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2010 (12) TMI 165 - AT - Central ExciseLiability of successor of business - Demand along with interest and penalty - penalties on the ground that the appellant bound to pay an amount equal to Cenvat Credit if any allowed to them in respect of inputs lying in stock or in possession or contained in the final product lying in stock on the date of surrendering of Registration certificate to the Department - during the relevant point of time there was no provision available to the revenue for the purpose of demanding duty from the successor in the case on hand. A new proviso was introduced only from 10-9-2004 and the said new proviso would not be applicable to the case on hand.
Issues Involved:
1. Liability of the successor to pay duty. 2. Applicability of Section 11 of the Central Excise Act, 1944. 3. Requirement of reversing Cenvat Credit on inputs lying in stock. 4. Validity of the demand raised post the death of the original proprietor. Detailed Analysis: 1. Liability of the Successor to Pay Duty: The central issue in this case was whether the successor of the deceased sole proprietor was liable for the duty confirmed by the Adjudicating Authority. The appellant argued that the duty cannot be demanded from the successor as the provisions of Section 11 of the Central Excise Act, 1944, which allows for recovery from the successor, were not applicable in this case. The Tribunal found that the demand raised on the appellant company could not be held as correct because the proviso to Section 11, which allows for recovery from the successor, was inserted only w.e.f. 10/9/2004. This amendment could not be applied retrospectively to demands confirmed before this date. 2. Applicability of Section 11 of the Central Excise Act, 1944: The Tribunal noted that the provisions of Section 11 were amended w.e.f. 10/09/2004 to include a proviso for recovery of duty from the successor in business. The relevant text of the amendment was cited, which allows for the attachment and sale of excisable goods and other assets in the possession of the successor to recover dues from the predecessor. However, the Tribunal emphasized that this proviso could not be applied to the demands confirmed before its insertion. The Tribunal relied on the judgment of the Hon'ble High Court of Karnataka in the case of Press Fab Precision Components (P) Ltd., which held that the new proviso to Section 11 could not be applied retrospectively. 3. Requirement of Reversing Cenvat Credit on Inputs Lying in Stock: The demand for duty arose because the Internal Audit Party observed that the unit had availed Cenvat Credit on inputs/raw materials and had a stock of Cenvat availed inputs valued at Rs. 25,24,887/- after surrendering the Registration Certificate. According to Rule 9(2) of the Cenvat Credit Rules, 2001/2002, the manufacturer is required to pay an amount equivalent to the Cenvat Credit taken on inputs lying in stock when opting out of the Cenvat scheme. The Tribunal found that the appellant had not reversed the amount of credit taken on the inputs in stock, leading to the demand. 4. Validity of the Demand Raised Post the Death of the Original Proprietor: The appellant contended that the demand was invalid as it was raised after the death of the original proprietor, and the successor should not be held liable. The Tribunal considered the submissions and noted that the demand could not be enforced against the successor due to the absence of a legal provision at the relevant time. The Tribunal referred to the case of Leelamma George, where the show-cause notice was issued before the demise of the assessee, and the successor chose to contest it. However, the Tribunal found the facts in the judgment of the Hon'ble High Court of Karnataka more pertinent, which upheld that no provision existed to demand duty from the successor before the insertion of the proviso to Section 11. Conclusion: The Tribunal concluded that the provisions of Section 11 of the Central Excise Act, 1944, as amended w.e.f. 10/9/2004, could not be applied retrospectively to demand duty from the successor for the period before the amendment. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief, if any.
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