Demanding excise duty from the legal heirs of deceased proprietor is not legal.

PJ/Case Laws/2012-13/1490

Case:- COMMISSIONER OF C. EX., CHANDIGARH Versus SHREE AMBICA STEEL INDUSTRIES

Citation:- 2013 (288) E.L.T. 420 (Tri.-Del.)

Brief Facts:-M/s. Ambica Steel Industries was sole proprietorship concern of one Smt. Bimla Devi. She died on 17-9-2006. Her legal heirs after her death got registration of the respondent under the Excise Act cancelled vide letter dated 18-10-2006. At the time of cancellation of registration, they submitted an undertaking to the department, which is reproduced thus:- "That Smt. Bimla Rani W/o Sh. Mohinder Kumar who was the sole proprietor of M/s. Shri Ambica Steel Industries, Amloh Road, Mandi Gobindgarh, expired on 17-9-2006. That we are the legal heirs of all the assets and liabilities of late Smt. Bimla Rani. That we un-conditionally undertake to pay all the pending Central Excise Duty liability of M/s. Shri Ambica Steel Industries, Amloh Road, Mandi Gobindgarh as and when these dues are finally settled. That we undertake not to dispose of the assets till the Central Excise Duty liability is finally settled." Pursuant to the application and undertaking, registration of the respondent-company was cancelled. Subsequently, a show cause notice was issued in the name of the respondent-company raising a Cenvat credit on the premise that the respondent-company during the period April, 2005 to Feb., 2006 had wrongly availed Cenvat credit in respect of the inputs not received in the factory. The demand was ultimately confirmed by the jurisdictional Addl. Commissioner vide order-in-original.

Appellant Contentions:-The Revenue had challenged the impugned order on the ground that the Commissioner (Appeals) have wrongly dropped the demand ignoring the fact that at the time of getting the registration of the respondent-company cancelled, the legal heirs of the proprietor of the respondent-company submitted unconditional undertaking to pay all the pending central excise duty dues of the respondent-company and also not to dispose of the assets of the company till the central excise duty liability is finally settled. Revenue is contended that by filing that undertaking, the legal heirs of the respondent took upon themselves of the duty liability of the respondent-company. As such, now they cannot be allowed to contend that the demand has been wrongly confirmed against them.

Respondent Contentions:-The respondent on the contrary has pressed for dismissal of appeal. Respondent contends that it is well settled that the recovery proceedings against a deceased assessee cannot be initiated and maintained. Admittedly, in this case sole proprietor of the respondent-company died in September, 2006 and with her death, the company became non functional. It is submitted that the undertaking was given by the legal heirs of the deceased Bimla Rani on the insistence of the Excise Authorities and said undertaking related only to existing excise duty liability or some pending demand under adjudication. Ld. Counsel submits that show cause notice raising demand was issued much after the undertaking given by the legal heirs of Smt. Bimla Devi (sic), sole proprietor of the assessee-firm, as such it cannot be termed as demand pending adjudication when the undertaking was given. Thus it is pleaded that the Commissioner (Appeals) have rightly allowed the appeal of the respondent-company.

Reasoning of Judgment:-We have considered the rival contentions and perused the records. Undisputedly, late Smt. Bimla Rani was the proprietor of the respondent-firm M/s. Shree Ambica Steel Industries. She died and after her death the legal heir applied for cancellation of Excise registration in the name of the firm and the registration was admittedly cancelled by the Department in October, 2006. It is well settled that a sole proprietorship concern has no legal entity independent of its proprietor. Thus it is obvious that the death of the respondent-company ceased to exist. That being the case, the relevant show cause notice issued to M/s. Shree Ambica Steel Industries, Mandi Gobindgarh is bad in law as it was issued against any non-existent firm. This circumstance in itself is sufficient to dismiss the appeal filed by the Department. Coming to the undertaking by the legal heir of sole proprietor of the respondent-firm on perusal of the undertaking reproduced above, we find that legal heir of the deceased sole proprietor of the respondent-firm had undertaken to pay all the pending central excise liability of the respondent-firm as and when the dues are finally settled. From this it is evident that the undertaking was given in respect of pending dues under dispute. In the instant case, the show cause notice raising demand was issued almost three years after the undertaking. This imply that the dispute pertaining to the demand in question was raised much after the undertaking as such the demand which is subject matter of the show cause notice cannot be termed as pending as covered by the undertaking given by the legal heir. That being the case, we are of the view that there was no reason for issue of show cause notice against non-existing firm. As such, the demand confirmed on the basis of aforesaid show cause notice cannot be sustained. We do not find any infirmity in the order-in-appeal setting aside the order-in-original and dropping the demand.

Decision:-Appeal dismissed.

Comment:-The substance of this case is that demand cannot be raised against the legal heirs when the sole proprietor of the proprietorship concern expired and demand was raised much after the death of the deceased due to the sole reason that proprietor and proprietorship concern are single entity.

Comments

PJ/Case Laws/2012-13/1490

Post a Comment

Query