2000 (12) TMI 774 - AT - Central Excise

Summary

Issues:
1. Duty liability on blended yarn manufactured in 1977.
2. Ownership change or management change of the company.
3. Effect of purchase of shares on company's ownership.
4. Interpretation of agreement dated 23-7-79 between the parties.

Issue 1: Duty liability on blended yarn manufactured in 1977

The appellant, a company manufacturing fabrics and yarn, was found liable for Central Excise duty evasion by the previous owners. The appellant, unaware of the evasion, contested the duty recovery, which was confirmed by the Central Board of Excise and Customs. However, the penalty and confiscation of the plant were set aside due to the appellant's delayed involvement. The Tribunal remanded the case to ascertain if there was a change in ownership or management. The duty liability was upheld, emphasizing the need for an undertaking from the new owner regarding existing liabilities.

Issue 2: Ownership change or management change of the company

The central issue revolved around determining whether there was a change in ownership or management of the company. The adjudicating authority considered the agreement between the parties, which highlighted the transfer of shares without a change in ownership of the company. The Tribunal's order emphasized that if there was only a change in management, the duty liability would stand, subject to quantification excluding certain materials.

Issue 3: Effect of purchase of shares on company's ownership

The purchase of shares by the appellant was analyzed to determine its impact on the company's ownership. The agreement dated 23-7-79 outlined the terms of the share transfer, indicating a change in management rather than ownership. The appellant, as a major shareholder, was given control of the company but did not acquire ownership as a separate legal entity. The duty liability was confirmed based on this interpretation.

Issue 4: Interpretation of agreement dated 23-7-79 between the parties

The agreement between the parties clarified the transfer of shares and the responsibilities of the vendor and purchaser. Conditions in the agreement specified that the purchaser assumed management responsibility without altering the ownership structure of the company. The terms of the agreement supported the decision to uphold the duty liability on the appellant.

In conclusion, the appellate tribunal dismissed the appeal, upholding the duty liability on the appellant based on the findings related to ownership change, management change, and the interpretation of the agreement dated 23-7-79. The judgment emphasized the distinction between ownership and management in determining the duty liability of the company.