2011 (8) TMI 35 - AT - Central Excise

Penalty under Rule 173Q (1) - Appellant purchased/ took over the factory premises of M/s. Akshay Daman Solvents Pvt. Limited and applied for Central Excise Registration.Further having given undertaking to the department at the time of registration appellant cannot go back and say that undertaking given by them is not binding on them - It was communicated to the appellants that one case is pending in the name of M/s. Akshay Daman Solvents Pvt. Limited and demand of Central Excise duty of Rs. 4, 36, 887/- with interest and penalty of equal amount and personal penalty of Rs. One lakh is pending against them - The Hon ble Supreme Court in Macson Marbles has held that on transfer of industrial unit by the State Financial Institution liability to pay excise dues of the previous owner gets transferred to the purchaser. Further having given undertaking to the department at the time of registration appellant cannot go back and say that undertaking given by them is not binding on them - Thus in terms of Section 11 and undertaking given by the appellant and in view of the decision of the Hon ble Supreme Court appellant are liable for the dues against M/s. Prince Paper Mills - As regards interest the issue is covered by the decision of the Tribunal in Elastolan Engineers and accordingly there is a need to re-calculate the interest amount as per law and as per the decision of the Tribunal in the case cited above - As regards penalty Hon ble Supreme Court in Para 8 of the judgment in Macson observed that penalty cannot be recovered from the successor since successor did not get an opportunity to contest the same - Decided against the assessee.

Issues involved:
- Appeal against Central Excise duty, interest, and penalties imposed on the appellant after taking over a factory premises.
- Admissibility of appeal under Section 35 of the Central Excise Act.
- Interpretation of Section 35B regarding appeals to the Appellate Tribunal.
- Liability of the appellant to pay dues based on an indemnity bond executed at the time of registration.
- Applicability of previous legal judgments on the transfer of liabilities in excise matters.
- Refund of penalty based on the appellant's lack of opportunity to contest.

Analysis:

1. Appeal against Central Excise duty, interest, and penalties:
- M/s. Chirag Industries appealed against the imposition of Central Excise duty, interest, and penalties following their takeover of a factory premises. The appellant argued against the demand, citing errors in the imposition of penalties without proper apportionment.

2. Admissibility of appeal under Section 35:
- The Commissioner (Appeal) held that the appeal was not admissible under Section 35 of the Central Excise Act, as the letters from the Revenue were not considered orders under the Act. The Commissioner also noted that he lacked the authority to delve into the merits of the case, suggesting the appeal should have been filed with the Tribunal.

3. Interpretation of Section 35B:
- The Tribunal analyzed Section 35B, emphasizing that appeals could only be entertained against orders passed by the Commissioner (Appeal) under Section 35A. The Tribunal highlighted that the appellant's execution of an indemnity bond at the time of registration bound them to pay all dues, as per the conditions specified.

4. Liability based on the indemnity bond:
- The Tribunal reiterated that the appellant's execution of the indemnity bond obligated them to fulfill the confirmed dues, with no objections raised at the time of execution. The Tribunal emphasized that the appellant could not contest the payment of dues after willingly providing the indemnity bond.

5. Applicability of previous legal judgments:
- Legal precedents were cited, including the case of K.K. Kadri Paper Mills Pvt. Ltd., to support the transfer of liabilities in excise matters. The Tribunal referenced a Supreme Court decision highlighting that liability to pay excise dues could transfer to the purchaser upon the transfer of an industrial unit.

6. Refund of penalty due to lack of opportunity to contest:
- The Tribunal referred to a Supreme Court judgment where it was held that penalties cannot be recovered from a successor without the opportunity to contest. In the present case, the Tribunal decided to set aside the proposal for penalty recovery, emphasizing the appellant's opportunity to contest the penalties.

7. Conclusion:
- The Tribunal concluded that the appeal by M/s. Chirag Industries was not sustainable, as the appellant's actions, including executing the indemnity bond and obtaining registration, indicated a breach of trust by contesting the payment of dues. The appeal was ultimately rejected based on these findings.

← Previous Next →