2009 (4) TMI 162 - AT - Central Excise

Belated payment of excise duty before issuance of SCN interest and penalty - the demand for interest of Rs. 2,80,015/- was confirmed and penalty of Rs. 70,000/- was imposed on 20-12-2005 transfer of ownership liability of succeeding person held that - 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 - , appellants are held liable to pay the interest amount demanded from them. Interest is applicable during the relevant period as per the provisions of Notification issued under Section 11AB of Central Excise Act, 1944. The proposal of recovery of penalty from the appellant is set aside

Summary

Issues:
1. Liability of successor for unpaid Central Excise duty, interest, and penalty.
2. Validity of undertaking given by the appellant at the time of taking over the unit.
3. Calculation of interest amount based on relevant legal provisions.
4. Imposition of penalty on the successor for unpaid dues.

Analysis:

Issue 1: Liability of successor for unpaid Central Excise duty, interest, and penalty
The case involved M/s. Prince Paper Mills failing to pay Central Excise duty on clearances made in November 2000, with the total outstanding amount being paid later in installments. After show cause notice and adjudication proceedings, interest and penalty were imposed. The appellant, who took over the property after the mills closed down, challenged the requirement to pay the dues of the previous owner. The Commissioner (Appeals) held the appellant liable based on the undertaking given. The Tribunal referenced the Hon'ble Supreme Court's decision in Macson Marbles, stating that liability transfers to the purchaser on transfer of the industrial unit by the State Financial Institution. Therefore, the appellant was held liable for the dues against M/s. Prince Paper Mills.

Issue 2: Validity of undertaking given by the appellant at the time of taking over the unit
The appellant argued that the undertaking was given to secure registration and that the liability of a successor arises only in case of a transfer of business by the previous assessee. However, the Tribunal upheld the validity of the undertaking, stating that once given, the appellant cannot deny its binding nature. The Tribunal emphasized that the appellant cannot backtrack on the undertaking and is bound by the obligations against M/s. Prince Paper Mills.

Issue 3: Calculation of interest amount based on relevant legal provisions
Regarding the calculation of interest, the appellant challenged the method used, citing a Tribunal decision in Elastolan Engineers. The Tribunal agreed that the interest amount needed to be recalculated in accordance with the law and the precedent set by the Tribunal in the mentioned case. The interest was to be determined as per the provisions of the Notification issued under Section 11AB of the Central Excise Act, 1944.

Issue 4: Imposition of penalty on the successor for unpaid dues
The Tribunal referred to the Hon'ble Supreme Court's observation in the Macson Marbles case that penalty cannot be recovered from the successor if they did not have an opportunity to contest it. Therefore, the proposal to recover the penalty from the appellant was set aside, and the Tribunal decided in favor of the appellant on this aspect.

In conclusion, the Tribunal held the appellant liable for the interest amount demanded, as per the legal provisions, but set aside the proposal for penalty recovery based on the Supreme Court's directive regarding successors' rights to contest penalties.