ORDER
J.N. Srinivasa Murthy, Member (J)
This appeal is filed by the above appellant against the Order-in-Original No. 24/MP/ 91 dated 25.3.91, praying for setting aside the same.
1. The facts of the case in brief are, appellant Company manufactures Cotton, man-made, fabrics and blended yarn under Central Excise License. During the tenure of old owners, Central Excise duty of Rs. 4,49,266.41 P. approximately, on the yarns manufactured in 1977 was evaded by them. Appellant came into picture in 1979. They came to know about it, later on as nothing was reflected in the provisional balance sheet furnished by old owners to the appellants while taking over the charge of the factory. They are answerable to the above charge, through the Managing Director. Appellant was not aware of it. It was brought to the notice of Collector of Central Excise, which was neglected, and decided the case against the appellant. In the appeal before the Central Board of Excise and Customs, New Delhi, fine and penalty imposed on the appellant was set aside. Duty liability was confirmed. In the order it was observed that–“However, so far as the order of penalty and confiscation of the Plant are concerned, it is evident that present ownership was not responsible and they have came into picture because of the delay in completing the adjudication, after booking the case on 26.8.77. There is case for reconsideration, and accordingly order of penalty and confiscation of Plant is set aside”. The appellant preferred revision against that order to Government of India, which was transferred to Tribunal; which remanded the case to Collector, Central Excise on 8.1.1988, who passed the Impugned order on 25.3.91 after hearing the appellant, which is challenged now in this appeal. Show cause notice was issued on 16.2.78 to the appellant Mills by Central Excise Authority to show cause why duty as above should not be recovered from them on the blended yarn. It was replied in 29.6.78 by the General Manager. There was an agreement dated 23.7.79 between M/s. Kishanlal & Sons (Udyog) Pvt. Ltd., and M/s. Radiant Investment Co. Ltd. which acquired principle shareholders interest from M/s. Kishanlal & Sons (Udyog) Pvt. Ltd.
2. In support of the appeal Sri K.L. Sharma, Manager (Commercial) of appellant company has submitted in the course of arguments that the impugned Order has overlooked the submissions made by appellant and has avoided to give findings. The case laws referred therein are on different issue under different Acts, and have no direct relations to the present issue, viz. recovery of tax in case of Licensee under Central Excise Act. Letter dated 5.1.91 & 8.1.91 of appellant is not at all considered. Law points raised therein are not dealt with. Para 11 of Tribunal order dated 8.1.88 is not at all taken note of, and impugned order has exceed the scope of remand. Dealing Company act, for recovery of Central Excise Act is beyond his powers. Issue was to be decided with reference to Para 11 & 17 of Tribunal order. Conclusion of Board,” that appellant came into picture at later stage on the basis of facts that copies of fresh License were furnished at the time of personal hearing”–while setting aside fine and penalty, was not at all taken of, while passing the impugned order. It is not legal and proper, and requires to be set aside. Sri Arun Chopra, learned SDR for the Respondent has contended that the impugned Order is passed in terms of remand order of Tribunal, which was a limited one for the purpose of ascertaining as to whether there was only a change of management or of ownership of M/s. Niranjan Mills Ltd. The oral as well as written submissions made by Sri. K.L. Sharma, authorised representative (liaison officer) for appellant in the personal hearing on 7.1.91 and board order page 2 and para 3 and its effect as pointed out was also noted are considered. Case laws cited on 8.1.91 is also dealt with by the adjudicating authority. Copy of agreement dated 23.7.79 produced by appellant is also examined in detail. Section 2(7) of sale of goods act is also considered by adjudicating authority. In the light of the contention that sale of 496 shares is a goods sold, affecting the ownership of company, which resulted in sale of company, and appellant has become absolute owner. The Adjudicating authority has dealt with the question posed under remand order in proper perspective, and has come to just and proper conclusion. The material available on record is considered, while coming to that conclusion. The issue involved does not entirely covered under Central Excise Act, but under Company’s Act, as evident from the Tribunal order. Impugned order is well within the limits of remand order. The contention of appellant cannot be upheld.
3. From the above, it is clear that the Tribunal order remanding the case, terms of agreement entered into with respect to appellant company, are to be considered to decide the appeal. Board of Central Excise and Customs has confirmed the duty liability on appellant, which is challenged. Order No. 606/87 WRB in ED (T) (BOM) 56/81 dated 8.1.88 of the Tribunal in the present case has raised the issue in Para 9(i) of the order, arising out of the contention of both sides, for consideration. “Whether duty can be demanded from the present appellant in respect of yam manufactured during the period when the mill was under the management of M/s. Kishanlal & Sons (Udyog) Ltd.” This issue is dealt with in detail in paras 11 to 13 of the order, after noting the contention of appellant before the adjudicating authority, and its order in para 14 of the adjudication order. In para 13, Tribunal has observed that to answer the above question, it is necessary to know whether present appellant have only taken over the management of the mills or have purchased the mills and its property. There is no clear finding either by Collector or by Board. Records available do not disclose anything. Liability of appellants depends upon the question whether they have acquired ownership of existing mills or had only taken over the management, which is required to be considered by Collector, and remand is necessary. Whether appellant obtained a fresh License after purchase of shares is not clear from records. When there is change of ownership of Mills, department can recover duty from new owner, only when an undertaking as to existing liability was obtained from the new owner, while granting License. In para 17 of the order tribunal has remanded to Collector for the limited purpose of ascertaining as to whether there was only a change of management of M/s. Niranjan Mills Ltd., or there was change of ownership. In para 18, a direction was given to the Collector to pass orders in the light of para 17. From the perusul of Impugned order in Para 1,5 & page 5 of the order, last two paragraph, it is clear that the adjudicating authority has acted well within the scope of remand orders para 17 & 18. The question involved was one of purchase of shares of a limited Company and the consequence of it, beneficial to purchaser. The adjudicating authority has considered and decided in the proper perspective. Remand order was quite exhaustive as to the answer to question No. 1 raised therein, in either way and accordingly decision is given by Collector. Law points raised and case law cited is considered in Para 4 of the Impugned order, which is an accepted principle. The contention of the appellant that great prejudice is caused in not considering them does not stand to reason, and it is rejected.
