Custom, Excise & Service Tax Tribunal
Sagar Engineering Works vs Cce, Ludhiana on 26 May, 2016
Customs, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160 017 Division Bench COURT NO.1 Excise Appeal No. E/56082/2013-EX (DB) [Arising out of the Order-in-Original No.48/LDH/2012 dated 14.12.2012 passed by the Commissioner of Customs (Appeals), Ludhiana] Date of Hearing/Decision: 26.05.2016 For Approval & signature: Honble Mr. Ashok Jindal, Member (Judicial) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes Sagar Engineering Works Appellant Vs. CCE, Ludhiana Respondent
Appearance Shri Jagmohan Bansal & Naveen Bindal, Advocates, for the appellant Shri R.K. Mishra, AR, for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Raju, Member (Technical) FINAL ORDER NO: 60345/2016 Per Ashok Jindal:
The appellant is in appeal against the impugned order denying the benefit of exemption Notification No.8/2003-CE dated 01.03.2003 on the ground that the appellant is using the brand name of others (third party), therefore is not entitled for the benefit of exemption of exemption Notification No.8/2003-CE ibid consequently the demand of duty has been confirmed alongwith interest and equivalent penalty was also imposed.
2. In the impugned order, it is alleged that against the appellant that they are using brand name SAGAR which is owned by M/s.Sagar Machine Tools Pvt.Ltd., 418,Industrial Area-A, Ludhiana (SMT). Therefore, the appellant is not entitled to avail the benefit of exemption Notification No.8/2003-CE on the ground that the appellant is using the brand name SAGAR which is owned by third person. The appellant is contested that the said issue on the ground that the brand name has been registered in the appellants own name vide application dated 20.4.1978.
3. It is further submitted by the learned Counsel for the appellant that initially the same brand name was registered in their fathers name i.e. Late Shri Atma Singh on 18.4.1958 and the said brand name is owned by several other persons. In that view, it cannot be said that the brand name is owned by M/s.SMT only. In fact, M/s.SMT has applied for registration on 5.2.1996 the date when M/s SMT started using the said brand name, therefore, the benefit of exemption cannot be denied to the appellant. He further submitted that the appellant is a partnership firm consisting of Shri Satpal Singh and Shri Kripal Singh has partners. He further submitted that Mr. Satpal Singh has expired on 25.6.2014, therefore, no demand is sustainable against the appellant in view of the decision of Honble Apex Court in the case of Shabina Abraham-2015 (322) ELT 372 (SC). Therefore, he prayed that the impugned order be set aside.
4. On the other hand, learned AR reiterated the findings of the impugned order.
5. Heard the parties and considered the submissions.
6. We find that following issues emerged from the arguments advanced by learned Counsel on facts of the case:
(a) In case the appellant is using the brand name prior to its registration in the name of SMT, whether the appellant is entitled for availing the benefit of exemption under Notification No. 8/2003-CE (SSI exemption) or not? and
(b) In case the partner of the firm dies whether the proceedings against the appellant firm are sustainable or not.
7. The issue No.1 has been dealt by this Tribunal in the case of M/s.Sagar Machine Tools Pvt.Ltd., the unit No.2 vide Final Order No.60147/2016 dated 24.05.2016 wherein this Tribunal has observed as under:
7. It is fact on record that M/s Sagar Engineering Works was partnership firm since, 1976 consisting of the Sh. Jaswant Singh (Proprietor of the Appellant) and Sh. Amarjit Singh Director of the M/s SMT. The said partnership firm was dissolved on 07.04.1999. Further, the appellant is using the said brand name since then and the appellant has produced invoices bearing brand name SAGAR for the said period. It is also fact on the record that the said brand name i.e. SAGAR was registered in the name of M/s Sagar Machine Tools Pvt. Ltd. w.e.f 05.02.1996. This fact has not been denied by Sh. Amarjit Singh Director of the M/s SMT. As per the invoice shown by the appellant; they were using this brand name prior to 05.02.1996. We also take note of the fact that initially the brand in question was registered in the name of the father of the appellant and is registered in the name of other independent parties, therefore, the brand in question is a common brand, hence nobody can claim the sole owner of the brand. In that circumstances, the case law relied by the Ld. Counsel in the case of Kali Aerated Water Works (Supra) is applicable to the facts of this case.
