TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 317
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....ues of M/s Nakhua Poly-Containers Pvt. Ltd.; [B] That Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order, directing the respondents, their servants and agents to forthwith issue a permission to add plot No.4705 to Central Excise Registration as a manufacturer in favour of the petitioner firm herein and be further pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order quashing and setting aside decision of the second respondent conveyed to the petitioners vide letter F.No.V(Rule-9)Vapi/2011-12 dated 29.02.2012 (Annexure "G")" 2. The petitioner, M/s Lami Fab Industries, is a partnership firm, inter alia, engaged in the business of manufacture of excisable goods like HDPE/PP Woven Fabrics, Tarpaulins, etc. for which central excise registration certificate has also been issued in favour of the petitioner firm, thereby recognizing, licensing and permitting the petitioner firm to manufacture excisable goods in their factory. The Central Excise Registration Certificate has been given for plots No.4702, 4703, 4604 and 4605 of Pla....
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....nsion of manufacturing activities could be smoothly made by using the plot as a part of the factory. The petitioner firm, therefore, made an online application dated 12.12.2011 requesting the Assistant Commissioner of Central excise to add the subject plot No.4705 in the petitioners' Central Excise Registration. By a letter dated 29.02.2012 issued by the Assistant Commissioner of Central Excise, the application of the petitioner firm came to be rejected on the ground that GIIC had imposed a condition at the time of the auction and handing over the possession of assets of M/s Nakhua as regards recovery of outstanding excise duty because M/s Nakhua had not discharged dues amounting to Rs. 12,84,023/- and interest thereon when their unit was closed down and that M/s Poonam Enterprise was liable to pay all dues, taxes, cess, etc. of the Central Government for plot No.4705; and this plot having been purchased by the petitioner firm, the liability to pay outstanding government dues arose at the petitioner's end. The Assistant Commissioner also informed the petitioner firm that a fresh registration for the premises could not be issued unless the earlier registration was surrendered and ca....
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....s; secondly, whether the central excise dues can be recovered from the subsequent owner of the property; and thirdly, whether there are any provisions under the Central Excise Act which authorize the respondents to take such action. Referring to the provisions of section 11 of the Act, it was submitted that the petitioner has only bought the leasehold rights which does not make it the successor in business and trade of the predecessor. It was submitted that in the facts of the present case, there is no sale of property, but only a sale of leasehold rights. It was submitted that assuming that the transaction in question is a sale, it is not a sale as contemplated under section 11 of the Act, under the circumstances, the proviso thereto is not attracted. Referring to the communication dated 29th February, 2012 addressed by the Assistant Commissioner, Central Excise, Vapi to the petitioner, it was pointed out that the agreement which finds reference in the said communication is between GIIC and M/s Poonam Enterprises and not with the petitioner. It was submitted that for the purpose of seeking to recover the dues of M/s Poonam Enterprises from the petitioner, the respondents have to e....
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....e to discharge the liabilities of the predecessor. It was submitted that the above decision would be squarely applicable to the facts of the present case and M/s Nakhua can in no circumstances, be termed as the predecessor of the petitioner, inasmuch as, it has neither transferred or disposed of its business or trade, either wholly or partly, to the petitioner. 5.2 As regards the delay in attempting to recover the outstanding dues of the defaulter unit, the learned counsel placed reliance upon the decision of this court in the case of M/s Jagdish Enterprise Pvt. Ltd. v. Union of India rendered on 18.09.2013 in Special Civil Application No.15515 of 2010, wherein the court has held that it was not permissible for the department to initiate recovery proceedings to recover the dues of the erstwhile unit from the subsequent purchasers after a delay of ten years. Reliance was also placed upon the decision of this court in the case of Ani Elastic Industries v. Union of India, 2008 (222) ELT 340 (Guj.), wherein the court has held that the lapse of period in seeking to recover the dues of the erstwhile unit from the auction purchaser, namely, the petitioner, is certainly not a reasonable t....
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....or deregistration, there is no jurisdiction to grant another person registration of the premises as in the case of a bona fide transferee for value or for that to the owner of the premises whose lessee has defaulted in payment of excise dues. Section 6 and Rule 9 and the notification contemplates that it is the person who must be registered. Neither section 6 nor rule 9 and the notification is a provision for enforcing the claim for dues of the department. That is contained in different provisions. An immovable property by itself cannot be sold unless the owner of the premises is defaulter and immovable property by itself cannot be sold unless the owner of the premises is defaulter and that too under a certificate as arrears of land revenue. That sale would be subject to the priority of claims. In case of a lease hold property given for a particular period, there would be no question of sale of the property except the limited interest. In our opinion, the case of bona fide transferee was not in issue in the case of M/s Manibhadra Processors (supra) or the instances we have cited above. The respondent No.3 has therefore, clearly acted without jurisdiction in refusing to grant regist....