4. Now coming to the question of effect of purchase in 1978 of 496 shares by M/s. Radiant Investment (P) Ltd., from M/s. Kishanlal & Sons, out of 500 Equity shares of Rs. 400 each and 250, 9.5% cumulative Redeemable Preference shares of Rs. 400 each which was the share capital of the company, the agreement dated 23.7.1979 between the parties is a material document to throw light as to the status of the appellant as owner or manager of M/s. Niranjan Mills. In Para 5.2 and Page 5 of the Impugned order, adjudicating authority has considered Judgments of Supreme Court and English case law, as to the right of share holder, and the status of the company. It is held by Adjudicating Authority that–“M/s. Radiant Investment Co. (P) Ltd., is only a major share-holder, and only controls the management of the company, and M/s. Niranjan Mills Ltd., as retained its corporate identity, and there is no change in ownership of the same. This is only a case of Transfer of Shares, and not sale of company, which is a separate legal entity, separate from shareholders, and appellant is liable to pay duty”. It has to be seen how far it is correct. Terms of agreement dated 23.7.79 requires consideration.
5. As per the 23.7.79 agreement between the Vendor Kishanlal & Sons (Udyog) Pvt. Ltd., and M/s. Radiant Investment Co. Ltd., Purchaser, the Vendor is the absolute owner of 496 Equity shares out of 500 Equity shares of face value of Rs. 4000 each and 250 9.5 Cumulative redeemable shares of face value of Rs. 4000 each, in the Issued and Subscribed Capital of M/s. Niranjan Mills Pvt. Ltd. (Company), and they are sold to Purchaser detailed in Ist schedule, on certain terms and conditions No. 1 to 15 mentioned therein. As per 3rd condition Directors were changed at the request of Purchasers prior to completion of sale. Under condition No. 4, Proforma unaudited balance sheet for the period ending 30.6.79 copy was furnished by vendor to purchaser, prior to completion of sale, which is also enclosed to agreement on vendor representing to the purchaser that it reflects true and correct position of financial affairs of the company for the period ending 30.6.79, subject to 3% either way before the agreement of purchase of shares, under condition No. 4. Condition No. 5 is most relevant to the case viz. vendor shall be liable to make good to purchaser under Clause (c) undischarged liabilities for Customs, Sales Tax, Income Tax, Super Tax or other taxes on income or other penalty levied or any other tax levied or any other tax levy assessment or cess made or imposed by any of the authority in respect of any of the financial years of the company, and not disclosed or provided for in the said balance sheet. Save as aforesaid the vendor shall not be liable to the purchaser or Company. Condition No. 11, the vendor has caused the company to hand over to the purchaser all books of accounts, cheque books, slip books, statement of accounts, files or papers and other documents listed in the IIIrd schedule. And vendor has assured the purchaser that the company does not have any other books of account, papers and documents, on or before the execution of this agreement. Condition No. 15 has placed the responsibility on the purchaser to so arrange that the company shall pay all outstanding statutory dues as the when demanded with liberty to purchaser to arrange with the concerned authorities for spreading the said liability over a period, however purchaser shall not be in any way responsible for any acts of omission or comission on the part of the erstwhile Directors of the company prior to the completion of the said sale.
6. From the above material, it is crystal clear that the company is a separate entity from the shareholders, and purchaser is given the management of the company as a major shareholder, and is liable to pay the duty confirmed, and recover the same from vendor. In view of the specific condition under No. 5 & 15, Central Board of Excise and Customs has set aside the fine and penalty on the appellant and confirmed the duty demand. Tribunal order dated 8.1.88 has also observed in Para 13 of the order that if the Collector finds that there had been only a change of management, then there is no illegality in the order passed, and the appellant will be liable to pay duty, subject however, to the actual quantification by excluding the weight of the sizing materials. Annexure I and III to the agreement describes the shares and list of books and documents, which clearly shows only the entrustment of management of company, and not the transfer of assets of the company in to confer ownership of the company on the appellant. So the contention of the appellant, that he has become new owner of the company cannot be upheld. It is rejected. Hence I pass the following order.
ORDER
For the reasons discussed above, appeal cannot be allowed. It is dismissed.