A bench comprising of Justices A.K. Sikri and Rohinton F. Nariman on Tuesday held that that there is no machinery under the Central Excises and Salt Act, 1944 (The Central Excise Act, 1944 as it stands today)and the rules thereunder to continue assessment proceedings against the legal representatives or estate of an assesse after his death.
Late Mr. George Varghese was the sole proprietor of a tread rubber manufacturing concern, which was shut down by late October 1985.On 12.06.1987,a show cause notice demanding a sum of Rs.74,35,242/-was issued to him inter alia alleging evasion of payment of excise duty. Subsequently, Mr. Varghese died in 1989 after which a follow up notice was issued upon his legal heirs.
Hearing an appeal filed on behalf of the legal heirs of late Mr. Varghese challenging the show cause notice issued to them the Supreme Court noted:
‘ “Nothing is certain except death and taxes.” Thus spoke 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.’
The advocates appearing for the appellants / legal heirs contended 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.
An assessee under the Excise Act means “the person” who is liable to pay the duty of excise under this Act and 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 and not his legal heirs.
Besides a plethora of judgments relied upon by the contesting parties, specific reliance was placed on the decision of the Bombay High Court in Commissioner of Income Tax, Bombay v. Ellis C. Reid [AIR 1933 Bom 333]to arrive at the conclusion in the present appeal. In that case a Division Bench, quashing the proceedings initiated by the Revenue against the legal heirs of a deceased assessee, held that in the absence of a specific provision under the Income Tax Act, 1922 Act the tax liability of a deceased assessee cannot be recovered from his estate or legal heirs. However, unlike the present Central Excise Act, the Income Tax Act of 1922 was subsequently amended to include necessary provisions to recover tax from the deceased assesses estate.
The Supreme Court, though of the view that there is an apparent lacuna in the statue, while allowing the appeal rightly applied the principle of strict construction and deterred from reading into it those words which only the legislature ought to do.
Read the Judgment here.