Excise duty liability follows the actual manufacturer; a business purchaser is not liable for predecessor tax dues without a legal basis.

Excise duty liability under the Act and Rules rests on the actual manufacturer for the relevant period, and a purchaser of a business is not automatically fastened with the seller's antecedent tax dues absent an enforceable basis in law. A sale deed excluding prior debts, liabilities, taxes and charges reinforces that past duty cannot be recovered from the transferee, though the Department may proceed against the erstwhile firm and its partners in accordance with law. Where the transferee voluntarily disclosed its manufacturing activity, any penalty may still be moderated if found excessive in relation to the duty involved.

---

---

Issues: (i) Whether duty for the period 1985-86 could be fastened on the present partners who purchased the firm after that period, and (ii) whether the penalty imposed on the appellants required reduction.

Issue (i): Whether duty for the period 1985-86 could be fastened on the present partners who purchased the firm after that period.

Analysis: Liability to pay excise duty under the scheme of the Act and the Rules rests on the actual manufacturer. The obligation to take out a licence also lies on the manufacturer. Rule 225 contemplates responsibility of the producer, manufacturer or licensee for contravention by removal of excisable goods, but that does not justify fastening past duty liability on persons who were not the manufacturers during the relevant period. The sale deed specifically stated that the purchaser would not be liable for antecedent debts, liabilities, taxes or charges standing in the name of the firm up to the date of sale. The Department was not barred from proceeding against the erstwhile firm and its partners for recovery in accordance with law.

Conclusion: The demand for duty for the period 1985-86 against the appellants was not sustainable and was set aside.

Issue (ii): Whether the penalty imposed on the appellants required reduction.

Analysis: The appellants had voluntarily come forward with a declaration regarding their manufacturing activity. In the circumstances, the penalty was found to be excessive having regard to the duty involved.

Conclusion: The penalty was reduced from Rs. 15,000/- to Rs. 5,000/-.

Final Conclusion: The appeal succeeded in part, with the duty demand for 1985-86 annulled and the penalty substantially reduced, while leaving the Department free to pursue recovery against the erstwhile firm and its partners in accordance with law.

Ratio Decidendi: Excise duty and licence liability attach to the actual manufacturer for the relevant period, and a purchaser of the business is not liable for the predecessor's past tax dues absent an enforceable basis to fasten such liability on the transferee.

---