M/s Deep Enterprises vs CCE And ST- Ludhiana

The appellant is in appeal against the impugned order wherein the Ld. Commissioner (Appeals) has remanded the matter back to the adjudicating

authority to decide the liability of the appellant in the light of the decision of this Tribunal in the case of Blue Star Communication vs. CCE & ST-

Ludhiana vide Final Order No. A/60167-60171/2019 dt. 22.02.2019.

The facts of the case are that the appellant (M/s Deep Enterprises)was owned by Late Shri Kuldeep Singh who started the business of cable

operator in October 2009 but unfortunately, he expired on 01.03.2014. Thereafter, a show cause notice was issued to the appellant for the period

October 2009 to February 2014 to demand service tax on cable operator services. The matter was adjudicated, the demand of service tax was

confirmed along with interest and penalty was imposed. The said order was challenged by the appellant firm through his son and the Ld.

Commissioner (Appeals) remanded the matter back to determine the liability of service tax payable by the appellant during the impugned period relying

on the decision of Blue Star Communication (supra). Against the said order, this appeal is filed.

The Ld. Counsel for the appellant submits that he has not opposing the order on merits, but his contention is that as Shri Kuldeep Singh has expired

on 01.03.2014, therefore, the liability of service tax for the period October 2009 to 28.02.2014 are not sustainable in the light of the decision of the

Hon’ble Apex Court in the case of Shabina Abraham vs. Collector of Central Excise and Customs 2017 (50) STR 241 (S.C.) to say that as the

proprietor of the firm has been expired, therefore, till then, he was the proprietor of the firm. There is no provision under The Finance Act, 1994 or

Central Excise Act, 1944 for recovery of the dues of lifetime of the deceased proprietor, therefore, the demand for the period 0f lifetime of Late Sh.

Kuldeep Singh is not sustainable.

On the other hand, the Ld. AR opposed the contention of the Ld. Counsel and submits that as the business of Shri Kuldeep Singh was taken over

by his son who has filed an undertaking before the department of the liability of lifetime of his father, therefore, he is liable to pay service tax for the

period October 2009 to 28.02.2014 also. It is his further contention that as the business has been taken over by his son, therefore, in the light of the

decision of Hon’ble High Court of Karnataka in the case of CCE, Bangalore-Ill v/s Dhiren Gandhi -2012 (281) E.L.T. 64 (Kar.), the son is liable

to pay the dues. It is his further contention that on 10.09.2004 that in case of transfer or otherwise disposal of thebusiness or trade in whole or in part,

or effects any change in the ownership thereof, the successor is liable to pay dues.

Heard the parties and considered the submissions.

After hearing the parties, the following issues has emerged is whether for the period October 2009 to February 2014, the successor or the son of

Shri Kuldeep Singh is liable to pay dues of services provided by Shri Kuldeep Singh or not?

The Ld. AR has taken the argument that there is an amendment w.e.f. 10.09.2004 that the successor is liable to pay the dues. The said provision is

incorporated herein as under: -

“Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums Of any kind, as

specified in this section, is recoverable or due, transfers or otherwise disposes Of his business or trade in whole or in part, or effects any

change in the ownership thereof in consequence Of which he is succeeded in such business or trade by any other person, all excisable

goods, materials, preparations, plants machineries, vessels, utensils, implements and articles in the custody or possession Of the person so

succeeding may also be attached and sold by such officer empowered by the Central Board Of Excise and Customs, after obtaining written

approved from the Commissioner of Central Excise, for the purposes of recovering such duty or other sums recoverable or due from such

predecessor at the time of such transfer or otherwise disposed of change.â€​

On going through the said provision, it is very much clear that in case of transfer or otherwise disposal of the business, in such circumstances, only

the successor is liable to pay the dues. There is no provision in law till yet in case of death of the proprietor of the firm who will be liable to pay the

dues thereof. The said issue has been settled by the Hon’ble Apex Court in the case of Shabina Abraham (supra) and observed as under:-

“26. It is clear on a reading of the aforesaid paragraph that what revenue is asking us to do is to stretch the machinery provisions of the

Central Excises and Salt Act, 1944 on the basis of surmises and conjectures. This we are afraid is not possible. Before leaving the judgment

in Murarilal’s case (supra), we wish to add that so far as partnership firms are concerned, the Income Tax Act contains a specific

provision in Section 189(1) which introduces a fiction qua dissolved firms. It states that where a firm is dissolved, the Assessing Officer shall

make an assessment of the total income of the firm as if no such dissolution had taken place and all the provisions of the Income Tax Act

would apply to assessment of such dissolved firm. Interestingly enough, this provision is referred to only in the minority judgment in M/s.