8. We also find that, the appellant is entitled to avail benefit of the said Notification No. 8/03-CE dated 01.03.2003 as the appellant is using the said brand name prior to the brand name registered for the other person. This issue also came up before this Tribunal in the case Novel Tronics Corporation (Supra) wherein the issue of denial of exemption under Notification before this Tribunal on the ground that the assessee was using brand name from 1993 where is the registered owner of said brand name which came into existence only in 1995. In these facts, this tribunal has observed as under:
2. After examining the records and hearing the learned JDR, we note that the appellate Commissioners finding that the brand names in question belonged to the buyer is under challenge. The goods were cleared under two brand names, South Safe and Crystal. The lower appellate authority found that the respondents had been using the brand names south safe right from 1993 and that the buyer-company viz M/s Southern Saftey Systems Ltd. came into existence only in 1995. It was also found that the said company had not applied for registration of the brand name. A brand name which had been in use by the respondents prior to 1995 cannot be held to have belonged to the buyer-company which came into existence only in 1995. The buyer Company did not apply for registration of the brand name in their favour, either. In the circumstances, the finding of the lower appellate authority has only to be sustained. Accordingly, it is held that the goods in question were cleared by the respondents under their own brand name and they were eligible for SSI benefit.
9. In the facts of the case, the decision of this Tribunal in the case of Novel Tronics Corporation (Supra) is applicable. Therefore, relying on this decision of this Tribunal in the case of Novel Tronic Corporation (Supra), we hold that the appellant is the owner of brand name SAGAR as the appellant was using the said brand name prior to M/s SMT. Therefore, the appellant is entitled to avail benefit of exemption Notification No. 8/2003-CE dated 01.03.2003 as the appellant has using the brand name prior to the registered owner of the brand name and the brand name is a common brand. Accordingly, impugned order deserves no merits, the same is set aside.
In result, the appeal is allowed with consequential relief (if any).
8. In view of above, we hold that the appellant is entitled for the benefit of exemption under Notification No. 8/2003-CE (SSI exemption) being user of the said brand name prior to the brand name registered in the name of SMT and the fact of usage has not been disputed by the Revenue.
9. With regard to the issue No.2, we find that this issue came up before the Apex Court in the case of Shabina Abrahma (Supra) wherein the Apex Court has examined the issue and observed as under:
23.?The question that arose in the aforesaid case was whether a dissolved firm could be re-assessed to sales tax in respect of its pre-dissolution turnover. By a two to one (2:1), decision, this Court held that the Bombay Act contained the necessary provisions to re-assess such a dissolved firm in respect of its pre-dissolution turnover. The majority judgment referred to the definition of dealer in the Bombay Act of 1953 and referred to this Courts judgment in State of Punjab v. M/s. Jullunder Vegetables Syndicate (supra). We find that the majority judgment of this Court relied heavily on the fact that dishonest persons may dissolve a firm in order to escape liability to assessment of taxes legitimately due from them but which have escaped assessment. In paragraph 19, the majority held :
It is plausible that a distinction ought to be made between the death of an individual and the dissolution of a firm. Human beings, as assessees, are not generally known to court death to evade taxes. Death, normally, is not volitional and it is understandable that on the death of an individual, his liability to be assessed to tax should come to an end unless the statute provides to the contrary. With firms it is different, because a firm which incurs during its existence a liability to pay sales-tax may, with a little ingenuity, evade its liability by the voluntary act of dissolution. The dissolution of a firm could therefore, be viewed differently from the death of an individual and the partners could be denied the advantage of their own wrong. But we do not want to strike this new path because the Jullundur case (supra) and the two cases which follow it have likened the dissolution of a firm to the death of an individual. Let us therefore, proceed to examine the other provisions of the 1953 Act. It then went on to quote Section 15(1) of the Bombay Sales Tax Act, 1953 and then arrived at this conclusion :
