COMMISSIONER OF CENTRAL EXCISE Vs. DHIREN GANDHI

JUDGEMENT

(1.) The Revenue has preferred this appeal challenging the order passed by the Tribunal which has 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 availing Cenvat credit on the inputs/capital goods as per the provisions of Rule 3 of the Cenvat Credit Rule, 2001/2002. He died on 15-9-2003. The central excise registration certificate was surrendered to the department by his son Sri Dhiren Gandhi. Sri Dhiren Gandhi took over the business on the basis of no objection given by his family members to carry on the business of the family as sole proprietor. The internal audit party, attached to the Central Excise Bangalore III Commissionerate, during the course of audit on the records of the assessee, observed that the assessee was availing Cenvat credit on the inputs/capital goods received into the factory for use in the manufacture of the aforesaid goods. On the date the registration certificate was surrendered, there was a stock of cenvat credit availed inputs/raw materials valued at Rs. 25,24,887/-. The audit, party was of the view that, by surrendering the central excise registration, the assessee opted out of cenvat scheme or for that matter from the whole of the provisions of the Central Excise Act and the Rules made there under. Therefore the assessee was liable to reverse the cenvat credit relating to the inputs, held in stock valued at Rs. 25,24,887/- as on the date of surrendering the registration certificate i.e., on 13-10-2003 and the cenvat credit attributable, works out to Rs. 4,03,982/-. A show cause notice came to be issued to M/s. D & M Naturals & Fragrances, the trade name of the Sri Prakash Gandhi and it was served on his son Sri Dhiren Gandhi. He answered the show cause notice by contending that the show cause notice has been issued to a concern which has got nothing to do with the commissions or purported omissions of M/s. D & M Naturals & Fragrances. His business is known by the name M/s. Dee & Em Naturals & Fragrances. It cannot be mistaken for the erstwhile proprietorship of by Sri Prakash Gandhi. He also denied all other allegations in the show cause notice, the availability of the stocks as alleged. He further contended, there cannot be any demand against him because sec. 11A does not provide for recovery of duty from a successor in business. The charging provisions under Sec. 3 of the Act is not attracted as he did not manufacture the goods prior to the date of demise of late Sri Prakash Gandhi and therefore he sought for dropping all the proceedings. The adjudicating authority, after going through 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. 26,47,145/-. 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 applicability of Sec. 11A, he held that proviso to Sec. 11A is rightly invokable for demanding duty for the extended period. Since the duty has not been paid, the same is liable to be paid along with interest at the rates prevalent during the said periods till the payment. Thus he confirmed, the demand of Rs. 4,03,982/- from M/s. D & M Naturals & Fragrances being the cenvat credit availed on the stock of inputs/raw materials held on the date of surrender of registration certificate and also confirmed the demand for interest, imposed penalty of equal amount and also a sum of Rs. 5,000/- under Rule 13 (1) of the Rules. Aggrieved by the said order, the assessee preferred an appeal. The Commissioner of Central Excise (Appeals), upheld the order of the adjudicating authority and dismissed the appeal. Against the said order, the assessee preferred an appeal to the Tribunal. The Tribunal relying on the judgment of this court in the case of CCE v. Press Fab Precision Components (P.) Ltd., 2007 207 ELT 207 held there is no provision to demand duty from the successor, therefore the provisions of Sec. 11 of the Central Excise Act, 1944, to demand duty from successor cannot withstand the test of law. Accordingly he allowed the appeal, set aside the impugned orders and granted relief to the assessee. Aggrieved by the said order, the Revenue is in appeal.

(3.) The learned Counsel, for the Revenue, assailing the impugned order, contends the original assessee was a proprietor concern. After the death of the proprietor, his son surrendered the central excise registration certificate, but utilized the assets of the business and is carrying on the very same business under the very same name, as its proprietor. Therefore, once the registration certificate is surrendered, the cenvat credit availed should be reversed and consequently the duty representing the said cenvat credit should be paid to the department. It is in that context, the show cause notice was issued, and proviso to Sec. 11 is directly attracted, as he is the successor, he is liable to pay the duty demanded and therefore he submit that the Tribunal is not justified in setting aside the well considered order passed by the authorities.