2009 (1) TMI 576 - AT - Central Excise

Summary

Issues involved: Clandestine removal, liability of successor u/s 11 of Central Excise Act, validity of undertaking given by appellant.

Clandestine Removal and Liability: The case involved clandestine removal by M/s. Palav Synthetics, detected in June 2002, before the present management took over in September 2002. A show cause notice was issued in 2004, leading to a demand of Rs. 4,89,914/- with penalty and interest. The appellant argued that they were not aware of the removal as it occurred before their management and they had given an undertaking to fulfill past and future liabilities of the previous entity.

Validity of Undertaking: The appellant had given an undertaking to pay past and future liabilities of the previous entity, which included responding to show cause notices and queries. The Department insisted on this undertaking before issuing a fresh registration certificate. The Commissioner observed that the appellant cannot deny liability based on the timing of the removal, as they had voluntarily undertaken the responsibilities.

Liability of Successor u/s 11: The Department argued that as per Section 11 of the Central Excise Act, a successor taking over a business is liable for sums due to the Government. The appellant's written undertaking included obligations to pay arrears and respond to pending matters, aligning with the legal requirement for successors. The Revenue's action was supported by the proviso to Section 11, allowing attachment and sale of assets to recover dues from the predecessor.

Decision: The Tribunal found that the appeals filed by the appellant had no merits, given the facts and legal position. The liability of the successor, as per Section 11, and the undertaking voluntarily given by the appellant, established their responsibility for the past liabilities. However, the penalty under Section 11AC could be reduced to 25% of the duty if paid within 30 days of the order communication.