2022 (12) TMI 7 - HC - Central Excise

Recovery of excise dues: restraint on land alienation struck down as excise liability relates to goods produced, not property.

Recovery of excise dues concerning an erstwhile owner was contested by way of a restraint preventing alienation of land. The court relied on precedents ... Liability for central excise dues of predecessor - purchase of land versus purchase of entire unit/business - statutory liabilities arising out of land and plant and machinery - proviso to Section 11 of the Central Excise Act regarding recovery from purchaser - priority of secured creditor over excise duesLiability for central excise dues of predecessor - purchase of land versus purchase of entire unit/business - statutory liabilities arising out of land and plant and machinery - Validity of notices issued to subsequent purchaser of land seeking recovery of central excise dues of the erstwhile owner. - HELD THAT: - Following the Supreme Court's decision in Rana Girders Limited, this Court held that excise liabilities arise from the manufacturing of excisable goods by the erstwhile owner and are not liabilities that 'arise out of' the land, building or plant and machinery. Consequently, where a purchaser acquires only the land (and not the entire business/unit), he cannot be fastened with the predecessor's central excise dues unless the purchaser has bought the entire unit as a going concern or there is a statutory provision creating a first charge on the purchaser. The proviso to Section 11 relied upon by the excise authorities was not applicable to the facts of these petitions. The Court therefore concluded that the impugned recovery notices issued to the purchasers were unsustainable and liable to be set aside, while leaving the excise authorities free to pursue other remedies permissible in law against the debtor. [Paras 10, 11, 13]Impugned notices issued to the purchasers for recovery of the erstwhile owner's excise dues are quashed; authorities may pursue other lawful remedies against the former owner.Final Conclusion: Writ petitions allowed; notices seeking recovery of central excise dues from purchasers of land (who did not acquire the entire business/unit) set aside, without prejudice to recovery action permissible in law against the original debtor. Issues involved:Challenge to notice for recovery of excise dues and restriction on alienation of land.Analysis:The High Court heard arguments from both the petitioners' counsel and the counsel representing Customs and Central Excise. The petition sought to quash a notice issued for the recovery of excise dues from the previous owner of the land, Midwest Alloys Pvt. Limited, and to prevent the petitioner from selling the land. The petitioner, engaged in the manufacture of saw-dust powder for mosquito coils, contended that the excise dues were not their liability as they acquired the land after it was seized from Midwest Alloys Pvt. Limited due to default in repayment of financial assistance. The excise authorities initiated recovery action based on the proviso to Section 11 of the Central Excise Act, 1944. The respondent filed a counter affidavit stating the outstanding excise duty and penalty owed by Midwest Alloys Pvt. Limited. The legal issue was whether the excise duty liability could be transferred to the petitioner.The High Court referred to a Supreme Court judgment in Rana Girders Limited v. Union of India, where it was held that a subsequent purchaser is not liable for the excise dues of the previous owner unless there is a specific provision in the statute claiming 'first charge for the purchaser.' The court emphasized that excise duties are related to the items produced, not the plant and machinery or the land and building. The court clarified that statutory liabilities arising from the land or properties should be borne by the purchaser, but excise dues do not fall under this category. The court also cited a previous decision where a similar notice was set aside, allowing excise authorities to take other legal steps for recovery.Based on the legal principles established by the Supreme Court and previous decisions, the High Court set aside the notices issued for recovery of excise dues and restriction on alienation of the land. The court granted permission to the excise authorities to take lawful steps for recovering the outstanding excise duty from Midwest Alloys Pvt. Limited. The writ petitions were allowed without costs, and any pending miscellaneous applications were closed.