Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5802 OF 2005

SHABINA ABRAHAM & ORS. … APPELLANTS

VERSUS

COLLECTOR OF CENTRAL EXCISE

& CUSTOMS ...RESPONDENT

J U D G M E N T

R.F. Nariman, J.

1.“Nothing is certain except death and taxes.” Thus spake

Benjamin Franklin in his letter of November 13, 1789 to Jean

Baptiste Leroy. To tax the dead is a contradiction in terms. Tax

laws are made by the living to tax the living. What survives the

dead person is what is left behind in the form of such person’s

property. This appeal raises questions as to whether the dead

person’s property, in the form of his or her estate, can be taxed

without the necessary machinery provisions in a tax statute.

The precise question that arises in the present case is whether

an assessment proceeding under the Central Excises and Salt

1

Page 2 Act, 1944, can continue against the legal representatives/estate

of a sole proprietor/manufacturer after he is dead. The facts of

the case are as follows.

2.One Shri George Varghese was the sole proprietor of

Kerala Tyre and Rubber Company Limited. By October 1985,

this proprietary concern had stopped manufacture and

production of tread rubber. By a show cause notice dated

12.6.1987, for the period January 1983 to December 1985, it

was alleged that the assessee had manufactured and cleared

tread rubber from the factory premises by suppressing the fact

of such production and removal with an intent to evade

payment of excise duty. The provisions of Section 11A, as they

then stood, of the Central Excises and Salt Act were invoked

and duty amounting to Rs.74,35,242/- was sought to be

recovered from the assessee together with imposition of

penalty for clandestine removal.

3.On 14.3.1989, the said Shri George Varghese died. As a

result of his death, a second show cause notice was issued on

18.10.1989 to his wife and four daughters asking them to make

submissions with regard to the demand of duty made in the

2

Page 3 show cause notice dated 12.6.1987. By their reply dated

25.10.1989, the said legal heirs of the deceased stated that

none of them had any personal association with the deceased

in his proprietary business and were not in a position to locate

any business records. They submitted that the proceedings

initiated against the deceased abated on his death in the

absence of any provision in the Central Excises and Salt Act to

continue assessment proceedings against a dead person in the

hands of the legal representatives. The said show cause notice

was, therefore, challenged as being without jurisdiction.

4.As the Central Excise Authorities posted the matter for

hearing and refused to pass an order on the maintainability of

the show cause notice alone, the legal heirs approached the

High Court under Article 226 of the Constitution by filing a Writ

Petition in January, 1990. The learned single Judge of the High

Court quashed the proceedings against the legal heirs stating

that the Central Excises and Salt Act did not contain any

provisions for continuing assessment proceedings against a

dead person. Against this, revenue went in appeal. The

3

Page 4 Division Bench of the High Court of Kerala reversed the single

Judge’s judgment.

5.Shri Rajshekhar Rao, learned counsel appearing for the

legal heirs made submissions before us with great clarity and

persuasiveness. He submitted that a reading of Sections 2(f),

(3), Section 4(3)(a), Section 11 and 11A as they stood at the

relevant time would show that unlike the provisions of the

Income Tax Act, there is no machinery provision in the Central

Excises and Salt Act for continuing assessment proceedings

against a dead individual. He stressed the fact that an

assessee under the said Act means “the person” who is liable

to pay the duty of excise under this Act and further stressed the

fact that in cases of short levy, such duty can only be recovered

from a person who is chargeable with the duty that has been

short levied. He further invited our attention to the Central

Excise Rules and Rules 2(3) and 7 in particular to buttress his

submission that there is no machinery provision contained

either in the Act or in the Rules to proceed against a dead

person’s legal heirs. He cited certain judgments before us

which we will advert to later on in this judgment.

4

Page 5 6.Shri A.K. Panda, learned senior advocate appearing on

behalf of the revenue contended that a close reading of Section

11 of the Central Excises and Salt Act will indicate that sums

are recoverable from an assessee by an attachment and sale of

excisable goods belonging to such assessee and further that if

the amount so recoverable falls short, it can be recovered from

the person himself as an arrear of land revenue. Inasmuch as

a dead man’s property can be attached and sold and

proceeded against, it is clear that the necessary machinery is

contained in the Central Excises and Salt Act. His further

submission is that Section 11A of the said Act is a machinery

provision and, therefore, the rule to be applied is that that

construction should be preferred which makes a machinery

Section workable. He also referred us to the definition of

“person” in Section 3(42) of the General Clauses Act to buttress

his submission that a legal representative would be included

within a “person” as so defined. He referred us to Section 6 of

the said Act dealing with registration and argued that

registration of a person makes him a legal entity liable to be

assessed as such. His other submission is that the general

5

Page 6 principle, namely, that a cause of action abates when a person

who institutes a proceeding dies is not applicable in the present

case and cited various judgments before us in support of the

said principle. He also submitted that the position under the

Income Tax Act would be entirely different as income tax is a

tax leviable on a person whereas a duty of excise is leviable on

manufacture of goods. He also cited a number of decisions

which will be dealt with in the course of this judgment.

7.We have heard learned counsel for the parties. Before

entering into a discussion on the merits of the case, it is

necessary to set out the statutory provisions contained in the

Central Excises and Salt Act at the relevant time, which are

given below:-

2(f) "manufacture" includes any process incidental

or ancillary to the completion of a manufactured

product; and

(i)In relation to tobacco includes the preparation

of cigarettes, cigars, cheroots, biris, cigarette

or pipe or hookah tobacco, chewing tobacco

or snuff,

(ia) in relation to manufactured tobacco,

includes the labeling or re-labelling of

containers and repacking from bulk packs to

retail packs or the adoption of any other

treatment to render the product marketable to

the consumer.

