Pre-vesting excise duty liability cannot be enforced against a nationalised undertaking after statutory vesting.

Under the nationalisation scheme, the undertaking and the erstwhile owner's rights vested in the Central Government and then in the appellant free from pre-vesting liabilities. Excise duty attributable to the period before vesting could not be recovered from the appellant, because the statute channels such claims to the Commissioner of Payments under Section 18, and revenue dues form part of the Second Schedule. The demand was therefore unsustainable against the appellant, and the adjudication also did not address this specific defence.

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Issues: Whether the appellant, after nationalisation and vesting of the undertaking, could be made liable for excise duty allegedly due from the erstwhile owner for a period prior to the vesting date.

Analysis: Under the nationalisation Act and the relevant notification, the undertaking and the right, title and interest of the erstwhile owner vested first in the Central Government and thereafter in the appellant free from all encumbrances and liabilities. The Act also provides a special mechanism under Section 18 for claims against the erstwhile owner to be pursued before the Commissioner of Payments, and revenue dues are included in the Second Schedule. In that statutory scheme, recovery of such pre-vesting dues could not be enforced against the appellant, and the adjudication order had not dealt with this specific plea.

Conclusion: The excise duty demand against the appellant was not sustainable and was set aside.

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