2003 (11) TMI 71 - SC - Central Excise

Supreme Court rules auction purchaser liable for excise dues under Rule 230(2)

MACSON MARBLES PVT. LTD. Versus UNION OF INDIA

The Supreme Court held that the auction purchaser was liable for the excise dues of the previous owner under Rule 230(2) of the Central Excise Rules. It ... Show cause notice issued under Section 11A of the Central Excise Act to respondent No. 4 in relation to certain goods that are said to have been removed between 13-8-1986 and 23-8-1986 and excise duty of Rs. 1,04,586.17 and penalty of Rs. 3 lakhs was levied and demanded. Held that:- The Department having initiated the proceedings under Section 11A of this Act adjudicated liability of respondent No. 4 and held that respondent No. 4 is also liable to pay penalty in a sum of Rs. 3 lakhs while the Excise dues liable would be in the order of a lakh or so. It is difficult to conceive that the appellant had any opportunity to participate in the adjudication proceedings and contend against the levy of the penalty. Therefore, in the facts and circumstances of this case, we think it appropriate to direct that the said amount, if already paid, shall be refunded within a period of three months. In other respects, the order made by the High Court shall remain undisturbed. The appeal is disposed of accordingly. Issues:1. Liability of auction purchaser for excise dues of previous owner.2. Applicability of Rule 230(2) of the Central Excise Rules.3. Conflict between State Act and Central Excise Act.4. Opportunity for auction purchaser to participate in adjudication proceedings.Analysis:Issue 1: Liability of auction purchaser for excise dues of previous ownerThe appellant, an auction purchaser, contended that they were not liable to pay excise dues of the previous owner, as they had acquired the unit from the third respondent. The High Court disagreed, stating that as per Rule 230(2) of the Central Excise Rules, the Department could proceed against the plants and machinery of the previous owner. The appellant challenged this decision, arguing that the liability should only be on the previous owner. However, the Supreme Court held that the sale made by the corporation under the State Act would vest all rights in the property to the successor, making Rule 230(2) applicable.Issue 2: Applicability of Rule 230(2) of the Central Excise RulesThe Supreme Court clarified that Rule 230(2) of the Central Excise Rules allows for the recovery of excise dues from the assets owned by a predecessor, which can be enforced against the successor. In this case, the liability arose under the Central Excise Act, and the Rule provided a mechanism for recovery from the successor, even if the sale was made under the State Act.Issue 3: Conflict between State Act and Central Excise ActThe appellant argued that the State Act should prevail over the Central Excise Act, citing Section 46B of the State Act. However, the Supreme Court noted that both Acts were special enactments, and in this case, no conflict arose between the two. Therefore, the Court did not find it necessary to examine this aspect further.Issue 4: Opportunity for auction purchaser to participate in adjudication proceedingsThe Supreme Court observed that the appellant did not have the opportunity to participate in the adjudication proceedings where the penalty was imposed on the previous owner. As a result, the Court directed the refund of the penalty amount if already paid by the appellant, within three months. The rest of the High Court's order was upheld.In conclusion, the Supreme Court ruled that the auction purchaser was liable for the excise dues of the previous owner under Rule 230(2) of the Central Excise Rules, and there was no conflict between the State Act and the Central Excise Act in this case. The Court also emphasized the importance of providing the auction purchaser with an opportunity to participate in adjudication proceedings regarding penalties imposed on the previous owner.