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Page 7 (ii)In relation to salt, includes collection, removal,

preparation, steeping, evaporation, boiling, or

any one or more of these processes, the

separation or purification of salt obtained in

the manufacture of saltpeter, the separation of

salt from earth or other substance so as to

produce elementary salt, and the excavation

or removal of natural saline deposits or

efflorescence;

(iii)In relation to patent or proprietary medicines,

as defined in Item No. 14-E of the first

Schedule and in relation to cosmetics and

toilet preparations as defined in Item No.14-F

of that Schedule, includes the conversion of

powder into tablets or capsules, the labeling

or relabeling of containers intended for

consumers and repacking from bulk packs to

retail packs or the adoption of any other

treatment to render the product marketable to

the consumers;

(iv)In relation to goods comprised to Item

No.18-A of the First Schedule, includes sizing,

beaming, warping, wrapping, winding or

reeling, or any one or more of these

processes, or the conversion of any form of

the said goods into another form of such

goods;

And the word “manufacturer” shall be

construed accordingly and shall include not

only a person who employs hired labour in the

production or manufacture of excisable goods,

but also any person who engages in their

production or manufacture on his own

account.”

3.Duties specified in the First Schedule to be

levied. (1) There shall be levied and collected in

such manner as may be prescribed duties of excise

on all excisable goods other than salt which are

produced or manufactured in India and a duty on

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Page 8 salt manufactured in, or imported by land into, any

part of India as, and at the rates set forth in the First

Schedule.

4. Valuation of excisable goods for purposes of

charging of duty of excise. –

(1) Where under this Act, the duty of excise is

chargeable on any excisable goods with reference

to value, such value shall, subject to the other

provisions of this section be deemed to be –

(a) the normal price thereof, that is to say, the price

at which such goods are ordinarily sold by the

assessee to a buyer in the course of wholesale

trade for delivery at the time and place of removal,

where the buyer is not a related person and the

price is the sole consideration for the sale:”

(4) For the purposes of this section, -

(a) “assessee” means the person who is liable to

pay the duty of excise under this Act and includes

his agent;”

11. Recovery of sums due to Government. - In

respect of duty and any other sums of any kind

payable to the Central Government under any of the

provisions of this Act or of the rules made

thereunder, the officer empowered by the

Central

Board of Excise and Customs constituted under the

Central Boards of Revenue Act, 1963, to levy such

duty or require the payment of such sums may

deduct the amount so payable from any money

owing to the person from whom such sums may be

recoverable or due which may be in his hands or

under his disposal or control, or may recover the

amount by attachment and sale of excisable goods

belonging to such person; and if the amount

payable is not so recovered he may prepare a

certificate signed by him specifying the amount due

from the person liable to pay the same and send it

to the Collector of the district in which such person

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Page 9 resides or conducts his business and the said

Collector, on receipt of such certificate, shall

proceed to recover from the said person the amount

specified therein as if it were an arrear of land

revenue.

11A. Recovery of duties not levied or not paid or

short levied or short paid or erroneously refunded.-

(1)When any duty of excise has not been levied

or paid or has been short-levied or short-paid or

erroneously refunded, a Central Excise Officer may,

within six months from the relevant date, serve

notice on the person chargeable with the duty which

has not been levied or paid or which has been

short-levied or short-paid or to whom the refund has

erroneously been made, requiring him to show

cause why he should not pay the amount specified

in the notice:

Provided that where any duty of excise has not

been levied or paid or has been short-levied or

short-paid or erroneously refunded by reason of

fraud, collusion or any wilful misstatement or

suppression of facts, or contravention of any of the

provisions of this Act or of the rules made

thereunder with intent to evade payment of duty, by

such person or his agent, the provisions of this

sub-section shall have effect,

as if for the words "six

months", the words "five years" were substituted.”

Rule 2(3) and Rule 7 of the Central Excises Rules, 1944, read

as under:

“2. Definitions.—In these rules, unless there is

anything repugnant in the subject or context—

(3) "assessee" means any person who is liable for

payment of duty assessed and also includes any

producer or manufacturer of excisable goods or a

9

Page 10 registered person of a private warehouse in which

excisable goods are stored;

7. Recovery of duty.- Every person who produces,

cures or manufactures any excisable goods, or who

stores such goods in a warehouse, shall pay the

duty or duties leviable on such goods, at such time

and place and to such persons as may be

designated, in, or under authority of these rules,

whether the payment of such duty or duties is

secured by bond or otherwise.

Provided that nothing contained in this rule shall

apply to molasses produced in a khandsari sugar

factory.

Provided further that in respect of goods falling

under Chapter 62 of the First Schedule to the

Central Excise Tariff Act, 1985 (5 of

1986), manufactured on job-work, the provisions of

these rules shall apply subject to the provisions of

rule 7AA.”

8.On a reading of the aforesaid provisions, it is clear that

Shri Rajshekhar Rao, learned counsel appearing on behalf of

the appellants is correct – there is in fact no separate

machinery provided by the Central Excises and Salt Act to

proceed against a dead person when it comes to assessing him

to tax under the Act.

