Retired Partner Not Liable for Firm’s Post-Retirement Excise Duty Dues

Court Name : CESTAT Ahmedabad

Parties : Jawahar K Vakharia Vs C.C.E. & S.T.

Decision Date : 24 July 2023

Judgement ref : Excise Appeal No. 11005 of 2014- DB

Imagine you're a partner in a firm, and you've just retired. A few months later, you get a notice from the Excise Department demanding payment for dues incurred by the firm after your retirement. You're taken aback. You're no longer a part of the firm, so why should you be liable for its post-retirement dues?

This was the predicament faced by a retired partner in a recent Supreme Court case. The court, however, came to the retired partner's rescue. It ruled that a retired partner is not liable for a firm's excise duty dues incurred after retirement.

The court emphasized that the liability of a partner does not extend beyond the period of partnership. In this case, the Excise Department failed to provide any evidence that the retired partner was involved in the firm's operations after retirement.

So, if you ever find yourself in a similar situation, remember this ruling. It underscores the importance of understanding the limits of a partner's liability. Always ensure your retirement from a firm is well-documented and can withstand scrutiny. And remember, you have the right to challenge any demands if you believe you've been wrongly accused.

Final Order No.11567/2023

RAMESH NAIR

The brief facts of the case are that there is a confirmed demand of

duty against a partnership firm namely K.J. Vakharia and Company. The

department issued notice for demand of dues of said partnership firm to the

appellant Shri Jawahr K. Vakahria along with the partnership firm K. J.

Vakharia and company and other two persons. The appellant being

aggrieved, with the said demand notice, filed an appeal before the

Commissioner Appeal. The Learned Commissioner appeal held that there is

no infirmity in the letter (notice of demand to defaulter) dated 14.02.2005

issued by the Deputy Commissioner of Central Excise and Customs Division-

ii, Surat-i and the appeal was rejected. It is this Order-in-Appeal against

which the present appeal was filed by the appellant.

2. Shri Mukund Chauhan, Learned Counsel, appearing on behalf of the

appellant submits that the recovery notice dated 14.02.2005 was issued to

the appellant, against the dues adjudged into Orders-in-Original No.

01/MP/2000 dated 28.01.2000 and OIO No. SRT-I/Division-II/ADJ276/OA/03 dated 31.03.2004 for Rs. 1,59,87,146/- and 32,726/- respectively.

2.1 He submits that as regard the OIO dated 28.01.2000 the period

involved was April-1994 to August-1994. Whereas, the present appellant

Shri Javahar K Vakharia taken retirement from the partnership firm on

August- 1993, which is much before the period for which duty demand is

involved. Moreover, no statement was recorded of the appellant, therefore,

for this reason of the dues of partnership firm M\s K. J. Vakharia and

Company cannot be recovered from the present appellant.

3. Shri, R. K. Agarwal, Learned Superintendent (AR), appearing on behalf

of the revenue reiterates the findings of the impugned order.

4. On careful consideration of the submission made by both the sides and

perusal of record, we find that the Learned Commissioner (Appeal) merely

by reproducing in section 11 held that there is no infirmity in the ‘notice of demand to defaulter dated 14.06.2004’. However as per the submission

made by the Learned Counsel, we find that the Learned Commissioner

appeal has not examined the vital facts of the case that during the period,

for which the demand was confirmed, which is sought to be recovered from

the present appellant what was the status of the appellant.

4.1 As submitted by the Learned Counsel, the present appellant had

resigned as a partner from the partnership firm in August, 1993 and the

period involved in the present demand is April, 1994 to August 1994. On this

basis it prima facie appears that the period for which the demand was

raised, when the appellant was not a partner, how he can be held

responsible for the demand. However, the Learned Commissioner has not

examined this fact at all, which is very vital to arrive at conclusion whether, any recovery can be made from the present appellant.

4.2 We therefore, set aside the impugned order and remand the matter to

the commissioner appeal for reconsidering the appeal before him by

following the principle of natural justice.

5. Accordingly, the impugned order is set aside. Appeal is allowed by

way of remand to the Learned Commissioner for passing a fresh order within

a period of two months from the date of this order.

(Pronounced in the open court on 24.07.2023)

(RAMESH NAIR)

MEMBER (JUDICIAL)

(C L MAHAR)

MEMBER (TECHNICAL)

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ustoms, Excise & Service Tax Appellate Tribunal

West Zonal Bench At Ahmedabad

REGIONAL BENCH-COURT NO. 3

Excise Appeal No. 11005 of 2014- DB

(Arising out of OIA-SUR-EXCUS-001-APP-595/13-14 dated 26/12/2013 passed by

Commissioner of Central Excise, Customs and Service Tax-SURAT-I)

Jawahar K Vakharia ……..Appellant

82/a, Adarsh Society,

Athwalines,

Surat, Gujarat

VERSUS

C.C.E. & S.T.-Surat-i ……Respondent

New Building...Opp. Gandhi Baug,

Chowk Bazar,

Surat, Gujarat-395001

APPEARANCE:

Shri, Mukund Chauhan, Advocate for the Appellant

Shri Rajesh K Agarwal, Superintendnet(AR) for the Respondent

CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR

DATE OF HEARING: 05.07.2023

DATE OF DECISION: 24.07.2023