SHABINA ABRAHAM & ORS. Vs. COLLECTOR OF CENTRAL EXCISE & CUSTOMS

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 5802 of 2005, Judgment Date: Jul 29, 2015

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 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 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
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.

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 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.

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
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 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 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 (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:-

“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 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
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 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 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 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 12th 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 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 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.
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 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 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 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 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
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 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 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.”

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:

“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 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 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. 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 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.”
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 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:
(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 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 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:

“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 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.

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