9.The position under the Income Tax Act, 1922 was also the

same until Section 24B was introduced by the Income Tax

10

Page 11 (Second Amendment) Act of 1933. Prior to the introduction of

the aforesaid Section, the Bombay High Court had occasion to

deal with a similar question in Commissioner of Income Tax,

Bombay v. Ellis C. Reid, A.I.R. 1931 Bombay 333. A Division

Bench of the Bombay High Court noticed the definition of

“assessee” contained in Section 2(2) of the 1922 Act which

definition stated that “‘assessee’ means a person by whom

income tax is payable”. The Division Bench went on to say that

the words “or by whose estate” are conspicuous by their

absence in the said definition. The Division Bench then went

on to say that there appears to be nothing in the charging

Section to suggest that a man who has once become liable to

tax can avoid payment of tax by dying before such tax has been

assessed or paid. However, the Act has to contain appropriate

provisions for continuing an assessment and collecting tax from

the estate of a deceased person which was found to be absent

in the 1922 Act before it was amended by insertion of Section

24B. Having noticed various provisions of the said Act, the

Division Bench went on to say:-

11

Page 12 “These are, I think, the only material provisions, of

the Act. It is to be noticed that there is throughout

the Act no reference to the decease of a person on

whom the tax has been originally charged, and it is

very difficult to suppose the omission to have been

unintentional. It must have been present to the mind

of the legislature that whatever privileges the

payment of Income-tax may confer, the privilege of

immortality is not amongst them. Every person

liable to pay tax must necessarily die and in

practically every case, before the last installment

has been collected, and the legislature has not

chosen to make any provisions expressly dealing

with assessment of, or recovering payment from,

the estate of a deceased person. In order that the

Government may succeed and the assessment

made in this case may be held legal I think, one

must do a certain amount of violence to the

language of Section 23(4); I think one must either

do a certain amount of violence - I should say a

considerable amount of violence - to the language

of Section 27, or else hold that the privilege

conferred on a living person assessed under

Section 23(4) of getting the assessment set aside is

not to be enjoyed by the estate of a deceased

person - a distinction for which I can see no logical

reason. One must also construe Section 29 so as to

give to the word "assessee" one meaning in one

place and another meaning in another place.

In my judgment, in construing a taxing Act the

Court is not justified in straining the language in

order to hold a subject liable to tax. If the legislature

intends to assess the estate of a deceased person

to tax charged on the deceased in his lifetime, the

legislature must provide proper machinery and not

leave it to the Court to endeavor to extract the

appropriate machinery out of the very unsuitable

language of the statute. We are not concerned with

the case which may arise of the death of a person

12

Page 13 after assessment but before payment.” (at page

335)

10.Given the aforesaid decision of the Bombay High Court,

the legislature was quick to amend the Income Tax Act, 1922 by

inserting Section 24B which reads as follows:-

Section 24B : Tax of deceased person payable

by representative-

(1) Where a person dies, his executor, administrator

or other legal representative shall be liable to pay

out of the estate of the deceased person to the

extent to which the estate is capable of meeting the

charge the tax assessed as payable by such

person, or any tax which would have been payable

by him under this Act if he had not died.

(2) Where a person dies before the publication of

the notice referred to in sub-section (1) of section 22

or before he is served with a notice under

sub-section (2) of section 22 or section 34, as the

case may be, his executor, administrator or other

legal representative shall, on the serving of the

notice under sub-section (2) of section 22 or under

section 34, as the case may be, comply therewith,

and the Income-tax Officer may proceed to assess

the total income of the deceased person as if such

executor, administrator or other legal representative

were the assessee.

(3)Where a person dies, without having furnished

a return which he has been required to furnish

under the provisions of section 22, or having

furnished a return which the Income-tax Officer has

reason to believe to be incorrect or incomplete, the

13

Page 14 Income-tax Officer may make an assessment of the

total income of such person and determine the tax

payable by him on the basis of such assessment,

and for this purpose may, by the issue of the

appropriate notice which would have had to be

served upon the deceased person had he survived,

require from the executor, administrator or other

legal representative of the deceased person any

accounts, documents or other evidence which he

might under the provisions of sections 22 and 23

have required from the deceased person.”

11.This judgment of the Bombay High Court has been

affirmed in two judgments of this Court. In Commissioner of

Income Tax, Bombay City I v. Amarchand N. Shroff, [1963]

48 I.T.R. 59, this Court referred with approval to Ellis C. Reid

and held:-

“The correct position is that apart from section 24B

no assessment can be made in respect of the

income of a person after his death. See Ellis C.

Reid v. Commissioner of Income-tax. In that case,

and that was a case before section 24B was

enacted, a person was served with a notice under

section 22(2) of the Income-tax Act but no return

was made within the period specified and he died. It

was held that no assessment could be made under

section 23(4) of the Act after his death. At p.106 it

was observed:-

"It is to be noticed that there is throughout the Act

no reference to the decease of a person on whom

the tax has been originally charged, and it is very

difficult to suppose the omission to have been

unintentional. It must have been present in the

14

Page 15 mind of the legislature that whatever privileges the

payment of income-tax may confer, the privilege of

immortality is not amongst them. Every person

liable to pay tax must necessarily die and, in

practically every case, before the last instalment

has been collected, and the legislature has not

chosen to make any provisions expressly dealing

with assessment of, or recovering payment from the

estate of a deceased person".

The individual assessee has ordinarily to be a living

person and there can be no assessment on a dead

person and the assessment is a charge in respect

of the income of the previous year and not a charge

in respect of the income of the year of assessment

as measured by the income of the previous year.

Wallace Brothers & Co. Ltd. v Commissioner of

Income-tax. By section 24B the legal

representatives have, by fiction of law, become

assessees as provided in that section but that fiction

cannot be extended beyond the object for which it

was enacted. As was observed by this Court in

Bengal Immunity Co. Ltd. v. State of Bihar legal

fictions are only for a definite purpose and they are

limited to the purpose for which they are created

and should not be extended beyond that legitimate

field. In the present case the fiction is limited to the

cases provided in the three sub sections of section

24B and cannot be extended further than the liability

for the income received in the previous year.” (at

page 66)

12.Similarly, in Commissioner of Income Tax, Bombay v.

