2017 (7) TMI 555 - AT - Central Excise

Tribunal Upholds Refund Claim, Clarifies Central Excise Act Application

Commissioner of Central Excise & Service, Tax, Mumbai Versus M/s. Powerica Limited

The Tribunal upheld the Commissioner(Appeals)'s order, allowing the refund claim of the respondent and dismissing the Revenue's appeal. It clarified that ... Recovery of duty from the purchaser of property - purchase of property under auction - denial of refund on the ground that under provision of Section 11 (i) and as per Section 11 (e) of CEA, 1944 the Govt. dues of M/s. Bagwe Udyog Ltd is liable to paid by the person, owner ie.e. respondent - Held that: - In case of purchase of property alone under auction from Bank/ financial instituations, Section 11 is not applicable. Section 11 is applicable only in case where the buyer purchases the business in whole or in part from the earlier owner against whom central excise dues are pending - In the present case admittedly the respondent having their own existing business, only purchased the land from the bank in auction, accordingly they have not purchased the business either in whole or in part from the earlier owner, therefore the old dues of earlier owner is not recoverable from the present respondent therefore whatever amount paid by them is clearly refundable - appeal dismissed - decided against Revenue. Issues Involved:1. Liability for Government dues under Section 11 of the Central Excise Act, 1944.2. Applicability of Section 11(e) of the Central Excise Act, 1944.3. Refund claim for the amount paid by the respondent.Issue-wise Detailed Analysis:1. Liability for Government dues under Section 11 of the Central Excise Act, 1944:The Revenue argued that under Section 11 of the Central Excise Act, 1944, if there are government dues of the previous owner of a property, the subsequent purchaser is liable to pay those dues. They cited the provision which allows the Central Excise Department to recover dues from the successor of the business. The adjudicating authority initially rejected the respondent's refund claim based on this provision.The respondent countered that Section 11 is not applicable as they did not purchase the business of the previous owner but only acquired the land through an auction from the Debt Recovery Tribunal (DRT). The Tribunal agreed with the respondent, referencing multiple judgments, including *Lamifab Industries Vs. Union of India* and *Gopal Agarwal Vs. Commr. Cus & C Ex. Hyderabad*, which clarified that Section 11 applies only when the business is transferred, not merely the assets.2. Applicability of Section 11(e) of the Central Excise Act, 1944:The Revenue also referred to Section 11(e), which came into effect in 2011, arguing that it gives the Central Excise Department the first charge to recover its dues. However, the respondent argued that Section 11(e) was not applicable as the dues in question pertained to a period before the enactment of Section 11(e).The Tribunal supported the respondent’s view, noting that Section 11(e) could not be retrospectively applied to dues that arose before its enactment. The Tribunal cited the case *Krishna Lifestyle Technologies Ltd.*, which held that recovery from the successor can only be made when the business or trade is transferred in whole or part, not merely by the sale of assets.3. Refund claim for the amount paid by the respondent:The respondent sought a refund of Rs. 30,45,434/- paid by them, arguing that they were not liable for the previous owner's dues. The Tribunal examined the transaction chain and found that the respondent purchased the property from the bank, which had acquired it through an auction, not from the previous owner directly. Therefore, the proviso to Section 11 did not apply.The Tribunal referenced several judgments, including *Rana Girders Ltd. vs. Union of India* and *Ambuja Electro Castings Ltd. Vs. Union of India*, which consistently held that buyers of auctioned properties are not liable for the previous owner’s dues. The Tribunal concluded that the respondent was entitled to a refund as they did not purchase the business but only the property.Conclusion:The Tribunal upheld the Commissioner(Appeals)'s order, allowing the refund claim of the respondent and dismissed the Revenue's appeal. The Tribunal emphasized that Section 11 of the Central Excise Act applies only when there is a transfer of business, not merely the sale of assets, and that Section 11(e) could not be applied retrospectively. The Tribunal's decision was based on established legal precedents ensuring that the respondent was not liable for the previous owner's dues and was entitled to the refund claimed.