Shabina Abraham & Ors vs. Collector of Central Excise (Supreme Court)

The Supreme Court had to consider whether a 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 question was 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. HELD by the Supreme Court:

(i) 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 of the Income-tax Act 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 Income-tax Act 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.

(ii) 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. 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. Under the Central Excise Rules and Rules 2(3) and 7 in particular, there is no machinery provision contained either in the Act or in the Rules to proceed against a dead person’s legal heirs.

(Commissioner of Income Tax, Bombay v. Ellis C. Reid, A.I.R. 1931 Bombay 333, Commissioner of Income Tax, Bombay City I v. Amarchand N. Shroff, [1963] 48 I.T.R. 59 Commissioner of Income Tax, Bombay v. James Anderson, [1964] 51 I.T.R. 345 Commissioner of Income Tax, Bombay v. Darabsha Nasarwanji Mehta, A.I.R. 1935 Bombay 167 referred)