2018 (4) TMI 62 - AT - Central Excise

Recovery of duty from a successor in business - legal heirs of a deceased assessee - Clandestine manufacture and removal - Held that - no recovery proceeding can be initiated against the legal heir of late Sudhir Kapoor as they are not carrying on business of the deceased. However the Department Officers may proceed to recover the Government dues from the attached plant and machineries of the deceased Shri Sudhir Kapoor - reliance placed in the case of THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III Versus SHRI DHIREN GANDHI 2012 (6) TMI 556 - KARNATAKA HIGH COURT where it was held that Courts cannot under the guise of interpreting these provisions bring within the network the legal heirs who are not the person chargeable to duty under the Act. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty demand and penalties imposed on the appellant for clandestine manufacture and clearance of cigarettes.
2. Imposition of penalties on the authorized signatory and confirmation of confiscation of goods.
3. Legal liability of the legal heir of the deceased proprietor regarding Central Excise dues.

Analysis:
1. The appeal arose from an Order-in-Original dated 24/03/2014, where duty demand of ?62,42,566/- along with interest was confirmed on the appellant for clandestine activities. Penalties totaling ?67,59,091/- were imposed under relevant sections. Confiscation of goods and imposition of penalties on the authorized signatory were also upheld. The appellant appealed against this order.

2. During the proceedings, the proprietor of the appellant passed away, leading to a discussion on the legal liability of the legal heir for Central Excise dues. The legal heir, through written submissions, expressed disinterest in continuing the business and requested not to be held liable for the deceased's dues. The Department argued that legal heirs are liable for dues under the Central Excise Act. The appellant's counsel argued citing relevant case laws supporting the position that recovery from legal heirs is only applicable if the business is succeeded by them.

3. The Tribunal, after considering the contentions and case laws, referred to the judgment in Commissioner of C. Ex., Bangalore v. Dhiren Gandhi, which highlighted that recovery from legal heirs is not automatic and is applicable only if the business is succeeded by them. The Tribunal held that in this case, as the legal heir was not continuing the business of the deceased, recovery proceedings against them were not justified. The Department was directed to recover dues from the attached assets of the deceased. The appeal was disposed of accordingly, with appreciation for the assistance provided by the appellant's advocate.

This judgment clarifies the legal position regarding the liability of legal heirs for Central Excise dues and emphasizes that recovery from legal heirs is contingent upon the continuation of the deceased's business by them.