(1)
COMMISSIONER OF CUSTOMS, HYDERABAD Vs.
PENNAR INDUSTRIES LTD. AND OTHERS .....Respondent D.D
31/07/2015
(2)
RAMESH KUMAR Vs.
UNION OF INDIA AND OTHERS .....Respondent D.D
31/07/2015
(3)
PEERAPPA HANMANTHA HARIJAN AND OTHERS Vs.
STATE OF KARNATAKA AND OTHERS .....Respondent D.D
30/07/2015
(4)
YAKUB ABDUL RAZAK MEMON Vs.
STATE OF MAHARASHTRA AND OTHERS .....Respondent D.D
30/07/2015
(5)
DHARAM CHAND Vs.
CHAIRMAN, NEW DELHI MUNICIPAL COUNCIL AND OTHERS .....Respondent D.D
29/07/2015
(6)
Not Found Vs.
STATE OF CHHATTISGARH AND OTHERS .....Respondent D.D
29/07/2015
(7)
RAJESHWAR BABURAO BONE Vs.
THE STATE OF MAHARASHTRA AND OTHERS .....Respondent D.D
29/07/2015
(8)
SHABINA ABRAHAM AND OTHERS Vs.
COLLECTOR OF CENTRAL EXCISE AND CUSTOMS .....Respondent
Sections, Acts, Rules, and Articles Mentioned:
Section 14, Section 14(3), Section 15, Section 15(1), Section 35, Section 35A, Section 62: Bombay Sales Tax Act, 1953
Rule 2(3), Rule 7, Rule 7AA: Central Excise Rules, 1944
Section 11, Section 11A, Section 2, Section 3, Section 4(3), Section 6: Central Excises and Salt Act, 1944
Article 226: Constitution of India, 1950
Section 3(42), Section 6: General Clauses Act, 1897
Section 2(2), Section 3: Income Tax (Amendment) Act, 1953
Section 24B: Income Tax (Second Amendment) Act, 1933
Section 2(2), Section 22, Section 22(1), Section 22(2), Section 23, Section 23(4), Section 24B, Section 27, Section 29, Section 34: Income Tax Act, 1922
Section 147, Section 147(1), Section 159, Section 159(2), Section 159(3), Section 159(4), Section 159(5), Section 161(2), Section 162, Section 167, Section 167(4), Section 167(5), Section 168, Section 189(1), Section 44: Income Tax Act, 1961
Subject:
Interpretation of provisions regarding assessment proceedings under the Central Excises and Salt Act, 1944, concerning deceased individuals.
Headnotes
Facts:
The case of Shabina Abraham & Ors. v. Collector of Central Excise & Customs (Civil Appeal No. 5802 of 2005) involved the assessment proceedings against the legal representatives or estate of a deceased sole proprietor or manufacturer under Section 4(3)(a) of the Central Excises and Salt Act, 1944.
Issues:
Whether assessment proceedings could continue against the legal heirs or estate of a deceased individual under the mentioned provision of the Central Excises and Salt Act, 1944.
Held:
The court held that there is no specific provision within the Central Excises and Salt Act, 1944, to proceed against a deceased person for tax assessment under the Act.
The definition of "assessee" under Section 4(3)(a) exclusively refers to a living person, leaving no room for interpretation otherwise. The addition of a proviso to Section 11 by an Amendment Act of 2004 does not change this interpretation, as it pertains to the recovery of sums due to the government and not assessment against deceased individuals.
Additionally, the General Clauses Act, 1897, does not include legal representatives of deceased persons in its definition of "person," further supporting the interpretation that assessment proceedings cannot continue against deceased individuals' legal heirs.
Decision: Assessment proceedings cannot continue against the legal representatives or estate of a deceased individual under the Central Excises and Salt Act, 1944, as there are no specific provisions for such cases within the Act.
