By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Whether successor company was liable to be assessed for the liabilities of the predecessor who was a sole proprietor and now the director in the company, under Central Excise Act, 1944? Held, No.
Facts:
The appellant succeeded a sole proprietorship firm M/s. Freezair India (FI) and took over all the assets and liabilities. The proprietor subsequently became the director of the said company. The department issued a show-cause notice including the duties and liabilities in respect of manufacturing and clearing operations effected by M/s. FI on the ground that prior to taking over, the Appellant company was known as M/s. FI situated at the same address and also that the proprietor had become the director. The Tribunal held that the liabilities inherited by the company from the proprietary concern included the liability to be assessed and to pay the duty of excise.
Held:
Holding that the duties and liabilities of the predecessor were not liable to be paid by the appellant, the Hon. High Court observed that a company in law was different from its subscribers of the memorandum and the promoter directors and that its independent existence was of great significance except where lifting of the corporate veil was required against the promoter directors, directors or others in charge and responsible for day to day work of the company, to enforce obligations of the corporate identity and seek performance or penalise the natural person behind the corporate cloak which had no application in the present case. The high court further observed that Rule 230(2) of the Central Excise Rules was also inapplicable since no determination of duty on the predecessor and a finding to invoke and make recovery from the successor was made by the revenue and that there had been no assessment of duty on the predecessor either before or after transfer/take over.
