issued under the said section, therefore, such a notice cannot be challenged under the said provision in appeal. However, it may also be added that the stress of section 193 of the Customs Act relates to "any decision or order passed under this Act". As discussed hereinabove, the impugned notice could not be issued either under the Customs Act or under any other legal instrument of a civilized society, therefore, the impugned notice cannot be held to be an order under "the Act". Since the impugned notice was entirely illogical and unreasonable, therefore, it could not be challenged in appeal under the said section and the only remedy available to the aggrieved person was to challenge the absurd notice in a constitutional petition. Similarly, the concept of appeals and internal redressal mechanism through an Appellate Tribunal or through the Board etc. Shall only, relate to the grievances of an action legally taken by an authority of the Federal Government under the statutory provisions. The objections with regard to the assessment, legality of the demand, propriety of an assessment etc. Cannot be challenged by a person through the fora created within the Department itself but if a third person having no relationship or responsibility with the defaulter is required to pay the liability of the defaulter, such an action cannot be challenged in the internal redressal system. Such an illegal and arbitrary order has to be taken to the Court where the fundamental rights of a citizen are watched and the citizens are protected from the atrocities of irresponsible administrative agency.
16. In view of the foregoing discussion, this constitutional petition is allowed, the impugned notice is set aside and any action taken thereunder stands reversed. Copy of this judgment be forwarded to the Federal/Central Board of Revenue for taking appropriate action against the person responsible for such illegal, unjust, arbitrary and illogical demand notice coupled with a restraint order.