James Anderson, [1964] 51 I.T.R. 345, this Court referred with

approval to the judgment in Ellis C. Reid’s case and further

15

Page 16 held that even after Section 24B was enacted tax cannot be

assessed on receipts on the footing that it is the personal

income of the legal representative. This Court held:-

“It was then urged that apart from section 24B, the

legal representatives of a deceased person also

represent his estate in the matter of taxation of

income and it is competent to the taxing authorities

to assess them on income received on behalf of the

estate. Counsel did not rely upon any specific

provision of the Act in support of the contention, and

merely asserted that the Act seeks to tax all

assessable incomes, and income received by a

legal representative of the estate of a deceased

person should not be permitted to escape tax to the

detriment of public revenue. But if the Legislature

has failed to set up the procedure to assess such

income, the Courts cannot supply it. The expression

"assessee" in section 2(2) as substituted by the

Indian Income Tax (Amendment) Act, (25 of 1953),

with effect from April 1, 1952, means a person by

whom income-tax or any other sum of money is

payable under the Act, and includes every person in

respect of whom any proceeding and this Act has

been taken for the assessment of his income or of

the loss sustained by him or of the amount of refund

due to him. By section 3 where income-tax is

chargeable for any year at any rate or rates

prescribed by the Act of the Central Legislature, tax

at that rate shall be charged for that year in

accordance with and subject to the provisions of the

Act in respect of the total income of the previous

year of every individual, Hindu undivided family,

company and local authority, and of every firm and

other association of persons or the partners of the

firm or the members of the association individually.

The charge to income-tax has therefore to be in

16

Page 17 accordance with and subject to the provisions of the

Act, and the Legislature has not provided that the

income received by a legal representative which

would, but for the death of the deceased, have been

received by such deceased person, is to be

regarded for the purpose of assessment as the

personal income of the legal representative. To

assess tax on such receipts on the footing that it is

the personal income of the legal representative is to

charge tax not in accordance with the provisions of

the Act.” (at page 352)

13.In Commissioner of Income Tax, Bombay v. Darabsha

Nasarwanji Mehta, A.I.R. 1935 Bombay 167, the Bombay High

Court held that Section 24B of the 1922 Act was not

retrospective and stated that as Avabai N. Mehta died before

the said Act came into force and before she had made any

return, her estate was not liable to be assessed to tax particular

regard being had to the opening words of Section 24B which

state “where a person dies” which are words in the present

tense.

14.Pursuant to the 12

th

Law Commission Report, a new

Income Tax Act was passed in 1961 which contained elaborate

provisions for assessment of deceased persons after they die.

The anomalies left by Section 24B of the 1922 Act, as pointed

17

Page 18 out in the two Supreme Court judgments referred to above,

were sought to be rectified in the new provisions contained in

the 1961 Act. Sections 159 and 168 of the Act are apposite in

this regard and read as follows:-

“159. (1) Where a person dies, his legal

representative shall be liable to pay any sum which

the deceased would have been liable to pay if he

had not died, in the like manner and to the same

extent as the deceased.

(2) For the purpose of making an assessment

(including an assessment, reassessment or

recomputation under section 147) of the income of

the deceased and for the purpose of levying any

sum in the hands of the legal representative in

accordance with the provisions of sub-section (1),—

(a) any proceeding taken against the deceased

before his death shall be deemed to have been

taken against the legal representative and may be

continued against the legal representative from the

stage at which it stood on the date of the death of

the deceased;

(b) any proceeding which could have been taken

against the deceased if he had survived, may be

taken against the legal representative; and

(c) all the provisions of this Act shall apply

accordingly.

(3) The legal representative of the deceased shall,

for the purposes of this Act, be deemed to be an

assessee.

(4) Every legal representative shall be personally

liable for any tax payable by him in his capacity as

legal representative if, while his liability for tax

remains undischarged, he creates a charge on or

disposes of or parts with any assets of the estate of

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Page 19 the deceased, which are in, or may come into, his

possession, but such liability shall be limited to the

value of the asset so charged, disposed of or parted

with.

(5) The provisions of sub-section (2) of section 161,

section 162, and section 167, shall, so far as may

be and to the extent to which they are not

inconsistent with the provisions of this section, apply

in relation to a legal representative.

(6) The liability of a legal representative under this

section shall, subject to the provisions of

sub-section (4) and sub-section (5), be limited to the

extent to which the estate is capable of meeting the

liability.”

“168. (1) Subject as hereinafter provided, the

income of the estate of a deceased person shall be

chargeable to tax in the hands of the executor,—

(a)if there is only one executor, then, as if the

executor were an individual; or

(b)if there are more executors than one, then, as if

the executors were an association of persons;

and for the purposes of this Act, the executor

shall be deemed to be resident or non-resident

according as the deceased person was a resident

or non-resident during the previous year in which

his death took place.

(2)The assessment of an executor under this

section shall be made separately from any

assessment that may be made on him in respect of

his own income.

(3)Separate assessments shall be made under

this section on the total income of each completed

previous year or part thereof as is included in the

period from the date of the death to the date of

complete distribution to the beneficiaries of the

estate according to their several interests.

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Page 20 (4) In computing the total income of any previous

year under this section, any income of the estate of

that previous year distributed to, or applied to the

benefit of, any specific legatee of the estate during

that previous year shall be excluded; but the income

so excluded shall be included in the total income of

the previous year of such specific legatee.”

15.It will be noticed that under Section 159(2), for the

purpose of making any assessment, any proceeding taken

against the deceased before his death is by deeming fiction

deemed to have been taken against his legal representative

and may be continued against the legal representative from the

stage at which it stood on the date of the death of the

deceased. Further, the legal representative under sub-section

(3) of 159 is again by deeming fiction deemed to be an

assessee himself. However, the liability of such representative

is limited only to the extent to which the estate left by the

deceased is capable of meeting the tax liability subject to the

contingencies mentioned in sub-sections (4) and (5) of Section

159.

