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TMI Blog2012 (6) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... after his death, the manufacturing activity goes on, the legal entity which is carrying on the business is not disrupted and the commercial activity is continued without any interruption. In the case of an individual, on his death, the manufacturing activity comes to an end. To hold his legal heirs liable for the dues under the Act from the manufacturer who is the person who is charged with the duty to pay tax would be unreasonable. - CEA No.28 of 2011 - - - Dated:- 23-9-2011 - N Kumar and Ravi Malimath, JJ. For Appellant: Shri Jeevan J Neeralgi, Adv. For Respondent: Shri K S Ravi Shankar, Adv. JUDGEMENT The Revenue has preferred this appeal challenging the order passed by the Tribunal which hag set aside the order passed by the Appellate Commissioner as well as the Original Authority, confirming the demand of central excise duty due from M/s. D M Naturals Fragrances. 2. One Sri Prakash Gandhi was carrying on business in industrial fragrances, flavors, natural essential oils, etc., under the name and style 'M/s, D M Naturals Fragrances'. It was his proprietary concern. He was a holder of central excise registration certificate No.ACJPP2061KXM001. He was avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the records, held that the material on record shows that M/s. D M Naturals Fragrances, under the proprietorship of late Sri. Prakash Gandhi, had a closing stock worth Rs.26,4,7,145/-. Sri Dhiren Gandhi filed the income tax return for the financial year 2003-04 enclosing balance sheet as on 31/3/2004 of M/s. D M Naturals Fragrances, wherein the inventory of the assets of the firm has been shown as Rs.26,18,574/-. From the above, it is distinctly clear that M/s. D M Naturals Fragrances is one legal entity with persons of the same family, as its proprietors. The demand in the show cause notice is made against a firm and not against any individual. Whatever argument/contention against the said demand is untenable for the aforesaid reasons and circumstances. The assessee was availing cenvat facility on inputs/capital goods and as a result of surrendering the registration, the assessee is bound to pay an amount equal to the cenvat credit, if any, allowed to them in respect of inputs lying in stock or in process or contained in final products lying in stock on the date when such option is exercisable in terms of Rule 9(2) of the Cenvat Credit, Rules 2002. Regarding the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under the Act on the legal heirs of the deceased holder of a registration certificate. Therefore when once the cenvat credit was availed, but not used and utilised, and the assessee dies and his legal heirs surrender the certificate of registration, they are precluded from having the benefit of the cenvat credit. In those circumstances, question of the legal heirs paying the duty which represents the said cenvat credit availed, would not arise. Even otherwise, no proceedings under the Act can be initiated against the legal heirs of an assessee who was chargeable to tax under the Act. Therefore the entire proceedings initiated is one without jurisdiction and rightly the Tribunal has set aside the orders passed in such proceedings which is void ab initio and no case for interference is made out. 5. In the light of the aforesaid facts and rival contentions, the substantial question of law which arise for our consideration in this appeal is as under: When the assessee who was registered under the Act as a manufacturer and who was availing the benefit of cenvat credit dies and registration certificate is surrendered, whether the legal heirs are liable to answer the claims of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore Sec. 11A can be invoked only to recover duty from a person chargeable with duty Sec.3 of the Act is the charging section. It provides that they shall be levied and collected in such a manner as may be prescribed, a duty of excise on all excisable goods which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985. Therefore this provision makes it very clear, a person chargeable with duty under the Act, is the manufacturer. The word 'manufacturer' has been defined in Sec.2(f) of the Act, which reads as under: 2(f) "manufacture" includes any process - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture, (5 of 1986), and the word "manufacturer" shall he construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable, goods, but also any person who engages in their production or manufacture on his own account;] 7. It provides that the word 'manufacturer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such transfer or otherwise disposal or change. Therefore the proviso is attracted to cases in which the person chargeable to duty transfers or dispose of the business which he is carrying on during his lifetime. If any amount was due from the predecessor in title, the successor in title is liable and it is to be recovered from him. We do not find any provision in the Act which foists any such liability in the case of intestate succession. In other words, there is no provision which empowers the authorities to recover due from a deceased assessee by proceeding against his legal heirs. The way Sec. 11 and 11A are worded, it is amply clear, the legislature has consciously kept away the legal heirs from answering to liabilities under the Act. The reason is obvious. In the normal course, a manufacturing activity which involves huge investment and infrastructure is carried on by companies, partnership firms and association of persons. May be in very few instances, individuals undertake such commercial adventure. In all the cases of such commercial activity being carried on, except that of an individual, the death of any person who is involved in the manufacturing activity, has no imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore they cannot be treated as successors who can be made available for the duty payable by the predecessor in title and therefore proviso to Sec. 11 is not attracted to the facts of this case. 10. In this context, the counsel for the revenue pointed out a judgment of the Kerala High Court in the case of Collector of C. Ex. Customs vs. Leelamma George 2004 (163) ELT 17 (KAR) where, interpreting Sec. 11A, it has been held, the person against whom such proceedings are initiated, is the person chargeable with duty. That is a case of short levy of duty. The proceedings can be continued against the manufacturer, if he had removed the products paying the duty less than what is liable under the Act. Obviously he has to pay the balance duty as well, if there was a short levy. This demand has to be made, if it remained unpaid, from the legal representatives, even after the death of the predecessor. This is a case where the short levy has been noticed during the life of the predecessor. Therefore the said case has no application to the facts of this case. In this case there was no short levy or non-levy on the predecessor during his lifetime. Even otherwise, with great respect, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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