Business takeover liability permits service tax recovery from the successor where transfer covers running assets and operations.

Service tax dues could be recovered from a purchaser who took over the defaulting business on an "as is where is and what is" basis and obtained control over the mall and mortgaged assets, because the transfer was treated as extending beyond immovable property and fell within the proviso to Section 87(c) of the Finance Act, 1994. The High Court also accepted that the departmental notices and attachment were preceded by opportunities and that the statutory recovery scheme permitted action against the successor in these circumstances. The challenge based on the priority of secured creditors and denial of liability was rejected on the facts, and the recovery action was upheld.

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Issues: Whether the department could recover service tax dues from the purchaser of the business and mortgaged property under Section 87(c) of the Finance Act, 1994 and treat the dues as a first charge under Section 88 of the Finance Act, 1994.

Analysis: The business of the defaulting company had been taken over by the petitioner on an "as is where is and what is" basis under a tri-party settlement and the petitioner had also acquired control and possession of the mall and the mortgaged assets. On the facts recorded, the transfer was not confined to immovable property alone but extended to the running business, bringing the case within the proviso to Section 87(c) of the Finance Act, 1994. The Court held that the departmental notices and attachment were preceded by opportunities and that the statutory scheme permitted recovery from the successor in the circumstances noted. The contention based on priority of secured creditors and exclusion of liability was rejected on the facts of the case.

Conclusion: The recovery action against the petitioner was held valid and the writ petition failed.

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