Referred Cases:
Commissioner of Income Tax, Bombay City I v. Amarchand N. Shroff (1963) 48 I. T.R. 59
Commissioner of Income Tax, Bombay v. James Anderson (1964) 51 I.T.R. 345
State of Punjab v. Mis Jul/under Vegetables Syndicate (1966) 2 S.C.R. 457
Khushi Ram Behari Lal & Co. v. Assessing Authority, Sangrur (1967) 19 STC 381
Additional Tahsildar, Raipur v. Gene/ala/ (196.8) 21 STC 263
Yeshwantrao v. The Commissioner of Wealth Tax, Bangalore AIR 1967 SC 135:(1966) Suppl. SCR 419
Abraham v. The Income-Tax Officer, Kottayam & Anr. AIR 1961 SC 609: (1961) 2 SCR 765
The State of Tamil Nadu v. M.K. Kandaswami & Ors. Air 1975 SC 1871: (1975) 4 SEC 745: 1976 (1) SCR 38
Commissioner of Sales Tax, Delhi & Others v. Shri Krishna Engineering Co. & Ors. (2005) 2 SCC 695
Girja Nandini Devi & Ors. v. Bijendra Narain Choudhury (1967) 1 SCR 93
Shri Rameshwar Manjhi (deceased) Through his son Shri Lakhiram Manjhi v. Management of Sangramgarh Colliery & Ors. (1994) 1 SCC 292: 1993 (3) Suppl. SCR 668
Mis. Murarilal Mahabir Prasad and others v. Shri B.R. Vaci and Ors. (1975) 2 SEC 736
JUDGMENT
Rohinton Fali Nariman, J—"Nothing is certain except death and taxes." Thus spake Benjamin Franklin in his letter of November 13, 1789 to Jean Baptiste Leroy. To tax the dead is a contradiction in terms. Tax laws are made by the living to tax the living. What survives the dead person is what is left behind in the form of such person's property. This appeal raises questions as to whether the dead person's property, in the form of his or her estate, can be taxed without the necessary machinery provisions in a tax statute. The precise question that arises in the present case is whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead. The facts of the case are as follows.
2. One Shri George Varghese was the sole proprietor of Kerala Tyre and Rubber Company Limited. By October 1985, this proprietary concern had stopped manufacture and production of tread rubber. By a show cause notice dated 12.6.1987, for the period January 1983 to December 1985, it was alleged that the Assessee had manufactured and cleared tread rubber from the factory premises by suppressing the fact of such production and removal with an intent to evade payment of excise duty. The provisions of Section 11A, as they then stood, of the Central Excises and Salt Act were invoked and duty amounting to Rs. 74,35,242/- was sought to be recovered from the Assessee together with imposition of penalty for clandestine removal.
3. On 14.3.1989, the said Shri George Varghese died. As a result of his death, a second show cause notice was issued on 18.10.1989 to his wife and four daughters asking them to make submissions with regard to the demand of duty made in the show cause notice dated 12.6.1987. By their reply dated 25.10.1989, the said legal heirs of the deceased stated that none of them had any personal association with the deceased in his proprietary business and were not in a position to locate any business records. They submitted that the proceedings initiated against the deceased abated on his death in the absence of any provision in the Central Excises and Salt Act to continue assessment proceedings against a dead person in the hands of the legal representatives. The said show cause notice was, therefore, challenged as being without jurisdiction.
4. As the Central Excise Authorities posted the matter for hearing and refused to pass an order on the maintainability of the show cause notice alone, the legal heirs approached the High Court Under Article 226 of the Constitution by filing a Writ Petition in January, 1990. The learned single Judge of the High Court quashed the proceedings against the legal heirs stating that the Central Excises and Salt Act did not contain any provisions for continuing assessment proceedings against a dead person. Against this, revenue went in appeal. The Division Bench of the High Court of Kerala reversed the single Judge's judgment.
5. Shri Rajshekhar Rao, learned Counsel appearing for the legal heirs made submissions before us with great clarity and persuasiveness. He submitted that a reading of Sections 2(f), (3), Section 4(3)(a), Section 11 and 11A as they stood at the relevant time would show that unlike the provisions of the Income Tax Act, there is no machinery provision in the Central Excises and Salt Act for continuing assessment proceedings against a dead individual. He stressed the fact that an Assessee under the said Act means "the person" who is liable to pay the duty of excise under this Act and further stressed the fact that in cases of short levy, such duty can only be recovered from a person who is chargeable with the duty that has been short levied. He further invited our attention to the Central Excise Rules and Rules 2(3) and 7 in particular to buttress his submission that there is no machinery provision contained either in the Act or in the Rules to proceed against a dead person's legal heirs. He cited certain judgments before us which we will advert to later on in this judgment.
