1995 (6) TMI 112 - AT - Central Excise

Summary

Issues:
1. Duty demand and penalty imposed by Additional Collector
2. Allegation of removal of marble slabs without issuing gate pass and payment of duty
3. Liability for duty payment after change of ownership
4. Presumption of goods sold without paying duty due to shortages
5. Lack of stock verification by Central Excise Department after factory takeover
6. Applicability of Rule 230 of Central Excise Rules, 1944
7. Lack of evidence proving removal or evasion by manufacturer
8. Decision to set aside the impugned order and allow the appeal

Analysis:
The appeal was filed against the Order in Appeal No. 15/91 dated 5-6-1991 of Additional Collector, Central Excise, Jaipur, which confirmed a duty demand and imposed a penalty on the appellants for alleged removal of marble slabs without issuing gate pass and payment of duty amounting to Rs. 22,391.54. The appellants, manufacturers of marble slabs, were financed by Rajasthan Financial Corporation (RFC) and the factory was taken over by RFC due to non-payment of loan instalments. The appellants argued that they had informed the Central Excise Department about the takeover and lack of control over the factory's assets. They cited a case law to support their stance that the liability to pay dues after a change of ownership rests with the successor under Rule 230 of Central Excise Rules, 1944.

The Department contended that as the licensees, the appellants were responsible for accounting for shortages, implying goods were sold without paying duty. However, the Tribunal noted that the factory was taken over by RFC on 6-6-1987, and possession was transferred to M/s. Bhagaria Marbles before stock verification. The Tribunal observed discrepancies in the Department's actions, highlighting that no immediate stock verification was conducted despite intimation of takeover. The Tribunal emphasized that the Department failed to prove the appellants' effective control over the unit up to the verification date in November 1988. It was noted that the Department lacked evidence of removal or evasion by the manufacturer, and the presumption of responsibility based on shortages was insufficient.

Considering the facts and legal principles, the Tribunal set aside the impugned order and allowed the appeal. The decision was based on the lack of evidence supporting the Department's allegations of removal of goods without duty payment by the appellants. The Tribunal emphasized the importance of timely stock verification and the liability of the successor company for duty payment after a change in ownership, as per Rule 230 of the Central Excise Rules, 1944.