2016 (8) TMI 291 - AT - Central Excise

Who is liable to pay duty - conversion of proprietorship to partnership firm and then from partnership firm into company - the offence was committed when the unit was existing as a proprietorship - Whether of predecessor or of present appellant - Held that - as per assignment of Business agreement, entered between M/s. Laxmi Electronics (Partnership concern) and M/s. Laxmi Electrovision Private Limited (the present appellant), the entire business of M/s. Laxmi Electrovision was taken over by the appellant including liabilities. The words morefully described in Schedule A has to be understood as, including the liabilities specified in Schedule A to this agreement but cannot be limited to only those liabilities. Further all the registrations, licenses of the earlier manufacturers, including machinery stand transferred to the present appellant. Therefore, the present appellant cannot argue that any offence committed by their predecessors cannot be a charge on them. Liability gets fixed on a person who takes responsibility to obtain central excise licence/Registration. - In the present case there is no evidence on record that a new Central Excise licence/Registration was obtained by the present appellant. On the contrary transfer of licence/Registrations to the successor are also transferred which will legally mean the responsibilities/liabilities casted under Central Excise licence/Registration also gets transferred to the present appellant. - Decided against the appellant

Summary

Issues: Liability transfer from predecessor to successor, applicability of Section 11 (2) of Central Excise Act, 1944, interpretation of partnership agreement clauses, relevance of previous case law

The judgment pertains to an appeal filed against an Order-in-Appeal dated 9/6/2011, where the first appellate authority upheld the Order-in-Original dated 20/3/2008. The appellant argued that the liability for shortages detected during a specific period should be on the proprietor, not the present appellant. The Revenue contended that the duty demand could be recovered from the successor based on the amended provisions of Section 11 of the Central Excise Act, 1944. The first appellate authority observed that the partnership took over all rights and liabilities of the proprietorship firm, as evident from the partnership agreement and the Assignment of Business agreement. The partnership agreement explicitly stated the continuation of the same business in partnership, indicating the transfer of liabilities. The Assignment of Business agreement detailed the transfer of assets, liabilities, registrations, and goodwill to the present appellant. The judgment highlighted the proviso to Section 11 (2) of the Central Excise Act, 1944, allowing for the attachment and sale of assets to recover dues from the predecessor's successor. The case law cited by the appellant was deemed inapplicable due to differing facts, such as separate registration in the cited case versus the continuation of registrations to the successor in the present case. The judgment emphasized that liability under Central Excise law is fixed on the person responsible for obtaining the registration, and in this case, the liabilities transferred to the present appellant. The appeal was dismissed based on these observations, affirming the liability transfer from the predecessor to the successor.