1986 (4) TMI 218 - AT - Central Excise

Summary

Issues:
1. Liability transfer of Central Excise duty from previous owners to new owners.
2. Claim of exemption based on Notification under Bombay Relief Undertakings Act.
3. Allegation of non-continuity in management and liability under B-2 bond.
4. Time-barred demand for duty as per Central Excise Rules.

Analysis:

1. Liability transfer of Central Excise duty:
The appeal involved the transfer of liability for Central Excise duty from the previous owners to the new owners. The Collector contended that the duty was leviable on the quantity of cotton yarn removed illegally from the mills' premises between January 1977 and April 1979. The Appellants argued that they were not liable for the duty as they purchased the mills after the alleged pilferage. The Tribunal noted that under Rule 230 of the Central Excise Rules 1944, the transfer of business does not absolve the new owners from the liabilities of the previous owners. The Tribunal cited a similar case, establishing that the new owners are still liable for the duty on the removed yarn.

2. Claim of exemption under Bombay Relief Undertakings Act:
The Appellants claimed exemption from Central Excise duty based on a Notification under the Bombay Relief Undertakings Act, declaring the mills as a relief undertaking. However, the Tribunal ruled that this exemption did not apply to Central Excise duties governed by the Central Excises and Salt Act 1944, administered by the Union Government. Therefore, the claim for exemption under the relief undertaking notification was deemed legally untenable.

3. Allegation of non-continuity in management and liability under B-2 bond:
The Appellants contended that there was no continuity in the management of the mills from the previous to the present owners, citing the execution of a new B-2 bond. The Tribunal rejected this argument, stating that the law does not exempt new owners from the liabilities of the previous owners. The Tribunal referenced a previous decision to support this position, emphasizing that the new owners cannot disclaim liability based on the execution of a new bond.

4. Time-barred demand for duty as per Central Excise Rules:
The Tribunal noted that the demand for duty was issued on 22-3-1980, relating to a period from January 1979 to April 1979. As per old Rule 10 of the Central Excise Rules 1944, the demand was time-barred as it exceeded the six-month limitation period. Despite the Appellants not raising this plea, the Tribunal upheld the time-barred nature of the demand, leading to the allowance of the appeal solely on this ground. The Tribunal directed the extension of consequential relief to the Appellants due to the time-barred demand, even though the Collector's order was deemed legal and valid otherwise.