22.?Section 15(1) contains an important clause that action thereunder can be taken by the Collector after giving a notice to the assessee under Section 14(3) of the Act within the prescribed period. Once such a notice is given, the Collector gets the jurisdiction to assess or re-assess the amount of tax due from the dealer and all the provisions of the Act shall apply accordingly as if the notice were a notice served under Section 14(3). Section 14(3) speaks of the power of the Collector to assess the amount of tax due from the dealer after giving notice to him, if the Collector is not satisfied that the returns furnished are correct and complete. The jurisdiction to assess or reassess which is conferred by section 15(1) is thus equated with the original jurisdiction to assess the dealer under section 14. By this method, the continuity of the legal personality of the assessee is maintained in order to enable the assessment of turnover which has escaped assessment. It is no answer to a notice under Section 15 that the partners having dissolved the firm, the assessment cannot be reopened. It puts a premium on ones credulity to accept that having created a special jurisdiction to assess or reassess an escaped turnover, the Legislature permitted that salutary jurisdiction to be defeated by the device of dissolution. The argument of the appellants really comes to this : suppress the turnover, evade the sales-tax, dissolve the firm and earn your freedom from taxation. The Court then went on to add :
24.?Section 15A confers on the Collector analogous powers to asses or re-assess a dealer for taxes due prior to November 21, 1956 when the States were reorganised, if either no assessment was made for the prior period or if any turnover had escaped assessment. This provision, like the one contained in Section 15, is of general application and makes no exception in favour of dissolved firm. Therefore, if a firm was not assessed prior to the re-organisation of States or if any part of its turnover had escaped assessment, it is competent to the Collector to assess or re-assess the firm notwithstanding its subsequent dissolution. This is the necessary implication of Section 15A. It must follow as a corollary that the power to rectify a mistake apparent from the record can be exercised by the Collector under Section 35 of the Act of 1953 even after the dissolution of an assessed firm, though on conditions specified in the section. The section contains a compelling implication that evident errors can be corrected no matter whether the firm is in existence or is dissolved. Dissolution is not a panacea for liability to pay sales-tax. It also added in paragraph 32 :
It is indisputable that the first appellant firm was liable to be charged to sales tax on its business turnover. The charging provisions are contained in Chapter III of the Act of 1953 and Chapter II of the Act of 1959. In this appeal, we have to construe the machinery provisions of those Acts. In accordance with the view taken in the cases cited above, the machinery sections ought to be construed so as to effectuate the charging sections. The construction which we have placed on the machinery provisions of the 1953 Act will give meaning and content to the charging sections, in the sense that our construction will effectuate the provision contained in the charging sections. The resourcefulness and ingenuity which go into well-timed dissolution of firms ought not to be allowed to be used as convenient instruments of tax evasion. As observed by Lord Dunedin in Whitney v. Commissioners of Inland Revenue :
A statute is designed to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission of clear direction makes that end unattainable. Far from there being any crucial omission or a clear direction in the present case which would make the end unattainable, the various provisions to which we have drawn attention leave it in no doubt that a dissolved firm can be assessed on its pre-dissolution turnover.
