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2015 (7) TMI 1036 - SC - Central ExciseRecovery of tax from successor - SCN was issued before death but could not be adjudicated during his lifetime - whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead - Held that - On a conjoint reading of these paragraphs this Court found that the machinery provisions contained in the Bombay Sales Tax Act, 1953, were sufficient to reassess a dissolved firm in respect of income that had escaped assessment before its dissolution. A distinction was drawn between an individual who dies and a firm that is dissolved as a device to evade tax. The Court laid great stress on the provision contained in Section 15(1) of the said Act by which the jurisdiction to assess or reassess under Section 15(1) is equated with the original jurisdiction to assess the dealer under Section 14. By this method, the Court found the continuity of the legal personality of the assessee is maintained in order to enable the assessment of turnover which has escaped assessment. The crucial difference, therefore, between Section 15(1) of the Bombay Sales Tax Act, 1953 and Section 11A of the Central Excises and Salt Act is that Section 11A does not contain any such provision as is contained in Section 15(1) which equates the jurisdiction to assess or reassess with the original jurisdiction to assess the dealer in the very first place. Further, this Court also construed Section 19 of the Bombay Sales Tax Act, 1959 which would throw light on the earlier Bombay Sales Tax Act, 1953, as containing the necessary machinery provisions to assess dissolved firms in respect of escaped turnover pre-dissolution. A reading of the ratio of the majority decision contained in Murarilal's case (1975 (9) TMI 155 - SUPREME COURT OF INDIA) would lead to the conclusion that the necessary machinery provisions were already contained in the Bombay Sales Tax Act, 1953 which were good enough to bring into the tax net persons who wished to evade taxes by the expedient of dissolving a partnership firm. The fact situation in the present case is entirely different. In the present case an individual proprietor has died through natural causes and it is nobody's case that he has maneuvered his own death in order to evade excise duty. - Neither of these reasons are reasons which refer to any provision of law. Apart from this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly. - appeal must be allowed and the judgment of the High Court of Kerala is, accordingly set aside - Decided in favour of assessee.
Issues Involved:
1. Whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead. Detailed Analysis: Issue 1: Continuation of Assessment Proceedings Against Legal Representatives of a Deceased Sole Proprietor The primary issue in this case is whether the Central Excises and Salt Act, 1944, contains the necessary machinery provisions to continue assessment proceedings against the legal representatives of a deceased sole proprietor. Facts of the Case: - Shri George Varghese, the sole proprietor of Kerala Tyre and Rubber Company Limited, was alleged to have evaded excise duty for the period January 1983 to December 1985. - A show cause notice was issued on 12.6.1987, seeking recovery of Rs. 74,35,242/-. - Shri George Varghese died on 14.3.1989, and a second show cause notice was issued to his wife and four daughters on 18.10.1989. - The legal heirs challenged the notice, stating that the Central Excises and Salt Act did not provide for continuation of assessment proceedings against a deceased person's estate. Arguments by Legal Heirs: - Citing Sections 2(f), (3), 4(3)(a), 11, and 11A of the Act, the legal heirs argued that the Act does not contain machinery provisions to proceed against a dead person's legal heirs. - They emphasized that an "assessee" under the Act refers to a living person liable to pay excise duty. Arguments by Revenue: - The revenue argued that Section 11 of the Act allows for the recovery of sums due by attachment and sale of excisable goods, which can include the property of a deceased person. - They contended that Section 11A is a machinery provision and should be construed to make it workable. - The definition of "person" under Section 3(42) of the General Clauses Act includes legal representatives. Court's Analysis: - The Court noted that the Central Excises and Salt Act does not provide separate machinery to proceed against a dead person's legal heirs, unlike the Income Tax Act, which was amended to include Section 24B for this purpose. - The Court referred to the Bombay High Court's decision in Commissioner of Income Tax, Bombay v. Ellis C. Reid, which held that without specific provisions, an assessment cannot continue against a deceased person's estate. - The Court also referenced its own judgments in Commissioner of Income Tax, Bombay City I v. Amarchand N. Shroff and Commissioner of Income Tax, Bombay v. James Anderson, which affirmed the need for specific statutory provisions to assess a deceased person's estate. Comparison with Income Tax Act: - The Court highlighted that the Income Tax Act, 1961, contains Sections 159 and 168, which provide for the assessment of a deceased person's estate. - Section 159(2) allows for the continuation of proceedings against the legal representative from the stage at which it stood on the date of the deceased's death. - Section 168 charges the income of the estate of a deceased person in the hands of the executor. Distinction from Sales Tax Cases: - The Court distinguished the present case from sales tax cases like State of Punjab v. M/s Jullunder Vegetables Syndicate, where the absence of machinery provisions to assess a dissolved firm led to the abatement of proceedings. - In M/s. Murarilal Mahabir Prasad v. Shri B.R. Vad, the Court found sufficient machinery provisions in the Bombay Sales Tax Act to reassess a dissolved firm, but this was not applicable to the Central Excises and Salt Act. Conclusion: - The Court concluded that the Central Excises and Salt Act does not contain the necessary provisions to continue assessment proceedings against the legal representatives of a deceased person. - The appeal was allowed, and the High Court of Kerala's judgment was set aside, restoring the learned Single Judge's decision that quashed the proceedings against the legal heirs. Judgment: The Supreme Court allowed the appeal, setting aside the judgment of the High Court of Kerala and restoring the judgment of the learned Single Judge, thereby quashing the assessment proceedings against the legal heirs of the deceased sole proprietor.
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