Tax recovery after death
Hon’ble Supreme Court in the case titled as Shabina Abraham & Ors. Vs. Collector of Central Excise & Custom in Civil Appeal No. 5802 of 2005 decided on 29.07.15 has held that assessment proceeding under the Central Excise and Salt Act, 1944 cannot be continued against the legal representative/estate of a sole proprietor/manufacturer after he is dead.
Brief facts are that one Shri George Varghese was the sole proprietor of Kerala Tyre and Rubber Company Limited. By October, 1985, this proprietary concern had stopped manufacturer and production of tread rubber. By a show cause notice dated 12.06.1987, for the period January, 1983 to December, 1985, it was alleged that the assess 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 stood, of the central excise 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. On 14.03.1989, the said Shri George Varghese died.
As a result of his death, a second show cause notice issued on 18.10.1989 to his wife and four daughters for demand of duty made in the earlier show cause notice. In reply it was submitted that the proceedings initiated against the deceased abated on his death in the absence of any provisions in the Central Excise and Salt Act to continue assessment proceeding against a dead person in the hands of the legal representatives.
Thereafter, Legal representative approached Hon’ble High Court under article 226 of the constitution by filing writ petition in January, 1990. The learned Single Judge of the High Court quashed the proceeding against the legal heirs stating that the Central Excise and Salt Act did not contain any provisions for continuing assessment proceeding against a dead person.
Against this, revenue went in Appeal. The Division Bench of the High court of Kerala reversed the Single Judge Judgement. Legal heir challenged the Division Bench order before Hon’ble Supreme Court. Hon’ble Supreme Court allow the appeal and set aside the order of Division Bench by stating as
“8. On a reading of the aforesaid provisions, it is clear that Shri Rajshekhar Rao, Learned Cousel appearing on behalf of the appellants is correct there is no separate machinery provided by the Central Excise and Salt Act to proceed against a dead person when it comes to assessing him to tax under the Act.”
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