16.Similarly, under Section 168, where the assessee has left

a Will, the income of the estate of the deceased person

20

Page 21 becomes chargeable in the hands of the executor of such will.

This is made clear by Section 168.

17.It will be seen that the definition of “assessee” contained

in Section 4(3)(a) of the Central Excises and Salt Act is similar

to the definition of assessee contained in the Income Tax Act,

1922. Under that Act, as we have already seen, an assessee

means “a person by whom income tax is payable.” Under the

Central Excises and Salt Act, an assessee means “the person

who is liable to pay the duty of excise under this Act”. The

present tense being used, it is clear that the person referred to

can only be a living person as was held in Ellis C. Reid (supra).

Further, the only extension of the definition of “assessee” under

the Central Excises and Salt Act is that it would also include an

assessee’s agent, which has nothing to do with the facts of the

present case. It is well settled that a “means and includes”

definition is exhaustive in nature and that there is no scope to

read anything further into the said definition.

18.As has been correctly pointed out by learned counsel for

the appellants, the notice that is served under Section 11A is

21

Page 22 only on the person chargeable with excise duty, which takes us

back to “assessee” as defined.

19.Learned counsel for the revenue relied upon Section 11 of

the Act, which, according to him, indicates that an attachment

and sale of excisable goods can belong to a dead person and

such attachment and sale can continue notwithstanding the

death of such person. Apart from the fact that there is nothing

about dead persons in Section 11, Section 11 is limited only to

recovery of sums that are due to the Government. The very

opening words in Section 11 show that duty and other sums

must first be payable to the Central Government under the Act

or the rules. If such sums are not “payable” then the provisions

of the Section do not get attracted at all. We have seen that the

Act contains no machinery provisions for proceeding against a

dead person’s legal heirs, such as are contained in the Income

Tax Act. Obviously, therefore, duty and other sums do not

become “payable” without such machinery provisions. Further,

Section 11 deals with modes of recovery of tax payable and

does not deal with the subject matter at hand – namely

machinery provisions for assessment in the hands of the estate

22

Page 23 of a dead person and, therefore, does not have much bearing

on the matter in issue in the present case. The argument,

therefore, as to the insertion of the proviso to Section 11 by an

Amendment Act of 2004 so as to provide that if a person from

whom some recoveries are due transfers his business to

another person, then the excisable goods in the possession of

the transferee can also be attached and sold again leads us

nowhere. In fact learned counsel for the appellants also relied

on this proviso to argue that the Legislature’s need to add the

proviso shows that nothing can be read into the Central Excises

and Salt Act by implication. As has been stated above, Section

11 deals with an entirely different situation and the addition of

the proviso therein is not of much significance as far as the

question we have to answer is concerned.

20.Learned counsel for the revenue, however, contended

that the principles applied in the case of the Income Tax Act

should not be applied to the Central Excises and Salt Act as the

latter Act is a tax on manufacture of goods and not on persons.

We are afraid this argument cannot be countenanced in view of

this Court’s judgment in State of Punjab v. M/s Jullunder

23

Page 24 Vegetables Syndicate, [1966] 2 S.C.R. 457. In that judgment,

the question before this Court was whether a dissolved firm

could be assessed to sales tax under the East Punjab General

Sales Tax Act, 1948, with respect to its pre-dissolution turn over.

After analyzing the East Punjab General Sales Tax Act, this

Court held:-

“The scheme of the Act is a simple one. A firm is a

dealer; the said dealer is assessable to tax on its

turnover, if its turnover exceeds the prescribed limit.

It cannot do business while being liable to pay tax

under the Act without getting itself registered and

possessing a registration certificate. It is assessed

to tax under Section 11 of the Act in the manner

prescribed thereunder. If it discontinues its

business, it shall within the specified time inform the

prescribed authority accordingly. A dealer and its

partners are jointly and severally responsible to pay

the tax assessed on the dealer. But there is no

provision expressly empowering the assessing

authority to assess a dissolved firm in respect of its

turnover before its dissolution. The question is

whether such a power can be gathered by

necessary implication from the other provisions of

the Act.” (at page 461)

The Court went on to say:

“Though under the partnership law a firm is not a

legal entity but only consists of individual partners

for the time being, for tax law, income-tax as well as

sales-tax, it is a legal entity. If that be so, on

dissolution, the firm ceases to be a legal entity.

Thereafter, on principle, unless there is a statutory

24

Page 25 provision permitting the assessment of a dissolved

firm, there is no longer any scope for assessing the

firm which ceased to have a legal existence. As in

the present case, admittedly, the firm was dissolved

before the order of assessment was made, the said

order was bad.” (at page 462)

The Court went on to consider various High Court decisions

and ultimately concluded as follows:-

“Strong reliance was placed upon two judgments of

this Court. This Court in C.A. Abraham v.

Income-tax Officer, Kottayam, speaking through

Shah, J., held that S.44 of the Income-tax Act set up

a machinery for assessing the tax liability of firms

which have discontinued their business. This was

followed by this Court again in Commissioner of

Income-tax, Madras v. S.V. Angidi Chettiar. These

two decisions are of no help to the Revenue in the

present case. Indeed, in a sense they are against it.

The Income-tax Act contains an express provision

for assessing a dissolved firm. Indeed, but for that

provision no assessment could be made under that

Act on dissolved firms.

For the foregoing reasons we hold that the High

Court was right in holding that the assessment order

on the dissolved firm could not be supported under

the provisions of the Act. The High Court has given

a correct answer to the question propounded for its

decision.” (at page 464)

21.This judgment is a complete answer to the contention of

learned counsel for the revenue inasmuch as on a parity of

reasoning, sales tax is not a personal tax but a tax on the sale

25

Page 26 of goods. Nevertheless, this Court held that in the absence of

any machinery provisions to assess and collect sales tax from a

deceased person – in that case it was a dissolved partnership

firm – all proceedings against such deceased person/dissolved

firm abate. The aforesaid judgment has been followed by this

Court in Khushi Ram Behari Lal & Co. v. Assessing

Authority, Sangrur, (1967) 19 STC 381 and in Additional

Tahsildar, Raipur v. Gendalal, (1968) 21 STC 263.

