2013 (1) TMI 685 - AT - Service Tax

Recovery proceedings against a deceased assessee Whether SCN issued against non-existent firm is valid in law - Death of sole proprietorship - Cancellation of Excise registration Wrongly availed Cenvat credit in respect of the inputs not received in the factory Held that - Sole proprietorship concerned has no legal entity independent of its proprietor. On death of sole proprietor respondent company ceased to exist. Therefore notice issued was bad in law as it was issued against any non-existent firm. In favour of assessee Recovery from legal heir - legal heir of the deceased sole proprietor had undertaken to pay all the pending central excise liability of the firm Held that - As the SCN raising demand was issued almost three years after the undertaking on 2.4.2009. This imply that the dispute pertaining to the demand in question was raised much after the undertaking as such the demand which is subject matter of the SCN cannot be termed as pending as covered by the undertaking given by the legal heir. Therefore, demand confirmed on the basis of aforesaid SCN cannot be sustained. In favour of assessee

Summary

Issues:
Appeal against duty demand confirmation, legal liability of deceased sole proprietor's heirs, validity of show cause notice post proprietor's death, interpretation of undertaking by legal heirs.

Analysis:
The appeal was filed by the Revenue against an order setting aside a duty demand confirmation against a company after the death of its sole proprietor. The legal heirs of the deceased proprietor had undertaken to pay pending central excise duty liabilities of the company. However, the Commissioner (Appeals) set aside the demand, stating that the death of the sole proprietor led to the dissolution of the firm, making the demand from legal heirs unsustainable.

The Revenue contended that the legal heirs, by giving the undertaking, assumed the duty liability of the company, making the demand valid. On the other hand, the respondent argued that recovery proceedings against a deceased assessee cannot be initiated, and the demand was raised after the undertaking, rendering it invalid. The legal entity of a sole proprietorship ceases to exist upon the proprietor's death, making the show cause notice against a non-existent firm bad in law.

Upon review, the Tribunal found that the show cause notice was issued against a non-existent firm after the proprietor's death. The undertaking by the legal heirs was specific to pending dues under dispute at the time of the undertaking. As the demand was raised much later, it did not fall under the purview of the undertaking. Therefore, the demand based on the show cause notice was deemed unsustainable, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the order setting aside the duty demand confirmation, emphasizing that the legal heirs' undertaking did not encompass demands raised after the undertaking. The legal entity of the firm ceased to exist upon the proprietor's death, rendering the demand against a non-existent entity invalid. Thus, the appeal was dismissed.