Bona fide asset purchaser not liable for prior customs and excise dues; excise registration cannot be refused on uncancelled transferor registration
Registration under the Central Excise regime could not be refused to a bona fide purchaser of industrial assets merely because the transferor's registration remained uncancelled, since registration turns on the person carrying on the taxable activity and the provisions did not authorise denial on that basis. Customs and excise dues of the erstwhile owner did not, without an express statutory first charge, override secured creditors' claims or attach to a purchaser acquiring assets through a SARFAESI sale free from encumbrances. Mere purchase of assets also did not establish succession to the former business, so the purchaser was not liable for the predecessor's dues on that footing.
Issues: (i) Whether registration under the Central Excise regime could be refused to a purchaser of industrial assets merely because the seller's existing registration had not been cancelled or deregistered; (ii) whether customs and excise dues of the erstwhile owner had priority over the claims of secured creditors and could be recovered from a purchaser in a sale under the SARFAESI Act; (iii) whether the purchaser had succeeded to the business of the erstwhile owner so as to attract recovery of dues from it.
Issue (i): Whether registration under the Central Excise regime could be refused to a purchaser of industrial assets merely because the seller's existing registration had not been cancelled or deregistered.
Analysis: Registration under Section 6 of the Central Excise Act and Rule 9 of the Central Excise Rules is with reference to the person engaged in manufacture or specified activity. The notification under Rule 9 requires separate registration for separate premises where applicable, and provides for deregistration when a person ceases business. The refusal could not be justified by treating the seller's subsisting registration as an absolute bar, because those provisions do not confer power to deny registration to a bona fide transferee of assets. The earlier precedent on successive registrations was confined to its own facts of repeated leasing and tax evasion.
Conclusion: The refusal of registration was without jurisdiction and the petitioner was entitled to registration.
Issue (ii): Whether customs and excise dues of the erstwhile owner had priority over the claims of secured creditors and could be recovered from a purchaser in a sale under the SARFAESI Act.
Analysis: The Court applied the principle that government dues do not, by themselves, override the claims of secured creditors unless the statute creates such priority. Reading the recovery provisions of the Customs Act and the Central Excise Act with Section 35 of the SARFAESI Act, the Court held that a purchaser acquiring assets in a SARFAESI sale holds them free from encumbrances and the revenue cannot demand the erstwhile owner's dues from the purchaser on the footing of priority alone. Recovery, if any, must be pursued against the defaulting assessee under the law.
Conclusion: The customs and excise dues did not have priority over the secured creditors' claims and could not be recovered from the petitioner.
Issue (iii): Whether the purchaser had succeeded to the business of the erstwhile owner so as to attract recovery of dues from it.
Analysis: The proviso to Section 142 of the Customs Act was considered in the context of succession to business or trade. Mere purchase of assets under the SARFAESI mechanism did not, on these facts, establish that the petitioner had succeeded to the business of the former owner. The Court therefore declined to treat the petitioner as liable for the predecessor's dues on that basis.
Conclusion: The petitioner had not been shown to have succeeded to the business of the erstwhile owner for recovery purposes.
Final Conclusion: The statutory regime governing secured enforcement prevailed over the revenue's claim against the asset purchaser, the impugned demand and refusal of registration could not stand, and the petitioner obtained the consequential reliefs.
Ratio Decidendi: In the absence of an express statutory first charge, government dues under the customs and excise laws cannot be enforced against a bona fide purchaser of assets sold under the SARFAESI Act, and registration cannot be refused on the sole ground that the transferor's registration remains uncancelled.