Advocate Akhilesh Kumar Sah
Whether An Assessment Proceeding Under The Central Excises and Salt Act, 1944, Can Continue Against The Legal Representatives/Estate Of A Sole Proprietor/Manufacturer After His/ Her Demise, Where There Is No Provision In This Respect In The Tax Statute?
Hon’ble Supreme Court in Shabina Abraham & Ors. vs. Collector Of Central Excise & Customs [Civil Appeal no.5802 of 2005, decided on 29, July, 2015], has observed the speak of Benjamin Franklin in his letter of November 13, 1789 to Jean Baptiste Leroy that “Nothing is certain except death and taxes.” The Apex Court has further observed in this Appeal that to tax the dead is a contradiction in terms. Tax laws are made by the living to tax the living. What survives the dead person is what is left behind in the form of such person’s property. This appeal raises questions as to whether the dead person’s property, in the form of his or her estate, can be taxed without the necessary machinery provisions in a tax statute. The precise question that arises in the present case is whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead.
Facts In Brief Of The Shabina Abraham Case (supra):
The facts of the case were that one Shri George Varghese was the sole proprietor of Kerala Tyre and Rubber Company Limited. By October 1985, this proprietary concern had stopped manufacture and production of tread rubber. By a show cause notice dated 12.6.1987, for the period January 1983 to December 1985, it was alleged that the assessee 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 then stood, of the Central Excises 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 14.3.1989, the said Shri George Varghese died. As a result of his death, a second show cause notice was issued on 18.10.1989 to his wife and four daughters asking them to make submissions with regard to the demand of duty made in the show cause notice dated 12.6.1987. By their reply dated 25.10.1989, the said legal heirs of the deceased stated that none of them had any personal association with the deceased in his proprietary business and were not in a position to locate any business records. They submitted that the proceedings initiated against the deceased abated on his death in the absence of any provision in the Central Excises and Salt Act to continue assessment proceedings against a dead person in the hands of the legal representatives. The said show cause notice was, therefore, challenged as being without jurisdiction.
The Apex Court Decision In Brief:
The Supreme Court observed in the case that the position under the Income Tax Act, 1922 was also the same until Section 24B was introduced by the Income Tax (Second Amendment) Act of 1933. Prior to the introduction of the aforesaid Section, the Bombay High Court had occasion to deal with a similar question in Commissioner of Income Tax, Bombay vs. Ellis C. Reid, A.I.R. 1931 Bombay 333.
Pursuant to the 12th Law Commission Report, a new Income Tax Act was passed in 1961 which contained elaborate provisions for assessment of deceased persons after they die. The anomalies left by Section 24B of the 1922 Act were sought to be rectified in the new provisions contained in the 1961 Act.
The Apex Court after taking into account the statutory provisions contained in the Central Excises and Salt Act at the relevant time, the Central Excises Rules, 1944, the decision in the case of Commissioner of Income Tax, Bombay vs. James Anderson,  51 I.T.R. 345, Commissioner of Central Excise, Bangalore –III vs. Dhiren Gandhi, 2012 (281) E.L.T. 64 (Karnataka) as well as other judicial rulings, the relevant provisions of the Bombay Sales Tax Act, 1953, the definition of a “person” under the General Clauses Act, 1897, the rival submissions of the Counsels of the case, allowed the appeal and the judgment of the Kerala High Court was set aside.
While concluding, the Supreme Court observed a portion of its earlier decision in the case of Commissioner of Sales Tax Commissioner, Uttar Pradesh vs. 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.”
The ruling of the Apex Court in the Shabina Abraham case (supra), is eye- opener for the legislative authorities.