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

(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.