22.Learned counsel for the revenue, however, strongly relied

upon M/s. Murarilal Mahabir Prasad and others v. Shri B.R.

Vad and others, (1975) 2 SCC 736, a case arising under the

Bombay Sales Tax Act, 1953. Since this judgment has been

relied upon as the sheet anchor of the revenue’s case, it is

important to deal with it in some detail.

23.The question that arose in the aforesaid case was

whether a dissolved firm could be re-assessed to sales tax in

respect of its pre-dissolution turnover. By a two to one (2:1),

decision, this Court held that the Bombay Act contained the

necessary provisions to re-assess such a dissolved firm in

respect of its pre-dissolution turnover. The majority judgment

26

Page 27 referred to the definition of “dealer” in the Bombay Act of 1953

and referred to this Court’s judgment in State of Punjab v. M/s

Jullunder Vegetables Syndicate (supra). We find that the

majority judgment of this Court relied heavily on the fact that

dishonest persons may dissolve a firm in order to escape

liability to assessment of taxes legitimately due from them but

which have escaped assessment. In paragraph 19, the

majority held:

“It is plausible that a distinction ought to be made

between the death of an individual and the

dissolution of a firm. Human beings, as assessees,

are not generally known to court death to evade

taxes. Death, normally, is not volitional and it is

understandable that on the death of an individual,

his liability to be assessed to tax should come to an

end unless the statute provides to the contrary. With

firms it is different, because a firm which incurs

during its existence a liability to pay sales-tax may,

with a little ingenuity, evade its liability by the

voluntary act of dissolution. The dissolution of a firm

could therefore be viewed differently from the death

of an individual and the partners could be denied

the advantage of their own wrong. But we do not

want to strike this new path because the Jullundur

case (supra) and the two cases which follow it have

likened the dissolution of a firm to the death of an

individual. Let us therefore proceed to examine the

other provisions of the 1953 Act.”

27

Page 28 It then went on to quote Section 15(1) of the Bombay Sales Tax

Act, 1953 and then arrived at this conclusion:

“22. Section 15(1) contains an important clause that

action thereunder can be taken by the Collector

after giving a notice to the assessee under Section

14(3) of the Act within the prescribed period. Once

such a notice is given, the Collector gets the

jurisdiction to assess or re-assess the amount of tax

due from the dealer and all the provisions of the Act

"shall apply accordingly as if the notice were a

notice served under" Section 14(3). Section

14(3) speaks of the power of the Collector to assess

the amount of tax due from the dealer after giving

notice to him, if the Collector is not satisfied that the

returns furnished are correct and complete. The

jurisdiction to assess or reassess which is conferred

by section 15(1) is thus equated with the original

jurisdiction to assess the dealer under section 14 .

By this method, the continuity of the legal

personality of the assessee is maintained in order to

enable the assessment of turnover which has

escaped assessment. It is no answer to a notice

under section 15 that the partners having dissolved

the firm, the assessment cannot be reopened. It

puts a premium on one's credulity to accept that

having created a special jurisdiction to assess or

reassess an escaped turnover, the Legislature

permitted that salutary jurisdiction to be defeated by

the device of dissolution. The argument of the

appellants really comes to this: suppress the

turnover, evade the sales-tax, dissolve the firm and

earn your freedom from taxation.”

The Court then went on to add:

28

Page 29 “24. Section 15A confers on the Collector analogous

powers to asses or re-assess a dealer for taxes due

prior to November 21, 1956 when the States were

reorganised, if either no assessment was made for

the prior period or if any turnover had escaped

assessment. This provision, like the one contained

in Section 15, is of general application and makes

no exception in favour of dissolved firm. Therefore,

if a firm was not assessed prior to the

re-organisation of States or if any part of its turnover

had escaped assessment, it is competent to the

Collector to assess or re-assess the firm

notwithstanding its subsequent dissolution. This is

the necessary implication of Section 15A. It must

follow as a corollary that the power to rectify a

mistake apparent from the record can be exercised

by the Collector under Section 35 of the Act of 1953

even after the dissolution of an assessed firm,

though on conditions specified in the section. The

section contains a compelling implication that

evident errors can be corrected no matter whether

the firm is in existence or is dissolved. Dissolution is

not a panacea for liability to pay sales-tax.”

It also added in paragraph 32:

“It is indisputable that the first appellant firm was

liable to be charged to sales tax on its business

turnover. The charging provisions are contained in

Chapter III of the Act of 1953 and Chapter II of the

Act of 1959. In this appeal, we have to construe the

machinery provisions of those Acts. In accordance

with the view taken in the cases cited above, the

machinery sections ought to be construed so as to

effectuate the charging sections. The construction

which we have placed on the machinery provisions

of the 1953 Act will give meaning and content to the

charging sections, in the sense that our construction

will effectuate the provision contained in the

29

Page 30 charging sections. The resourcefulness and

ingenuity which go into well-timed dissolution of

firms ought not to be allowed to be used as

convenient instruments of tax evasion. As observed

by Lord Dunedin in Whitney v. Commissioners of

Inland Revenue:

"A statute is designed to be workable,

and the interpretation thereof by a court

should be to secure that object, unless

crucial omission of clear direction makes

that end unattainable."

Far from there being any crucial omission or a clear

direction in the present case which would make the

end unattainable, the various provisions to which we

have drawn attention leave it in no doubt that a

dissolved firm can be assessed on its

pre-dissolution turnover.”

