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M/S. Vira And Co. v. Commissioner Of Central Excise, Mumbai .
Factual and Procedural Background
The appellants, M/s. Vira & Co., were engaged in purchasing fabrics under Chapters 52 and 54 of the Central Excise Tariff and sending them for processing such as pleating and embossing. These processes became dutiable from 1.4.2003 following withdrawal of exemption by Notification No.6/2003. Subsequently, exemption was reinstated by Notification No. 75/2003 dated 27.10.2003. During the intervening period (1.4.2003 to 26.10.2003), a show-cause notice was issued demanding duty of Rs. 31,603/- under Section 11A of the Central Excise Act. The Assistant Commissioner confirmed the duty and imposed penalties on the appellants. The appellants appealed to the Commissioner (Appeals), who partly rejected and partly set aside penalties. This appeal challenges the order of the Commissioner of Central Excise (Appeals).
Legal Issues Presented
- Whether a show-cause notice demanding duty can be issued to the legal heir of a deceased sole proprietor of a proprietary concern under the Central Excise Act.
Arguments of the Parties
Appellant's Arguments
- M/s. Vira & Co. was a proprietary concern owned by Shri Jadavji F. Vira, who died on 8.10.2005.
- The show-cause notice dated 25.4.2006 demanded duty for the period 1.4.2003 to 26.10.2003, after the proprietor's death.
- No provision under the Central Excise Act allows demanding duty from the legal heir of a deceased proprietor.
- After the proprietor's death, the son Shri Bharat J. Vira formed a new proprietary firm; thus, no demand can be made on the legal heir for the predecessor's liability.
- Relied on Tribunal decision in D.Matai vs. CCE, Mumbai (2000(126)ELT 1264) supporting non-sustainability of such demand.
Respondent's Arguments
- The legal heir Shri Bharat J. Vira inherits the assets and liabilities of M/s. Vira & Co.
- The demand is validly issued to the legal heir as he is responsible for the firm’s obligations.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| D.Matai vs. Collector of Central Excise, Mumbai (2000(126)ELT 1264) | Show-cause notice issued to legal heir after death of sole proprietor is not sustainable absent statutory provision. | The court found the facts analogous and relied on this precedent to hold that the show-cause notice issued after proprietor’s death was not sustainable. |
| State of Punjab vs. Jullundur Vegetables Syndicate (1966 Vol.XVII Sales Tax case (SC)) | Legal principle regarding liability and demand on legal heirs in absence of statutory provision. | The Tribunal’s reliance on this Supreme Court judgment was endorsed by the court to support non-liability of legal heirs under the Central Excise Act. |
Court's Reasoning and Analysis
The court examined whether the show-cause notice demanding duty could be validly issued to Shri Bharat J. Vira, the son and legal heir of the deceased proprietor Shri Jadavji F. Vira. The notice was issued after the proprietor’s death, demanding duty for a period prior to his death. The court observed that the Central Excise Act contains no provision permitting demand of duty from a legal heir following the death of a sole proprietor. The court relied on the Tribunal decision in D.Matai (supra), which held that such a notice is not sustainable without statutory authority. The Tribunal’s reliance on the Supreme Court’s ruling in State of Punjab vs. Jullundur Vegetables Syndicate further reinforced this position. Finding the facts closely analogous, the court followed the established ratio and allowed the appeal.
Holding and Implications
The appeal is allowed.
The court’s decision holds that a show-cause notice demanding duty under the Central Excise Act cannot be issued to the legal heir of a deceased sole proprietor in the absence of explicit statutory provision. This results in the dismissal of the demand against the legal heir in this case. No new precedent was set beyond affirming the applicability of existing Tribunal and Supreme Court rulings to the facts.
Per : Sahab Singh This is an appeal filed by the appellants against the order passed by the Commissioner of Central Excise(Appeals).
2. The facts in brief are that the appellants, M/s. Vira & Co. were engaged in the purchasing of fabrics falling under Chapter 52 and 54 of the Central Excise Tariff and sending the same for processing i.e. pleating and embossing. These processes became dutiable with effect from 1.4.2003 as the exemption available to these processes was withdrawn vide Notification No.6/2003. Subsequently, in the month of October, these processes were again exempted vide Notification No. 75/2003 dated 27.10.2003. In the intervening period from 1.4.03 to 26.10.2003, a show-cause notice was issued to the appellants demanding duty amounting to Rs. 31,603/- under Section 11A of the Central Excise Act. This show-cause notice was adjudicated by the Asstt.Commissioner who confirmed the duty of Rs. 31,603/- on the appellants and also imposed penalty of the same amount under Sec. 11AC on the appellants and penalty of Rs. 5,000/- was also imposed on the second appellant. The assessee went in appeal before the Commissioner(Appeals) who rejected the appeal in the case of the first appellant and set aside the penalty against the second appellant Shri Bharat J.Vira.
3. The ld.counsel appearing for the appellants submitted that M/s. Vira & Co. was the proprietary concern and Shri Jadavji F.Vira was the proprietor . The proprietor Shri Jadavji F.Vira died on 8.10.05. The show-cause notice was issued on 25.4.2006 demanding duty for the period from 1.4.2003 to 26.10.2003. He submitted that no show-cause notice demanding duty can be served on the appellant as there is no provision under the Central Excise Act for demanding duty from the legal heir. After the death of Shri Jadavji F.Vira, his son Shri Bharat J.Vira has made the new proprietary firm which was handled by Shri Bharat J.Vira. He, therefore, submitted that no demand can be made from the legal heir after the death of the proprietor. In support of this contention, he relied on the decision of the Tribunal in the case of D.Matai vs. CCE, Mumbai reported in 2000(126)ELT 1264(Tri). He, therefore, requested that the appeal should be allowed on this ground alone.
4. Ld.authorised representative appearing for the Revenue defended the findings of the lower authorities and had stated that since Shri Bharat J.Vira was the legal heir of M/s. Vira & Co. the assets and liability of the firm will be his responsibility. Therefore, the demand is rightly issued to the legal heir.
5. After hearing both sides, I find that the issue is whether the show-cause notice for demand can be issued to Shri Bharat J.Vira the son of Shri Jadavji F.Vira who died on 8.10.05, In this case the show-cause notice was issued on 25.4.06 i.e. after the death of Jadavji F.Vira demanding duty for the period 1.4.03 to 26.10.03. In the case of D.Matai vs. Collector of Central Excise, Mumbai (supra) cited by the ld.counsel, it was held by the Tribunal that show-cause notice issued after the death of sole proprietor of the concern to the legal heir of the proprietary concern is not sustainable in the absence of such provision in the Central Excise Act or under the Rules. The Tribunal has relied on the judgment of the Honble Supreme Court in the case of State of Punjab vs. Jullundur Vegetables Syndicate reported in 1966 Vol.XVII Sales Tax case (SC). I find that the facts and circumstances of the present case are similar to the case cited by the ld.counsel and this is squarely covered by the said decision. Following the ratio of the cited decision, I allow the appeal of the appellants.
6. The appeal is allowed. (Pronounced in court) Sahab Singh Member(Technical)
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