Full Judgment
3. M/s. Press Fab Precision Components Pvt. Ltd., was incorporated on 1-4-1999. Prior to that period a partnership firm M/s. Press Fab Industries was in existence. Two demands were raised against M/s, Press Fab Industries for the period from 1-4-1995 to 30-3-1999 and the appellant Pvt. Limited Company for the period from 1-4-1999 to 30-11-1999. The Joint Commissioner who adjudicated the case held that the appellant company is not liable to pay any duty. Further he allowed exemption under Notification No. 8/98-C.E. for the financial year 1999-2000 up to 30-11-2000 but the OIO was served specifically on the appellant Pvt. Limited Company for the entire period from 1-4-1995 onwards demanding duty. The OIO has been upheld by the Commissioner (Appeals). Hence, the appellants have come before this Tribunal for the relief.
4. Shri K.S. Ravishankar learned advocate appeared on behalf of the appellants and Shri Ganesh Havanur learned SDR for the Revenue.
(i) The OIO is self-contradictory and the demand is untenable in law as the appellant was exempted from total duty liability and there was a separate show cause notice on the appellant and the erstwhile firm.
(ii) Instead of dropping the proceedings, the demand was confirmed.
The appellants was not put to notice as to why the firm's duty should not be demanded from the Private Limited Company but the OIO has proceeded on that basis. In Saastha Plastics Pvt. Ltd. v. CCE , it has been held that duty cannot be recovered from a Private Limited Company for the period prior to its incorporation, for the manufacture of goods by the partnership firm since Section 11A requires notice to be served on the "person chargeable with duty", who is the manufacturer. In the present case since the Limited Company was not in existence prior to 1-4-1999, the appellant is not the person chargeable with duty.
(iii) In CBEC Circular No. 6/92, dated 29-5-1992 it has been clarified that Pvt. Ltd. Company is a separate legal entity which is distinct from shareholders comprising it. Hence each company is a separate manufacturer and would be entitled to separate exemption limit.Supreme Washers (P) Ltd. v. CCE treated as a separate entity for the purpose of exemption limit.
Board's circular of 1992 was referred to.
(v) On 10-9-2004, a new proviso to Section 11 of the Central Excise Act was introduced for recovery of duty from a person succeeding his predecessor's business. This case, relates to a period prior to the introduction of the above said proviso. Moreover, the Supreme Court in the case of State of Punjab v. Julundur Vegetables Syndicate has held in the context of sales tax law that in the absence of a statutory provision in the Act, no recovery could be made of tax from a dissolved firm since it ceases to be a legal entity. In the present case, for the period prior to 10-9-2004, there was no law to demand duty on the (sic) 6. The learned DR said that once, the private limited company succeeds the partnership firm it has taken over all the liabilities of the firm.
Hence, the Original Authority was right in demanding the duty from the appellant firm.
7. We have gone through the records of the case carefully. In the adjudication order, the Original Authority has held that no duty is payable for the relevant period by the appellant limited company.
Moreover, during the relevant period, there was no provision to demand duty from the successor as a new pro-vision to Section 11 was introduced only on 10-9-2004. The period of demand in this case is prior to that. Moreover, for the period of demand, the appellant company was not in existence. In these circumstances, there is no merit in the demand of duty on the appellant company and the same is liable to be set aside. Hence penalty on the limited company and on Shri K.M.R. Babu is not leviable. Hence, we allow the appeals with consequential relief.
(Operative portion of the Order already pronounced in open Court on conclusion of the hearing)