24.It is clear that on a conjoint reading of these paragraphs

this Court found that the machinery provisions contained in the

Bombay Sales Tax Act, 1953, were sufficient to reassess a

dissolved firm in respect of income that had escaped

assessment before its dissolution. A distinction was drawn

between an individual who dies and a firm that is dissolved as a

device to evade tax. The Court laid great stress on the

provision contained in Section 15(1) of the said Act by which

the jurisdiction to assess or reassess under Section 15(1) is

equated with the original jurisdiction to assess the dealer under

30

Page 31 Section 14. By this method, the Court found the continuity of

the legal personality of the assessee is maintained in order to

enable the assessment of turnover which has escaped

assessment. The crucial difference, therefore, between Section

15(1) of the Bombay Sales Tax Act, 1953 and Section 11A of

the Central Excises and Salt Act is that Section 11A does not

contain any such provision as is contained in Section 15(1)

which equates the jurisdiction to assess or reassess with the

original jurisdiction to assess the dealer in the very first place.

Further, this Court also construed Section 19 of the Bombay

Sales Tax Act, 1959 which would throw light on the earlier

Bombay Sales Tax Act, 1953, as containing the necessary

machinery provisions to assess dissolved firms in respect of

escaped turnover pre-dissolution. Hence, this Court added:

“35. It is relevant, though we did not refer to this

aspect while dealing with the provisions of the 1953

Act, that section 19(3) of the 1959 Act contains a

clear indication that the legislature intended that a

dissolved firm could be assessed under the 1953

Act also. Section 19(3) speaks of the liability of

partners for the tax due from a dissolved firm and

provides that they shall be jointly and severally

liable to pay the tax due from the firm under the Act

of 1959 or "under any earlier law", whether such tax

has been assessed before or after dissolution.

31

Page 32 Section 2(12) of the 1959 Act defines "earlier law" to

mean, inter alia, the Bombay Sales Tax Act, 1953.

Thus, one of the postulates of section 19(3) at any

rate is that a dissolved firm could be assessed

under the 1953 Act. Such a postulate accords with

the principle that if the legislature provided for a

charge of sales-tax, it could not have intended to

render that charge ineffective by permitting the

partners to dissolve the firm, an easy enough thing

to do. Nothing, in fact, would be easier to evade a

tax liability than to declare that the firm, admittedly

liable to pay tax, has been dissolved. Section

19(3) of the 1959 Act not only makes clear what

was necessarily implied in the 1953 Act, but it

throws additional light on the true construction of the

earlier law. But we thought it advisable to keep

section 19(3) of the 1959 Act apart while construing

the 1953 Act because it is the courts, not the

legislature, who have to construe the laws of the

land authoritatively. As said in Craies on Statute

Law:

Except as a parliamentary exposition,

subsequent Acts are not to be relied on

as an aid to the construction of prior

unambiguous Acts. (6th Ed., p. 146).

The limited use which may be made of the language

of section 19(3) of the 1959 Act, though such a

course is unnecessary, is for saying that it serves to

throw some light on the Act of 1953, in case the

argument is that the Act of 1953 is ambiguous.

36. Section 19(3) being quite clear and explicit, it is

unnecessary to dwell on the other provisions of the

Act of 1959 in order to show that a dissolved firm

can be assessed under it. We may only point out

that the Act of 1959 contains provisions similar to

those in sections 15, 15A and 35 of the Act of 1953

on which we have dwelt at some length. Those

32

Page 33 provisions can be found in sections 35, 35A and 62

of the Act.”

25.A reading of the ratio of the majority decision contained in

Murarilal’s case (supra) would lead to the conclusion that the

necessary machinery provisions were already contained in the

Bombay Sales Tax Act, 1953 which were good enough to bring

into the tax net persons who wished to evade taxes by the

expedient of dissolving a partnership firm. The fact situation in

the present case is entirely different. In the present case an

individual proprietor has died through natural causes and it is

nobody’s case that he has maneuvered his own death in order

to evade excise duty. Interestingly, in the written submissions

filed by revenue, revenue has argued as follows:-

“It is pertinent to mention that in the present case,

Shri George Varghese (predecessor in interest of

the appellants herein) was doing business in the

name of manufacturing unit namely M/s. Kerala

Tyre & Rubber Company and after the death of Shri

George Varghese, his legal representatives

(appellants herein) might have been in possession

of the plant, machinery, stock etc. and continuing

the same business, but might be in some other

name in order to avoid the excise duty chargeable

to the previous manufacturing unit.”

33

Page 34 26.It is clear on a reading of the aforesaid paragraph that

what revenue is asking us to do is to stretch the machinery

provisions of the Central Excises and Salt Act, 1944 on the

basis of surmises and conjectures. This we are afraid is not

possible. Before leaving the judgment in Murarilal’s case

(supra), we wish to add that so far as partnership firms are

concerned, the Income Tax Act contains a specific provision in

Section 189(1) which introduces a fiction qua dissolved firms. It

states that where a firm is dissolved, the Assessing Officer shall

make an assessment of the total income of the firm as if no

such dissolution had taken place and all the provisions of the

Income Tax Act would apply to assessment of such dissolved

firm. Interestingly enough, this provision is referred to only in

the minority judgment in M/s. Murarilal’s case (supra).

27.The argument that Section 11A of the Central Excises and

Salt Act is a machinery provision which must be construed to

make it workable can be met by stating that there is no charge

to excise duty under the main charging provision of a dead

person, which has been referred to while discussing Section

34

Page 35 11A read with the definition of “assessee” earlier in this

judgment.

28.Learned counsel for the revenue also relied upon the

definition of a “person” under the General Clauses Act, 1897.

Section 3(42) of the said Act defines “person as under:-

“(42) “Person” shall include any company or

association or body of individuals whether

incorporated or not.”

