2017 (5) TMI 36 - AT - Central Excise

Penalty u/s 11AC - Valuation - transportation cost from factory to depot - includibility - Held that - the short payment occurred when the unit was run by M/s Standard Electricals Ltd., which was later taken over by M/s Havells India Ltd. - it is clear that M/s Standard Electricals Ltd. as a juristic person/legal entity stood dissolved, upon the scheme approved by the Hon ble Delhi High Court coming into effect. The dissolution of the company puts an end to the existence of the company. The Central Excise duty liability is linked to the goods manufactured and cleared. The penalty is on person-juristic or natural - the case is returned back to the referral Bench for a decision on merits - matter on remand.

Summary

Issues:
1. Dispute referred to Larger Bench for resolution by Division Bench, Chandigarh.
2. Short payment of Central Excise duty by non-inclusion of transportation cost.
3. Adjudication resulting in confirmation of duty short paid and penalty imposition.
4. Appeal before Commissioner (Appeals) and Tribunal.
5. Liability of appellant for penalty under Section 11AC.
6. Contrary decisions of Tribunal regarding penalty imposition on new management.
7. Reference to Larger Bench for clarification on penalty imposition.
8. Examination of different Tribunal decisions on penalty liability.
9. Legal status and change of management of the appellant.
10. Dissolution of the transferor company and its impact on penalty liability.
11. Lack of contrary decisions by coordinate benches for a final resolution.

Analysis:

1. The Division Bench of the Tribunal, Chandigarh referred a dispute to a Larger Bench for resolution, concerning the short payment of Central Excise duty by the appellant due to non-inclusion of transportation cost from factory to depot.

2. Adjudication proceedings confirmed the duty short paid and imposed a penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002, leading to an appeal before the Tribunal.

3. The primary issue in dispute was the liability of the appellant for penalty under Section 11AC, especially considering the change in management from M/s Standard Electricals Ltd. to M/s Havells India Ltd.

4. The Division Bench noted contrary decisions of the Tribunal regarding penalty imposition on new management, prompting a reference to a Larger Bench for clarification on whether the penalty can be imposed on the new present management for the activities of the earlier old management.

5. The Tribunal analyzed different decisions, including Madhoprasad Mahabirprasad (Supplies) Pvt. Ltd. and Marcandy Prasad Radhakrishna Prasad Pvt. Ltd., to understand the liability of the new management for penalties imposed on the old management.

6. The Tribunal examined the legal status and change of management of the appellant, especially focusing on the dissolution of M/s Standard Electricals Ltd. upon amalgamation with M/s Havells India Ltd.

7. After thorough analysis, the Tribunal concluded that there were no contrary decisions by coordinate benches on the issue referred by the Chandigarh Bench, and thus, returned the case to the referral Bench for a decision on the impossibility of penalty imposition on M/s Havells India Ltd.

This comprehensive analysis of the legal judgment highlights the intricate details and legal considerations involved in resolving the dispute regarding penalty imposition on the new management for activities of the old management.