Successor liability for excise dues upheld where undertaking covered past liabilities and timely payment reduced penalty

A successor factory management that obtained registration after giving a written undertaking to discharge past and future liabilities was held liable for duty and allied dues arising from clandestine removals committed before the takeover. The Tribunal relied on the undertaking and the successor-liability proviso to Section 11 of the Central Excise Act, 1944, concluding that the appellant could not avoid recovery on the ground that the removals occurred before the transfer or before notice. It also granted a limited penalty benefit under Section 11AC, directing that if duty, interest and penalty were paid within 30 days, the penalty would be reduced to 25% of the duty.

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Issues: (i) Whether the appellant, as successor of the earlier factory management, was liable for duty and allied dues arising from clandestine removal committed before the takeover; (ii) Whether the penalty under Section 11AC was liable to be reduced to 25% on payment within 30 days.

Issue (i): Whether the appellant, as successor of the earlier factory management, was liable for duty and allied dues arising from clandestine removal committed before the takeover.

Analysis: The appellant had obtained registration for the factory after giving a written undertaking to discharge past and future liabilities and to respond to pending proceedings. The Tribunal treated this undertaking as binding and held that the appellant could not later disown liability on the ground that the removal had taken place before the takeover or before issue of notice. The Tribunal also relied on the proviso to Section 11 of the Central Excise Act, 1944, which permits recovery of dues from the successor in the circumstances of transfer or change in ownership.

Conclusion: The appellant was held liable for the duty demand and allied dues.

Issue (ii): Whether the penalty under Section 11AC was liable to be reduced to 25% on payment within 30 days.

Analysis: The Tribunal granted a limited concession on penalty and directed that if the duty, interest and penalty were paid within 30 days of communication of the order, the penalty would stand reduced to 25% of the duty.

Conclusion: The appellant was granted conditional reduction of penalty under Section 11AC.

Final Conclusion: The appeal failed on the merits, with the duty demand and penalty sustained, subject to the limited statutory benefit on timely payment of penalty.

Ratio Decidendi: A successor who obtains registration and gives an undertaking to past and future liabilities can be held liable for dues arising from the predecessor's business, and recovery may be enforced under the successor-liability proviso to Section 11 of the Central Excise Act, 1944.

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