1987 (11) TMI 181 - AT - Central Excise

Summary

Issues: Liability of appellants to pay duty on stock purchased from another company.

In the present case, M/s. Makers Development Services (P) Ltd. purchased a mini cement plant from M/s. Associated Cement Co. Ltd. (ACC Ltd.) and the issue revolves around the liability of the appellants to pay duty on the stock of 1084.89 MT of cement as shown in the registers of ACC Ltd. The appellants argued that the stock was practically dead stock at the bottom of the silo and should not be their liability to pay duty on it. They contended that the duty should be on the manufacturer, ACC Ltd., at Rs. 135/- per MT, not on them at Rs. 100/- per MT. The Assistant Collector initially rejected their contentions, leading to an appeal where the Collector (Appeals) remitted the case for fresh adjudication to determine the removability of the stock and the applicable duty rate. The main contention raised was that the duty liability should be on the manufacturer, ACC Ltd., and not on the purchasers, citing various precedents to support this argument.

The Appellate Tribunal analyzed the situation and the legal precedents cited, emphasizing that the liability for excise duty is typically on the manufacturer and not on the purchaser of the manufactured goods. The Department sought to recover duty from the appellants based on their purchase of the factory with the stock in hand, arguing that the duty liability transferred to them as part of the purchase agreement. However, the Tribunal clarified that any agreement regarding duty liability was between the appellants and ACC Ltd., and if ACC Ltd. had to pay the duty due to the appellants' failure, they could seek recovery through civil court based on the sale agreement. The Tribunal concluded that the Department did not have the right to recover the duty from the appellants under the Central Excises and Salt Act, as the liability under the Act lies with the manufacturer, ACC Ltd., and not the purchasers.

The Tribunal distinguished the present case from a scenario where a manufacturing firm is taken over by another firm but continues to function under new management, stating that in such cases, the duty liability could extend to the new management. However, in this instance, the appellants were a distinct legal entity from the original manufacturer, ACC Ltd. Consequently, the Tribunal ruled in favor of the appellants, setting aside the orders of the lower authorities based on the conclusion that the duty liability should rest with the manufacturer, ACC Ltd., and not the appellants who purchased the stock. The Tribunal deemed it unnecessary to delve into other aspects such as the physical removability of the stock or the duty rate, as the primary issue of liability had been resolved in favor of the appellants.