TaxTMI 
TaxTMI 
2017 (7) TMI 555
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....tificate to the respondent. Dy Commissioner Central Excise, Khopoli vide letter dated 18-3-2013 informed LTU, Mumbai that there were govt. dues pending recovery amounting to Rs. 30,45,434/-( 9,80,742/- alongwith interest of Rs. 20,64,692/-) vide GAR-7 challan no.00026 dated 24-5-2013 against pending dues of M/s. Bagwe Udyog Ltd and intimated to the department on 18-6-2013. Subsequently respondent vide their letter dated 6-9-2014 filed the refund claim of Rs. 30,45,434/- paid by them. Show cause notice dated 10-2-2015 was issued proposing denial of refund on the ground that under provision of Section 11 (i) and as per Section 11 (e) of Central Excise Act, 1944 the Govt. dues of M/s. Bagwe Udyog Ltd is liable to paid by the person, owner ie.e. respondent. The adjudicating authority while adjudicating the show cause notice rejected the refund claim. Being aggrieved by the Order in original respondent filed appeal before the Commissioner(Appeals) who allowed the appeal therefore revenue is before me. 2. Shri. Ajay Kumar, Ld. Addl. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the ground of appeal. He further submits that there is statutory provision under Section 11....
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....ry of sums due to Government. - [(1)] In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder [including the amount required to be paid to the credit of the Central Government under Section 11D], the officer empowered by the [Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963)] to levy such duty or require the payment of such sums [may deduct or require any other Central Excise Officer or a proper officer referred to in section 142 of the Customs Act, 1962 (52 of 1962) to deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control or may be in the hands or under disposal or control of such other officer, or may recover the amount] by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered, he may prepare a certificate signed by him specifying 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 ....
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....rom whom duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or the Rules made thereunder have become due, in respect of the amount specified in the notice and all the consequences under this Act shall follow.] From the careful reading of the above proviso, I find that, proviso provides that where person against whom duty is recoverable transfer or otherwise, disposes of his business or trade in whole or any part or effect any change in owner ship thereto in conclusion of which he is succeeding in such business or trade by any other person, recovery of the pending dues against the person who is succeeded can be made from the person so succeeding. In the present case it is not under dispute that firstly the duty is recoverable from M/s. Sumit Rerolling Mills Pvt. Ltd but the assets was purchased by the appellant, not from M/S. Sumit Rerolling Mills Pvt. Ltd but from Zia Iron Stores. As per the provisions, if the asset is sold by M/s. Sumit Rerolling Mills Pvt. Ltd to the appellant then only proviso to provisions of Section 11 will attract. The asset was neither sold by M/s. Sumit Rerolling Mills Pvt. Ltd nor it was purchased....
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.... and the expression "transfer of ownership of business" were considered. Section 15 of the KST Act reads as under : "15(1) When the ownership of the business of a dealer liable to pay tax or penalty or any other amount under this Act, is transferred, the transferor and the transferee shall jointly and severally be liable to pay any tax or penalty or any other amount payable in respect of such business as 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 this Act". The language used by the Section is the transfer of the ownership of the business. The Supreme Court after considering various provisions, noted that the consequences contemplated under Section 15 of the Act, would come into effect only if the ownership of the business is transferred. It was sought to be argued that the assets had been transferred from the business. This was not accepted by the Court and in that context the Court observed "business is an activity, directed with a certain purpose, more often towards producing income or profit. Ownership of assets is merely ....
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....ed, the State to recover from the assets including plant and machinery, As such there must be a transfer of the whole or part of the business and succeeding in such business or trade for the proviso to be attracted. In Commissioner of Income Tax v. K.H. Chambers [1965) 55 ITR 674] the Court was considering the provisions of the Income Tax Act. The Court observed that there is no clear and exhaustive definition of the expression "succession" and consequently sought to place reliance on decided cases and text books which throw light on the matter. The Court then observed as under :- "In order to constitute a succession there must be, broadly speaking, a taking over of the whole of the business concerned;.................. But if a business is taken over as a whole, the fact that minor assets of the business are omitted from the transfer will not prevent there being a succession. The fact that the purchaser already has a similar business in not a material fact in establishing succession. The purchase of a business with a view to closing down would not appear to constitute succession". The following observations are also material : "This is an authority for the position that....
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....the first business, cannot be looked upon as its successor, because a successor should not only do the same business but also must continue the business to which it has succeeded. The Gujarat High Court in Kalaria Oil Mills v. The State of Gujarat and. others (1968 Sales Tax Cases 477) was again considering as to what is required to constitute succession in business under Section 19(4) of the Bombay Sales Tax Act, 1959. The Court noted that the goodwill of the business, the other assets and liabilities of the business and the tenancy rights of the premises where the Company was conducting its business were not transferred to the Petitionen. In those circumstances, held that there was only a sale of the machinery and not the sale of the whole business. We have already referred to the judgment in Shreyas Papers Pvt. Ltd. (supra). The High Court there had found that mere transfer of land, building, plant and machinery by the State Financial Corporation would not make the purchaser a transferee In Oriental Fire & General Insurance Co. Ltd. v. Commissioner of Income Tax (2000) 244 ITR 631 (Delhi) was pleased to hold that carrying on the business and its place has been taken by an entire....
