Liability of a person for purchasing property under SAFARAEISI Act from a bank under auction

[CLARENCE PEREIRA]

This is with reference to property with land,building,machinery,stores etc purchased from the Bank under SAFARAEISI Act. We have disposed the machinery.Central Excise authorities are demanding Central Excise Duty on the grounds that the previous owner may have taken modvat Credit.Under SAFARAEISI Act only the assets are transfered & not the liabilities.We have not purchased from the previous owner nor is it a take over of the previous business.The previous business is part of the old owner and we only have bought the assets.Hence the question of paying ED does not arize,nor reversal of MODVAT as we have no info as to whether MODVAT was taken at all.The Central Excise authorities should make a claim on the previous ownner.It is OK if we had taken over the business lock,stock&barrel from the previous owners. Kindly let us know if our stand is correct and any case law to support our claim.

AI Summary

Successor liability under central excise: asset purchases under SARFAESI may trigger recovery only if business succession is established.
Purchasers of assets acquired under SARFAESI assert they are not successors to the prior owner's business and therefore should not be liable for reversal of Cenvat/Modvat credit or central excise dues; Section 11 of the Central Excise Act, 1944 operates as a recovery provision applicable where succession of business is found and should not be used simply to deny entitlement to credit. SARFAESI's non judicial asset transfer powers have led authorities to seek recovery from auction purchasers by treating such acquisitions as succession, raising the legal question whether the sale was of assets only or of an ongoing business.