1997 (1) TMI 114 - HC - Central Excise

Summary

Issues:
Liability of excise duty on petitioner-firm for dues of predecessor-in-title M/s. Diamond Marbles Pvt. Ltd., applicability of Rule 230(2) of the Central Excise Rules, 1944, interpretation of agreement Ex. 1, liability transfer in case of facility change of hands without intervention of predecessor-in-title.

Analysis:
The writ petition questioned the imposition of excise duty liability on the petitioner-firm for the dues of M/s. Diamond Marbles Pvt. Ltd., the predecessor-in-title. The Corporation took over the defaulting unit of M/s. Diamond Marbles Pvt. Ltd. and transferred it to the petitioner-firm under an agreement, subject to clearing certain liabilities. The petitioner argued that the excise duty dues of the predecessor cannot be enforced against them based on the agreement (Ex. 1).

The Union of India and the Central Excise Superintendent contended that the petitioner should exhaust the appeal remedy under Section 35 of the Central Excises & Salt Act, 1944 before approaching the court. They also cited Rule 230(2) of the Central Excise Rules, 1944, which holds the successor-in-interest liable for excise duty. The Corporation, though not submitting a written response, orally stated that the excise duty should not be recovered from the petitioner.

The High Court analyzed the situation, emphasizing that the facility's ownership remained with the Corporation, and the petitioner merely operated it after the transfer. The court noted that under Rule 230(2) of the Rules, the transfer does not absolve the liability, and excise duty dues can be recovered from the facility. The court rejected the petitioner's reliance on a previous case, distinguishing between charges and taxes, emphasizing that a tax liability cannot be waived by an agreement.

Regarding the interpretation of agreement Ex. 1, the court found that while it may seem persuasive initially, it does not absolve the petitioner of excise duty liability. The court suggested that the burden may ultimately fall on the predecessor-in-title, M/s. Diamond Marbles Pvt. Ltd., but such determination requires a detailed interpretation of the agreement, which is beyond the scope of Article 226 proceedings. Consequently, the court dismissed the writ petition, finding no merit in the petitioner's arguments.