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....ter dated 04.08.2007 and letter dated 05.10.2007, inter alia, that the purchaser shall be liable for payment of dues, taxes etc. of the Central Government and the Central Government Department and other local bodies, payable, if any, in respect of the assets/properties under sale. That the purchaser will be liable to pay all dues in respect of assets/properties purchased or in respect of business, production etc. of the unit/person whose assets/properties are under sale. It was submitted that the liability of tax and other Government dues, therefore, lies solely on the transferee of the property and not on the transferor of the property and since the petitioner has purchased the said plot from M/s Poonam Enterprises, whose liability is outstanding, the same shall stand transferred to the petitioner by application of the proviso to section 11 of the Central Excise Act, 1944. The attention of the court was invited to the deed of assignment executed by M/s Poonam Enterprises in favour of the petitioner - M/s Laxmi Fab Industries, to point out that it has been specifically stated therein that the GIIC had approved of the proposal for the purchase of land and building and the plant and ....
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....a first charge on the plant and machinery of the defaulting unit in view of the provisions of section 11E of the Central Excise Act, 1944. It was submitted that while it is true that section 11E of the Act has been inserted with effect from 08.04.2011, however, this Court in the case of Gujarat Industrial Development Corporation Ltd. v. Union of India, rendered on 27.06.2014 in Special Civil Application No.18529 of 2007, has held that on the date on which section 11E has come into force there is a statutory first charge of the central excise dues. It was submitted that the decisions on which reliance has been placed by the learned counsel for the petitioner would, therefore, not be applicable to the facts of this case, in view of the fact that this case would be governed by the provisions of section 11E of the Act and the Central Government would have a first charge over the property in question. 6.2 Mr. Oza further submitted that section 142 of the Customs Act provides for recovery of sums due to Government, and clause (b) of sub-section (1) thereof provides that where any sum payable by any person under the Act is not paid, the Assistant Commissioner of Customs or Deputy Commiss....
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....r who is the successor of the subsequent owner of the property and whether there are any provisions under the Central Excise Act which authorize the respondents to take such action? (ii) Whether the respondents are barred from seeking to recover central excise dues of the erstwhile unit from the petitioners on the ground of gross delay in taking such action? (iii) Whether the Central Government has a first charge over the property in question in view of the provisions of section 11E of the Central Excise Act, 1944? (iv) Whether in the facts and circumstances of the case, the respondents are justified in refusing to grant central excise registration to the petitioner firm when it is the owner and occupier of the premises? 9. The facts are not in dispute. M/s Nakhua Poly Containers P. Ltd., the original lessee of Plot No.4705, GIDC, Sarigam did not pay the outstanding dues of Rs. 12,84,023/- in respect of central excise duty and penalty. M/s Nakhua Poly Containers P. Ltd. had borrowed funds from GIIC and could not repay the loan and advances and consequently, GIIC took over the said plot No.4705 from M/s Nakhua Poly Containers P. Ltd. in exercise of powers under section 29 of the....
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....by a deed of assignment-cum-sale dated 21.07.2009, GIIC sold the land and building and plant and machinery to M/s Poonam Enterprise, being the highest offerer, on the terms and conditions stipulated in the letter dated 24.06.2008 issued to the Bidder by the Vendor. (It may be noted that such letter has not been produced on record.) A perusal of the assignment cum sale deed shows that what is sold is leasehold land with building and other civil construction and plant and machinery lying therein. M/s Poonam Enterprise continued to own the leasehold rights in the plot for a period of two years till 2nd August 2011 when it transferred the said property in favour of the petitioner by a deed of assignment cum conveyance. After purchase of the said property, the petitioner made an application dated 12.12.2011 to the Assistant Commissioner of Central Excise to add plot No.4705 in the petitioner's central excise registration. By the impugned communication dated 29.02.2012 the petitioner was informed that there are outstanding dues amounting to Rs. 12,84,023 plus interest against M/s Nakhua Poly Containers Pvt. Ltd. and that the unit is closed and has not surrendered its Central Excise Regis....
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....the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue. Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of any kind, as specified in this section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining written approval from the Commissioner of Central Excise, for the purposes of recovering such duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise dispos....
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....espect of such business and remaining unpaid at the time of transfer, and for the purpose of recovery from the transferee such transferee shall be deemed to be the dealer liable to pay the tax or penalty or other amount under the Act. In the facts of the said case, the sale was made under section 29 of the State Financial Corporations Act, 1951. The court, on a careful reading of section 15(1) of the Karnataka Sales Tax Act, found that the consequences contemplated therein, namely, foisting of the liabilities of the defaulting transferor onto the transferee, would come into effect only if the "ownership of the business" is transferred. The court did not accept the contention on behalf of the revenue that "business" could not be separated from the assets of the business. The court held that business is an activity, directed with a certain purpose, more often towards producing income or profit. Ownership of assets is merely an incident rather than a characteristic of business. Hence, the mere transfer of one or more species of assets does not necessarily bring about the transfer of the "ownership of the business" for "ownership of a business" is much wider than mere ownership of disc....