It will be noticed that this definition does not take us any further

as it does not include legal representatives of persons who are

since deceased. Equally, Section 6 of the Central Excises Act,

which prescribes a procedure for registration of certain persons

who are engaged in the process of production or manufacture

of any specified goods mentioned in the schedule to the said

Act does not throw any light on the question at hand as it says

nothing about how a dead person’s assessment is to continue

after his death in respect of excise duty that may have escaped

assessment. Also, the judgments cited on behalf of revenue,

namely, Yeshwantrao v. The Commissioner of Wealth Tax,

Bangalore, AIR 1967 SC 135 at pages 140, 141 para 18:

35

Page 36 (1966) Suppl. SCR 419 at 429 A-B, C.A. Abraham v. The

Income-Tax Officer, Kottayam & Another, AIR 1961 SC 609

at 612 para 6: (1961) 2 SCR 765 at page 771, The State of

Tamil Nadu v. M.K. Kandaswami & Others, Air 1975 SC 1871

(para 26): (1975) 4 SCC 745 (para 26), Commissioner of

Sales Tax, Delhi & Others v. Shri Krishna Engineering Co. &

Others, (2005) 2 SCC 695, page 702, 703 paras 19 to 23, all

enunciate principles dealing with tax evasion in the context of

construing provisions which are designed to prevent tax

evasion. The question at hand is very different – it only deals

with whether the Central Excises and Salt Act contains the

necessary provisions to continue assessment proceedings

against a dead man in respect of excise duty payable by him

after his death, which is a question which has no relation to the

construction of provisions designed to prevent tax evasion.

29.Learned counsel for the revenue also cited Girja Nandini

Devi & Ors. v. Bijendra Narain Choudhury, [1967] 1 S.C.R.

93 at paragraph 15, and Shri Rameshwar Manjhi (deceased)

Through his son Shri Lakhiram Manjhi v. Management of

Sangramgarh Colliery & Ors., (1994) 1 SCC 292 at paragraph

36

Page 37 12, in support of the general principle that an action begun in a

court of law by a person does not cease with his death. The

context of both decisions was very different. The first decision

was in the context of proceedings in relation to partition of a

joint family whereas the second was under the Industrial

Disputes Act. Neither judgment has any direct bearing on the

controversy before us.

30.It remains to consider a judgment cited by learned

counsel for the appellants, namely, Commissioner of Central

Excise, Bangalore –III v. Dhiren Gandhi, 2012 (281) E.L.T. 64

(Karnataka). This judgment is correct in its conclusion that

while interpreting the provisions of the Central Excises and Salt

Act, legal heirs who are not the persons chargeable to duty

under the Act cannot be brought within the ambit of the Act by

stretching its provisions. To the extent that this judgment holds

what is set out hereinbelow, it is correct:-

“We do not find any provision in the Act which foists

any such liability in the case of intestate succession.

In other words, there is no provision which

empowers the authorities to recover due from a

deceased assessee by proceeding against his legal

heirs. The way section 11 and 11A are worded, it is

amply clear, the legislature has consciously kept

37

Page 38 away the legal heirs from answering to liabilities

under the Act.” (at page 69)

31.The impugned judgment in the present case has referred

to Ellis C. Reid’s case but has not extracted the real ratio

contained therein. It then goes on to say that this is a case of

short levy which has been noticed during the lifetime of the

deceased and then goes on to state that equally therefore legal

representatives of a manufacturer who had paid excess duty

would not by the self-same reasoning be able to claim such

excess amount paid by the deceased. Neither of these reasons

are reasons which refer to any provision of law. Apart from this,

the High Court went into morality and said that the moral

principle of unlawful enrichment would also apply and since the

law will not permit this, the Act needs to be interpreted

accordingly. We wholly disapprove of the approach of the High

Court. It flies in the face of first principle when it comes to

taxing statutes. It is therefore necessary to reiterate the law as

it stands. In Partington v. A.G., (1869) LR 4 HL 100 at 122,

Lord Cairns stated:

38

Page 39 “If the person sought to be taxed comes within the

letter of the law he must be taxed, however great

the hardship may appear to the judicial mind to be.

On the other hand, if the Crown seeking to recover

the tax, cannot bring the subject within the letter of

the law, the subject is free, however apparently

within the spirit of law the case might otherwise

appear to be. In other words, if there be admissible

in any statute, what is called an equitable,

construction, certainly, such a construction is not

admissible in a taxing statute where you can simply

adhere to the words of the statute".

32.In Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 at 71,

Rowlatt J. laid down:

“In a taxing Act one has to look merely at what is

clearly said. There is no room for any intendment.

There is no equity about a tax. There is no

presumption as to tax. Nothing is to be read in,

nothing is to be implied. One can only look fairly at

the language used.”

33.This Court has, in a plethora of judgments, referred to the

aforesaid principles. Suffice it to quote from one of such

judgments of this Court in Commissioner of Sales Tax

Commissioner, Uttar Pradesh v. Modi Sugar Mills, 1961 (2)

SCR 189 at 198:-

“In interpreting a taxing statute, equitable

considerations are entirely out of place. Nor can

taxing statutes be interpreted on any presumptions

39

Page 40 or assumptions. The court must look squarely at

the words of the statute and interpret them. It must

interpret a taxing statute in the light of what is

clearly expressed; it cannot imply anything which is

not expressed; it cannot import provisions in the

statute so as to supply any assumed deficiency.”

34.We are, therefore, of the view that this appeal must be

allowed and the judgment of the High Court of Kerala is,

accordingly set aside and that of the learned Single Judge

restored.

……………………J.

(A.K. Sikri)

……………………J.

(R.F. Nariman)

New Delhi;

July 29, 2015.

40