2005 (8) TMI 253 - AT - Central Excise

Summary

Issues Involved: Appeal against Order-in-Appeal demanding duty from a private limited company for the period prior to its incorporation.

Summary:
The case involved an appeal against Order-in-Appeal No. 637/02 passed by the Commissioner of Central Excise and Customs (Appeals) Bangalore, demanding duty from a private limited company for the period prior to its incorporation. The appellant company was incorporated on 1-4-1999, succeeding a partnership firm, and demands were raised against both entities. The Original Authority held that the appellant company is not liable to pay duty, but the Commissioner (Appeals) upheld the demand. The main contention was whether duty could be recovered from the private limited company for the period prior to its existence.

The appellant argued that the demand was untenable as they were exempted from duty liability and there was a separate show cause notice for the firm and the company. They relied on legal precedents and CBEC Circulars to support their claim that a private limited company is a separate legal entity, distinct from its shareholders, and should be treated as such for duty liability. The appellant also highlighted that there was no provision in the Central Excise Act at that time to demand duty from a successor entity.

The Revenue contended that the private limited company, as a successor to the partnership firm, had taken over all liabilities of the firm, justifying the demand for duty.

After careful consideration, the Tribunal found that no duty was payable by the appellant limited company for the relevant period as there was no provision to demand duty from a successor entity at that time. The Tribunal noted that the appellant company was not in existence during the period of demand, further supporting the decision to set aside the duty demand. Consequently, the penalty on the limited company and the individual was also deemed not leviable, and the appeals were allowed with consequential relief.