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.... any change in the ownership thereof, as a consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold for recovery of such dues. Thus, under the proviso to section 11 of the Act it is only the specified assets that can be attached and sold for recovery of the central excise dues of the predecessor but the purchaser is not deemed to be a defaulter. 17. In the aforesaid premises, it is evident that resort cannot be made to the proviso to section 11 of the Act, inasmuch as, what has been transferred to the predecessor of the petitioner and subsequently to the petitioner are the assets of the defaulting unit and not the business or trade. The above position has been further made clear by the Supreme Court in the case of Rana Girders Limited v. Union of India and others, (supra). In the facts of the said case, before the High Court, the Excise Department had contested the petition on the ground that the appellant therein being the successor-ininterest which had purcha....
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....ter unit cannot be recovered from the subsequent owner of the property, namely the petitioner herein. 18. The respondents also seek to recover the central excise dues of the defaulter unit from the petitioner in view of the above referred condition imposed by GIIC at the time of sale in favour of M/s Poonam Enterprise. In the opinion of this court, the terms and conditions of sale are an agreement between GIIC and M/s Poonam Enterprises and may also be binding on the petitioner as its successor in title. However, the said agreement does not create any right in favour of the Central Excise authorities and merely protects the rights of GIIC qua M/s Poonam Enterprise or its successor. Reliance placed upon the said condition, therefore, does not carry the case of the respondents any further and in the absence of any statutory power being vested in the authorities under the Central Excise Act empowering them to recover the outstanding dues from the petitioner or its predecessor in title, the sale being of the assets of the defaulter unit and not a going concern, it is not permissible for the respondents to seek to recover the outstanding dues of M/s Nakhua Poly Containers P. Ltd. from ....
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....on purchaser in the year 2012, after a period of about seven years from the end of the period to which the dues relate viz. 2005 and fourteen years from 1998. Evidently, therefore, there is a gross delay in seeking to recover the outstanding dues of the defaulter unit from the petitioner. 20. As to whether the Central Excise authorities have a first charge over the property in question in view of the provisions of section 11E of the Central Excise Act, 1944, as noted hereinabove, the assets of the defaulter unit first came to be sold to M/s Poonam Enterprises on 21.07.2009, albeit with the above referred condition. The defaulter unit, viz. M/s Nakhua Poly Containers P. Ltd., thereupon ceased to be the owner of the assets in question. Section 11E of the Central Excise Act, 1944 came to be inserted by the Finance Act, 2011 with effect from 8.4.2011. In terms of section 11E of the Act, notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest, or any other sum payable by an assessee or any other person under the Act or the rules made thereunder, shall save as otherwise provided in section 529A of the Companies Act, 1956,....
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....ot expressly stated in the order refusing registration, before the Court, on behalf of the respondent No.1, it has been contended that premises can be registered under the Central Excise Act only in relation to one person; that the defaulter M/s. Veenutex Dyeing & Printing Mills Pvt. Ltd. having already been registered in relation to the subject premises, unless such registration is revoked and cancelled, registration cannot be granted to the petitioners in relation to the said property. Attention was invited to notification No.35/2001 C.E. (N.T.) dated 26th June, 2001 as amended from time to time, issued in exercise of powers under rule 9 of the Central Excise Rules, 2001 which provides for the conditions, safeguards and procedures for registration and exemption in specified cases. Reference was made to clause (2) thereof which says that if the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises; clause (4) thereof which says that where a registered person transfers his business to another person, the transferee shall get himself registered afresh as well as clauses (6) and (7) thereof which provid....
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....r enforcing the claim for dues of the department. That is contained in different provisions. An immovable property by itself cannot be sold unless the owner of the premises is defaulter and that too under a certificate as arrears of land revenue. That sale would be subject to the priority of claims. In case of a lease hold property given for a particular period, there would be no question of sale of the property except the limited interest. In our opinion, the case of bona fide transferee was not in issue in the case of M/s. Manibhadra Processors (supra) or the instances we have cited above. The Respondent No. 3 has therefore, clearly acted without jurisdiction in refusing to grant registration on the specious plea that M/s. Usha Ispat whose assets has been sold and purchased by the Petitioners has not applied for deregistration. In the absence of a specific power to deny registration, the alternate would be whether there would be implied power. Neither Section 6 or Rule 9 or for that matter the notification confers such power. The right of revenue, however, would subsist for recovery of dues both against the defaulter or the transferee if the predicates for recovery are met. An in....