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Issues: (i) whether the original transferor had locus standi to challenge recovery proceedings and the demand raised against the successor unit; (ii) whether duty already paid on split yarn could be adjusted against the demand raised on mother yarn and whether the Commissioner was required to verify the claim from the seized records; (iii) whether the transferor's appeal against an order confirming demand against the successor was maintainable.
Issue (i): whether the original transferor had locus standi to challenge recovery proceedings and the demand raised against the successor unit.
Analysis: The liability arose in the context of a transfer of the undertaking by sale deed and supplementary agreement, under which the transferee undertook current and contingent excise liabilities. Rule 230(2) of the Central Excise Rules, 1944 was relied on to hold that, upon transfer or change in ownership, the successor could be proceeded against for duty due from the manufacturer up to the time of transfer. In these circumstances, the original transferor could not establish a legal grievance against the recovery action taken against the successor.
Conclusion: The challenge by the original transferor to the recovery proceedings failed, and the objection to locus standi was rejected.
Issue (ii): whether duty already paid on split yarn could be adjusted against the demand raised on mother yarn and whether the Commissioner was required to verify the claim from the seized records.
Analysis: The assessee asserted that substantial duty had already been paid on split yarn during the relevant period and that the Department had seized the contemporaneous records. The Tribunal found that the claim of prior payment had not been properly verified, and the explanation for non-verification was unsatisfactory. Since the earlier direction required examination of the departmental records, the demand could not be sustained without a proper factual verification of the duty already paid.
Conclusion: The demand was set aside and the matter was remanded to the jurisdictional Commissioner for fresh verification and reconsideration.
Issue (iii): whether the transferor's appeal against an order confirming demand against the successor was maintainable.
Analysis: The appeal was directed against an order confirming demand against the successor entity, while the transferor itself had already divested the undertaking and had no continuing legal liability shown on the record. The appeal sought relief in respect of a demand that stood fastened on the successor under the transfer arrangements and the statutory framework governing successor liability.
Conclusion: The appeal by the transferor was held to be not maintainable and was rejected.
Final Conclusion: The appeals were disposed of by rejecting the challenges to locus standi and maintainability, while granting relief on the demand-quantification issue by remanding it for fresh verification of the duty-payment records.
Ratio Decidendi: Where an undertaking is transferred with contingent excise liabilities and the statutory scheme permits recovery from the successor, the transferor cannot challenge recovery against the successor merely on ownership grounds; however, a demand cannot be sustained without proper verification of contemporaneous records when prior payment is specifically asserted.
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