6. Shri A.K. Panda, learned senior advocate appearing on behalf of the revenue contended that a close reading of Section 11 of the Central Excises and Salt Act will indicate that sums are recoverable from an Assessee by an attachment and sale of excisable goods belonging to such Assessee and further that if the amount so recoverable falls short, it can be recovered from the person himself as an arrear of land revenue. Inasmuch as a dead man's property can be attached and sold and proceeded against, it is clear that the necessary machinery is contained in the Central Excises and Salt Act. His further submission is that Section 11A of the said Act is a machinery provision and, therefore, the rule to be applied is that that construction should be preferred which makes a machinery Section workable. He also referred us to the definition of "person" in Section 3(42) of the General Clauses Act to buttress his submission that a legal representative would be included within a "person" as so defined. He referred us to Section 6 of the said Act dealing with registration and argued that registration of a person makes him a legal entity liable to be assessed as such. His other submission is that the general principle, namely, that a cause of action abates when a person who institutes a proceeding dies is not applicable in the present case and cited various judgments before us in support of the said principle. He also submitted that the position under the Income Tax Act would be entirely different as income tax is a tax leviable on a person whereas a duty of excise is leviable on manufacture of goods. He also cited a number of decisions which will be dealt with in the course of this judgment.
7. We have heard learned Counsel for the parties. Before entering into a discussion on the merits of the case, it is necessary to set out the statutory provisions contained in the Central Excises and Salt Act at the relevant time, which are given below:
2(f) "manufacture" includes any process incidental or ancillary to the completion of a manufactured product; and
(i) In relation to tobacco includes the preparation of cigarettes, cigars, cheroots, biris, cigarette or pipe or hookah tobacco, chewing tobacco or snuff,
(ia) in relation to manufactured tobacco, includes the labeling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer.
(ii) In relation to salt, includes collection, removal, preparation, steeping, evaporation, boiling, or any one or more of these processes, the separation or purification of salt obtained in the manufacture of saltpeter, the separation of salt from earth or other substance so as to produce elementary salt, and the excavation or removal of natural saline deposits or efflorescence;
(iii) In relation to patent or proprietary medicines, as defined in Item No. 14-E of the first Schedule and in relation to cosmetics and toilet preparations as defined in Item No. 14-F of that Schedule, includes the conversion of powder into tablets or capsules, the labeling or relabeling of containers intended for consumers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumers;
(iv) In relation to goods comprised to Item No. 18-A of the First Schedule, includes sizing, beaming, warping, wrapping, winding or reeling, or any one or more of these processes, or the conversion of any form of the said goods into another form of such goods;
And the word "manufacturer" shall be 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.
3. Duties specified in the First Schedule to be levied. (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates set forth in the First Schedule.
4. Valuation of excisable goods for purposes of charging of duty of excise.-
(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to value, such value shall, subject to the other provisions of this section be deemed to be-
(a) the normal price thereof, that is to say, the price at which such goods are ordinarily sold by the Assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, where the buyer is not a related person and the price is the sole consideration for the sale:
(4) For the purposes of this section,-
(a) "Assessee" means the person who is liable to pay the duty of excise under this Act and includes his agent;
11. Recovery of sums due to Government.-In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder, the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963, to levy such duty or require the payment of such sums may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue.
11A. Recovery of duties not levied or not paid or short levied or short paid or erroneously refunded.-
(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:
Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this Sub-section shall have effect, as if for the words "six months", the words "five years" were substituted.
Rule 2(3) and Rule 7 of the Central Excises Rules, 1944, read as under:
2. Definitions.--In these rules, unless there is anything repugnant in the subject or context--
(3) "Assessee" means any person who is liable for payment of duty assessed and also includes any producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored;
7. Recovery of duty.-Every person who produces, cures or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty or duties leviable on such goods, at such time and place and to such persons as may be designated, in, or under authority of these rules, whether the payment of such duty or duties is secured by bond or otherwise.
Provided that nothing contained in this rule shall apply to molasses produced in a khandsari sugar factory.
Provided further that in respect of goods falling under Chapter 62 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), manufactured on job-work, the provisions of these rules shall apply subject to the provisions of Rule 7AA.
8. On a reading of the aforesaid provisions, it is clear that Shri Rajshekhar Rao, learned Counsel appearing on behalf of the Appellants is correct-there is in fact no separate machinery provided by the Central Excises and Salt Act to proceed against a dead person when it comes to assessing him to tax under the Act.
9. The position under the Income Tax Act, 1922 was also the same until Section 24B was introduced by the Income Tax (Second Amendment) Act of 1933. Prior to the introduction of the aforesaid D.D
29/07/2015
(9)
UNION OF INDIA AND OTHERS Vs.
N.S. RATHNAM AND SONS .....Respondent D.D
29/07/2015