Murarilal’s case (supra).

The argument that Section 11A of the Central Excises and Salt Act is a machinery provision which must be construed to make it

workable can be met by stating that there is no charge to excise duty under the main charging provision of a dead person, which has been

referred to while discussing Section 11A read with the definition of “assesseeâ€​ earlier in this judgment.

Learned counsel for the revenue also relied upon the definition of a “person†under the General Clauses Act, 1897. Section 3(42)

of the said Act defines “personâ€​ as under :-

“(42) â€​Personâ€​ shall include any company or association or body of individuals whether incorporated or not.â€​

It will be noticed that this definition does not take us any further as it does not include legal representatives of persons who are since

deceased. Equally, Section 6 of the Central Excises Act, which prescribes a procedure for registration of certain persons who are engaged

in the process of production or manufacture of any specified goods mentioned in the schedule to the said Act does not throw any light on

the question at hand as it says nothing about how a dead person’s assessment is to continue after his death in respect of excise duty that

may have escaped assessment. Also, the judgments cited on behalf of revenue, namely, Yeshwantrao v. The Commissioner of Wealth Tax,

Bangalore, AIR 1967 SC 135 at pages 140, 141 para 18 : (1966) Suppl. SCR 419 at 429 A-B, C.A. Abraham v. The Income-Tax Officer,

Kottayam & Another, AIR 1961 SC 609 at 612 para 6 : (1961) 2 SCR 765 at page 771, The State of Tamil Nadu v. M.K. Kandaswami&

Others, AIR 1975 SC 1871 (para 26) : (1975) 4 SCC 745 (para 26), Commissioner of Sales Tax, Delhi & Others v. Shri Krishna

Engineering Co. & Others, (2005) 2 SCC 695, page 702, 703 paras 19 to 23, all enunciate principles dealing with tax evasion in the

context of construing provisions which are designed to prevent tax evasion. The question at hand is very different - it only deals with

whether the Central Excises and Salt Act contains the necessary provisions to continue assessment proceedings against a dead man in

respect of excise duty payable by him after his death, which is a question which has no relation to the construction of provisions designed to

prevent tax evasion.â€​

The Hon’ble Apex Court also taken note of the decision of Dhiren Gandhi (supra) also and observed as under:-

“30. It remains to consider a judgment cited by learned counsel for the appellants, namely, Commissioner of Central Excise, Bangalore-

III v. Dhiren Gandhi,2012 (281) E.L.T. 64 (Karnataka) = 2012 (27) S.T.R. 452 (Kar.). This judgment is correct in its conclusion that while

interpreting the provisions of the Central Excises and Salt Act, legal heirs who are not the persons chargeable to duty under the Act cannot

be brought within the ambit of the Act by stretching its provisions. To the extent that this judgment holds what is set out hereinbelow, it is

correct:-

“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 Section

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.â€​ (at page 69)

The impugned judgment in the present case has referred to Ellis C. Reid’s case but has not extracted the real ratio contained

therein. It then goes on to say that this is a case of short-levy which has been noticed during the lifetime of the deceased and then goes on to

state that equally therefore, legal representatives of a manufacturer who had paid excess duty would not by the self-same reasoning be able

to claim such excess amount paid by the deceased. Neither of these reasons are reasons which refer to any provision of law. Apart from

this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not

permit this, the Act needs to be interpreted accordingly. We wholly disapprove of the approach of the High Court. It flies in the face of first

principle when it comes to taxing statutes. It is therefore, necessary to reiterate the law as it stands. In Partington v. A.G., (1869) LR 4 HL

100 at 122, Lord Cairns stated :

“If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the

judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the

subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in

any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can

simply adhere to the words of the statuteâ€​.â€​

and thereafter the Hon’ble Apex Court has held that in case of death of the proprietor of the firm, no liability can be fastened on the legal heir for

the period till the lifetime of the proprietor.

In view of this, I hold that no demand of service tax can be fastened on the son of late Shri Kuldeep Singh for the period October 2009 to February

2014. Accordingly, the issue is answered in favour of the appellant.

In view of the above discussion, the impugned order is modified that the revenue shall determine the liability of the appellant firm w.e.f. 01.03.2014

in terms of the decision of this Tribunal in the case of Blue Star Communication (supra).

The appeal is disposed of in the above terms.

(Dictated & pronounced in the Court)