Case Law Details
Jawahar K Vakharia Vs C.C.E. & S.T. (CESTAT Ahmedabad)
Introduction: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Ahmedabad, in a notable judgment, held that a retired partner is not liable for the excise duty dues of his former partnership firm. This decision arose in the case of Jawahar K Vakharia Vs C.C.E. & S.T., challenging the recovery of dues from the appellant who retired before the period for which the duty demand was levied.
Analysis: This ruling has far-reaching implications, primarily because it underscores the principle that a partner cannot be held liable for debts incurred by the firm after his retirement. The Tribunal observed that the Learned Commissioner (Appeal) failed to examine the vital fact that the appellant had retired from the partnership before the period when the demand was raised. This examination of facts would have been critical in establishing whether any recovery could be made from the appellant.
Conclusion: The CESTAT Ahmedabad, in a decisive move, set aside the previous order and remanded the matter for reconsideration. This landmark judgment reinforces the legal principle that a retired partner should not be held accountable for the firm’s debts accrued after his retirement. It emphasizes the importance of thorough investigation and adherence to the principles of natural justice in such matters. The ruling is set to have a profound impact on future cases involving similar scenarios.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The brief facts of the case are that there is a confirmed demand of duty against a partnership firm namely K.J. Vakharia and Company. The department issued notice for demand of dues of said partnership firm to the appellant Shri Jawahr K. Vakahria along with the partnership firm K. J. Vakharia and company and other two persons. The appellant being aggrieved, with the said demand notice, filed an appeal before the Commissioner Appeal. The Learned Commissioner appeal held that there is no infirmity in the letter (notice of demand to defaulter) dated 14.02.2005 issued by the Deputy Commissioner of Central Excise and Customs Division‑ ii, Surat-i and the appeal was rejected. It is this Order-in-Appeal against which the present appeal was filed by the appellant.
2. Shri Mukund Chauhan, Learned Counsel, appearing on behalf of the appellant submits that the recovery notice dated 14.02.2005 was issued to the appellant, against the dues adjudged into Orders-in-Original No. 01/MP/2000 dated 28.01.2000 and OIO No. SRT-I/Division-II/ADJ276/OA/03 dated 31.03.2004 for Rs. 1,59,87,146/- and 32,726/-
2.1 He submits that as regard the OIO dated 28.01.2000 the period involved was April-1994 to August-1994. Whereas, the present appellant Shri Javahar K Vakharia taken retirement from the partnership firm on August- 1993, which is much before the period for which duty demand is involved. Moreover, no statement was recorded of the appellant, therefore, for this reason of the dues of partnership firm M\s K. J. Vakharia and Company cannot be recovered from the present appellant.
3. Shri, R. K. Agarwal, Learned Superintendent (AR), appearing on behalf of the revenue reiterates the findings of the impugned order.
4. On careful consideration of the submission made by both the sides and perusal of record, we find that the Learned Commissioner (Appeal) merely by reproducing in section 11 held that there is no infirmity in the ‘notice of demand to defaulter dated 14.06.2004’. However as per the submission made by the Learned Counsel, we find that the Learned Commissioner appeal has not examined the vital facts of the case that during the period, for which the demand was confirmed, which is sought to be recovered from the present appellant what was the status of the appellant.
4.1 As submitted by the Learned Counsel, the present appellant had resigned as a partner from the partnership firm in August, 1993 and the period involved in the present demand is April, 1994 to August 1994. On this basis it prima facie appears that the period for which the demand was raised, when the appellant was not a partner, how he can be held responsible for the demand. However, the Learned Commissioner has not examined this fact at all, which is very vital to arrive at conclusion whether, any recovery can be made from the present appellant.
4.2 We therefore, set aside the impugned order and remand the matter to the commissioner appeal for reconsidering the appeal before him by following the principle of natural justice.
5. Accordingly, the impugned order is set aside. Appeal is allowed by way of remand to the Learned Commissioner for passing a fresh order within a period of two months from the date of this order.
(Pronounced in the open court on 24.07.2023)
