2012 (11) TMI 869 - AT - Central Excise

Duty Liability - Validity of Proceedings due to demise of proprietor - held that - Show Cause Notice has been issued after the death of the proprietor of the firm, wherein it is alleged that there was clandestine removal of the goods. It is undisputed that there was no reply to Show Cause Notice. it was a serious dispute between two individuals wherein their lordships have clearly recorded that the dispute is with respect to the extent of property of the deceased coming into hand of legal heirs, hence legal heir can be proceeded in appropriate court of law for recovery of any demands from the authorities. In the case in hand, it is seen from the record that the lower authorities has issued Show Cause Notice to the proprietary-ship firm which was not in existence at the time of issuance of Show Cause Notice due to demise of the proprietor - No demand - decided in favor of assessee.

Summary

Issues:
1. Survival of proceedings against a proprietary-ship firm after the demise of the proprietor.
2. Liability of legal heir in case of duty evasion post the demise of the proprietor.

Analysis:
1. The primary issue in this case was whether the proceedings against a proprietary-ship firm, after the death of the proprietor, would survive. The Tribunal noted that the Show Cause Notice was issued after the demise of the proprietor, and the firm did not respond to it. The lower authorities initially confirmed the demand against the firm, but upon appeal, the first appellate authority set aside the order, leading to the Revenue's appeal. The Tribunal found that the liability of the firm ultimately falls on its proprietor, as highlighted in the case law of MAFHH Products. The first appellate authority's decision was deemed in line with legal principles governing proprietary ship firms.

2. The second issue revolved around the duty liability in cases of clandestine removal post the demise of the proprietor. The Revenue argued that duty liability automatically transfers to the legal heir in such instances. However, the Tribunal disagreed, emphasizing that the Show Cause Notice was served on the firm after the proprietor's death, and no response was provided. The Tribunal cited relevant case law to support the first appellate authority's decision, stating that the liability of the firm cannot automatically transfer to the legal heir in the absence of a valid response to the Notice.

3. The Tribunal further analyzed the arguments presented by both sides and found that the first appellate authority's decision was legally sound and aligned with precedents regarding the liability of proprietary ship firms. The Tribunal dismissed the Revenue's appeal, stating it lacked merit, and disposed of the respondent's cross objection in support of the first appellate authority's order. The judgment concluded that the impugned order was correct, legal, and free from any defects, thus upholding the decision in favor of the respondent.