Excise dues and auction purchases: liability does not pass with specified assets unless statute or contract clearly creates it.

Excise dues could not be recovered from an auction purchaser of only specified assets where the sale transferred land, building, plant and machinery from a State Financial Corporation, because secured creditor rights prevailed and no statutory first charge in favour of the excise department existed. Liability for excise arrears could be fastened on a transferee only if the entire business was acquired as a going concern, which was not the case. Contractual clauses requiring the purchaser to bear statutory liabilities were confined to property-related burdens and did not extend to the transferor's pre-existing excise dues. The demand was therefore unsustainable and the purchaser was not liable.

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Issues: (i) Whether excise dues could be recovered from an auction purchaser who bought land, building, plant and machinery of the borrower from a State Financial Corporation. (ii) Whether the covenants in the sale deed and agreement made the purchaser liable to discharge the borrower's excise dues.

Issue (i): Whether excise dues could be recovered from an auction purchaser who bought land, building, plant and machinery of the borrower from a State Financial Corporation.

Analysis: A secured creditor's statutory right under the State Financial Corporations Act prevails over unsecured Crown debts. Central excise dues do not create a charge over the assets merely because recovery is sought from the transferee of mortgaged property. Liability for excise dues can be fastened on a purchaser only where the entire business or unit is transferred as an ongoing concern, and not where only specified assets are purchased in auction. Since no statutory first charge in favour of the excise department existed for the relevant period, the secured creditor's claim had priority.

Conclusion: The excise department could not recover the dues from the purchaser on the basis of mere purchase of the assets in auction.

Issue (ii): Whether the covenants in the sale deed and agreement made the purchaser liable to discharge the borrower's excise dues.

Analysis: The clauses requiring the purchaser to bear statutory liabilities were confined to liabilities arising out of the land, building, or machinery itself, such as property-related levies. Excise duty was a liability arising from the manufacture of excisable goods by the erstwhile owner and not a burden arising out of the assets sold. The contractual language therefore did not extend to the borrower's excise arrears.

Conclusion: The purchaser did not contractually assume liability for the borrower's excise dues.

Final Conclusion: The demand raised by the excise department was unsustainable, and the purchaser was not liable for the erstwhile owner's excise dues.

Ratio Decidendi: Excise dues cannot be recovered from an auction purchaser of only specified assets unless a statute creates a first charge or the purchaser has purchased the entire business as an ongoing concern, and contractual clauses covering statutory liabilities arising from the property do not extend to the transferor's pre-existing excise liability.

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