24.?It is clear that on a conjoint reading of these paragraphs this Court found that the machinery provisions contained in the Bombay Sales Tax Act, 1953, were sufficient to reassess a dissolved firm in respect of income that had escaped assessment before its dissolution. A distinction was drawn between an individual who dies and a firm that is dissolved as a device to evade tax. The Court laid great stress on the provision contained in Section 15(1) of the said Act by which the jurisdiction to assess or reassess under Section 15(1) is equated with the original jurisdiction to assess the dealer under Section 14. By this method, the Court found the continuity of the legal personality of the assessee is maintained in order to enable the assessment of turnover which has escaped assessment. The crucial difference, therefore, between Section 15(1) of the Bombay Sales Tax Act, 1953 and Section 11A of the Central Excises and Salt Act is that Section 11A does not contain any such provision as is contained in Section 15(1) which equates the jurisdiction to assess or reassess with the original jurisdiction to assess the dealer in the very first place. Further, this Court also construed Section 19 of the Bombay Sales Tax Act, 1959 which would throw light on the earlier Bombay Sales Tax Act, 1953, as containing the necessary machinery provisions to assess dissolved firms in respect of escaped turnover pre-dissolution. Hence, this Court added :
35.?It is relevant, though we did not refer to this aspect while dealing with the provisions of the 1953 Act, that section 19(3) of the 1959 Act contains a clear indication that the legislature intended that a dissolved firm could be assessed under the 1953 Act also. Section 19(3) speaks of the liability of partners for the tax due from a dissolved firm and provides that they shall be jointly and severally liable to pay the tax due from the firm under the Act of 1959 or under any earlier law, whether such tax has been assessed before or after dissolution. Section 2(12) of the 1959 Act defines earlier law to mean, inter alia, the Bombay Sales Tax Act, 1953. Thus, one of the postulates of section 19(3) at any rate is that a dissolved firm could be assessed under the 1953 Act. Such a postulate accords with the principle that if the legislature provided for a charge of sales-tax, it could not have intended to render that charge ineffective by permitting the partners to dissolve the firm, an easy enough thing to do. Nothing, in fact, would be easier to evade a tax liability than to declare that the firm, admittedly liable to pay tax, has been dissolved. Section 19(3) of the 1959 Act not only makes clear what was necessarily implied in the 1953 Act, but it throws additional light on the true construction of the earlier law. But we thought it advisable to keep section 19(3) of the 1959 Act apart while construing the 1953 Act because it is the Courts, not the legislature, who have to construe the laws of the land authoritatively. As said in Craies on Statute Law :
Except as a parliamentary exposition, subsequent Acts are not to be relied on as an aid to the construction of prior unambiguous Acts. (6th Ed., p. 146).
The limited use which may be made of the language of Section 19(3) of the 1959 Act, though such a course is unnecessary, is for saying that it serves to throw some light on the Act of 1953, in case the argument is that the Act of 1953 is ambiguous.
36.?Section 19(3) being quite clear and explicit, it is unnecessary to dwell on the other provisions of the Act of 1959 in order to show that a dissolved firm can be assessed under it. We may only point out that the Act of 1959 contains provisions similar to those in Sections 15, 15A and 35 of the Act of 1953 on which we have dwelt at some length. Those provisions can be found in Sections 35, 35A and 62 of the Act.
25.?A reading of the ratio of the majority decision contained in Murarilals case (supra) would lead to the conclusion that the necessary machinery provisions were already contained in the Bombay Sales Tax Act, 1953 which were good enough to bring into the tax net persons who wished to evade taxes by the expedient of dissolving a partnership firm. The fact situation in the present case is entirely different. In the present case an individual proprietor has died through natural causes and it is nobodys case that he has maneuvered his own death in order to evade excise duty. Interestingly, in the written submissions filed by revenue, revenue has argued as follows :-
It is pertinent to mention that in the present case, Shri George Varghese (predecessor in interest of the appellants herein) was doing business in the name of manufacturing unit namely M/s. Kerala Tyre & Rubber Company and after the death of Shri George Varghese, his legal representatives (appellants herein) might have been in possession of the plant, machinery, stock, etc., and continuing the same business, but might be in some other name in order to avoid the excise duty chargeable to the previous manufacturing unit.
26.?It is clear on a reading of the aforesaid paragraph that what revenue is asking us to do is to stretch the machinery provisions of the Central Excises and Salt Act, 1944 on the basis of surmises and conjectures. This we are afraid is not possible. Before leaving the judgment in Murarilals case (supra), we wish to add that so far as partnership firms are concerned, the Income Tax Act contains a specific provision in Section 189(1) which introduces a fiction qua dissolved firms. It states that where a firm is dissolved, the Assessing Officer shall make an assessment of the total income of the firm as if no such dissolution had taken place and all the provisions of the Income Tax Act would apply to assessment of such dissolved firm. Interestingly enough, this provision is referred to only in the minority judgment in M/s. Murarilals case (supra).