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....e business has been transferred to the Petitioner and consequent thereto the Petitioner has succeeded in said business. Respondent Nos.2 and 3 on the facts of this case have not proceeded under the proviso to Section 11 of the Central Excise Act. 18. The Petitioner's have averred that they are engaged in the business of manufacturing/ trading in cotton yarn, knitted fabric and garmenting. Petitioner have also set out that they were intending to start the work of establishing of new textile mechanism in the property purchased. They were also advised to carry out repair to the building. Though respondents have filed a reply, nowhere is it alleged that the business has been sold in whole or part or that the Petitioner has succeeded in the business. Consequently, considering the proviso in the absence of the Petitioner succeeding in the business or part of the business, the issue of the Petitioner being liable for the arrears of Central Excise dues will not arise. The Respondent otherwise did not have a priority of claim over the dues of Respondent No.4. Considering that the Petition will have to be allowed. In view of the above judgment, it has been clearly settled that only whe....
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....e Excise Department became payable on the manufacturing of excisable items by the erstwhile owner, therefore, these statutory dues are in respect of those items produced and not the plant and machinery which was used for the purposes of manufacture. This fine distinction is not taken note at all by the High Court. 24. We thus conclude that the judgment of the High Court is unsustainable in law. Accordingly, the appeal is allowed and the impugned judgment of the High Court [2012 (281) E.L.T. 700 (All.)] is set aside. As a consequence the notice of the Excise Department calling upon the appellant to pay the dues of the erstwhile owner of the unit in question also stands quashed. The appellant shall also be entitled to cost of this appeal. Ambuja Electro Castings Ltd. Vs. Union of India[2014(306) ELT 583 (P&H)] 10. The controversy in the present petition is fully covered by the ratio of the aforesaid judgment. The petitioner purchased land and building and not the business of the owner. The clause in the agreement requires the petitioner to discharge statutory liabilities arising out of land and building. The petitioner, therefore, cannot be called upon to discharge liability of th....
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....he appellant, who is a bona fide purchaser in auction. Surat Metallics Ltd, Vs. Commissioner of C Excise, ELT 558(Fuj)] 17. Section 11 of the Central Excise Act makes provision for recovery of sums due to Government. The said section provides that in respect of any duty and any other sums of any kind payable to the Central Government under any of the provisions of the Act or the rules made thereunder, the Officer empowered by the Central Board of Excise and Customs to levy such duty or require the payment of such sums may : (i) deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control; or (ii) may recover the amount by attachment and sale of excisable goods belonging to such person; and (iii) if the amount payable is not so recovered he may prepare a certificate signed by him specifying 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....
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....e the person whose liability to pay the dues transfers or otherwise disposes of his business or trade in whole or any part or effects any change in the ownership thereof, and in consequence thereof, same person succeeds in such business or trade, In the present case, such a situation has not arisen. Proviso to Section 11 therefore would not attract. It is not a case of transfer of business or trade, but transfer of property under compulsory sale of' the property through auction by the financial institution in exercise of powers under the SARFAESI Act. 9. In the result, the petition is allowed, Revenue Authorities are directed to delete the entry pertaining to the charge of the Central Excise Department from the records in question. It is, however, clarified that nothing stated in this order will prevent the Department from recovering its dues from the defaulter or from its other properties if so permitted in accordance with law. Rule is made absolute accordingly. Tec. Spinner Pvt. Ltd. Vs. Union of India[2009(243) ELT 31(P&H)] The matter is not res integra. More than a decade ago, the Hon'ble Supreme Court in M/s. Isha Marbles v Bihar State Electricity Board & another, ....
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.... of Bikaner & Jaipur v. National Iron and Steel Rolling Corporation (1995 (2) SCC 19; (1995 AIR SCW 214-Three Judge Bench), Madhya Pradesh General Sales Tax in State of M.P. v. State Bank of Indore (2002 (10) SCC 441 - Three Judge Bench) and Karnataka Sales Tax Act in Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. (2000) 5 SCC 694; (2001 CLC 118). As explained in the case of Constitution bench Judgment in Builders Supply Corporation v. Union of India (AIR 1965 SC 1061), the arrears of tax due to the State can claim priority over private debts and thus the rule of common law amounts to law in force in the territory of British India at the relevant time within the meaning of Article 372(1) of the Constitution of India and therefore continues to be in force thereafter. In Dena Bank case (cited supra) it is held that the Crown's preferential right to recover all debts over other creditors is confined to ordinary and unsecured creditors. In the light of the above discussion, we conclude "(i) Generally, the dues to Government i.e. tax, duties etc. (Crown's debts) get priority over ordinary debts. (ii) Only when there is a specific provision in the statute claiming "first c....
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....Nagarik Sahakari Bank Ltd. "Accordingly the under signed authorized officer (Manager, Recovery) has acknowledge the receipt of the sale price in full and hereby handed over the possession of M/s. Sumit Re-Rolling Mills Pvt. Ltd. Nagpur to M/s. Zia Iron Stores, on this_____ day of ___ 2005 on terms and conditions "as and where it is" basis and from this date M/s. Zia Iron Stores, Prop. Mohd. Shafiquddin is solely responsible for all future liabilities, acts, deeds etc. arising out of the premises of M/s. Sumit Re-Rolling Pvt. Ltd. (ii) Deed of assignment between Nagar Nagarik Sahakari Bank Ltd and Jiya Iron stores dated 17/2/2006 "The liabilities, if any and the liabilities which may arise in future in respect of the local authorities and dues of Revenue Authority, MIDC Authority and Sales Tax etc. and also for transfer of property in question, shall be for transfer of property in question shall be payable by the purchaser. The property hereby assigned in on "As is where is" and "as is what is" basis. The Bank does not under take any liabilities or responsibility to procure any permission/ licence etc, in respect of, of the property offered for sale or for any dues like water/ s....