27.?The argument that Section 11A of the Central Excises and Salt Act is a machinery provision which must be construed to make it workable can be met by stating that there is no charge to excise duty under the main charging provision of a dead person, which has been referred to while discussing Section 11A read with the definition of assessee earlier in this judgment.
28.?Learned counsel for the revenue also relied upon the definition of a person under the General Clauses Act, 1897. Section 3(42) of the said Act defines person as under :-
(42)?Person shall include any company or association or body of individuals whether incorporated or not. It will be noticed that this definition does not take us any further as it does not include legal representatives of persons who are since deceased. Equally, Section 6 of the Central Excises Act, which prescribes a procedure for registration of certain persons who are engaged in the process of production or manufacture of any specified goods mentioned in the schedule to the said Act does not throw any light on the question at hand as it says nothing about how a dead persons assessment is to continue after his death in respect of excise duty that may have escaped assessment. Also, the judgments cited on behalf of revenue, namely, Yeshwantrao v. The Commissioner of Wealth Tax, Bangalore, AIR 1967 SC 135 at pages 140, 141 para 18 : (1966) Suppl. SCR 419 at 429 A-B, C.A. Abraham v. The Income-Tax Officer, Kottayam & Another, AIR 1961 SC 609 at 612 para 6 : (1961) 2 SCR 765 at page 771, The State of Tamil Nadu v. M.K. Kandaswami & Others, AIR 1975 SC 1871 (para 26) : (1975) 4 SCC 745 (para 26), Commissioner of Sales Tax, Delhi & Others v. Shri Krishna Engineering Co. & Others, (2005) 2 SCC 695, page 702, 703 paras 19 to 23, all enunciate principles dealing with tax evasion in the context of construing provisions which are designed to prevent tax evasion. The question at hand is very different - it only deals with whether the Central Excises and Salt Act contains the necessary provisions to continue assessment proceedings against a dead man in respect of excise duty payable by him after his death, which is a question which has no relation to the construction of provisions designed to prevent tax evasion.
31.?The impugned judgment in the present case has referred to Ellis C. Reids case but has not extracted the real ratio contained therein. It then goes on to say that this is a case of short-levy which has been noticed during the lifetime of the deceased and then goes on to state that equally therefore, legal representatives of a manufacturer who had paid excess duty would not by the self-same reasoning be able to claim such excess amount paid by the deceased. Neither of these reasons are reasons which refer to any provision of law. Apart from this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly. We wholly disapprove of the approach of the High Court. It flies in the face of first principle when it comes to taxing statutes. It is therefore, necessary to reiterate the law as it stands. In Partington v. A.G., (1869) LR 4 HL 100 at 122, Lord Cairns stated :
If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute.
32.?In Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 at 71, Rowlatt J. laid down :
In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.
33.?This Court has, in a plethora of judgments, referred to the aforesaid principles. Suffice it to quote from one of such judgments of this Court in Commissioner of Sales Tax, Uttar Pradesh v. Modi Sugar Mills, 1961 (2) SCR 189 at 198 :-
In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency.
34.?We are, therefore, of the view that this appeal must be allowed and the judgment of the High Court of Kerala is, accordingly set aside and that of the learned Single Judge restored.
10. Therefore, in the light of the above observations made by the Apex Court in the case of Shabina Abrahma (Supra), we hold that in case death of the partner of the firm, the demand of duty cannot be fastened on the firm which has been dissolved on the death of the partner. Therefore, the demand of duty against the dissolved firm is not sustainable.
11. As the both issues are decided in favour of the appellant, therefore, the impugned order is set aside and the appeal is allowed with consequential relief, if any.
(Pronounced in the open court) (Raju) Ashok Jindal Member (Technical) Member (Judicial) mk 1