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2014 (11) TMI 427 - HC - Central Excise


Issues Involved:
1. Refusal to grant Central Excise Registration due to outstanding dues of the previous owner.
2. Applicability of Section 11 and Section 11E of the Central Excise Act.
3. Whether the petitioner is a successor of the previous owner under Section 11 of the Central Excise Act.
4. Validity of the Central Excise Authorities' demand for indemnity bond.
5. Whether two parties can hold Central Excise Registration for the same premises.

Issue-wise Detailed Analysis:

1. Refusal to grant Central Excise Registration due to outstanding dues of the previous owner:
The petitioners, engaged in the manufacture of steel products, purchased the subject property from the Gujarat State Financial Corporation (GSFC) through a public tender. They applied for Central Excise Registration, which was denied by the authorities due to the outstanding dues of the previous owner, M/s. Shri Pramukh Industries Private Limited. The authorities insisted on the payment of these dues or the provision of an indemnity bond as a precondition for granting registration.

2. Applicability of Section 11 and Section 11E of the Central Excise Act:
The respondents argued that under Section 11 of the Central Excise Act, the petitioners, as successors, are liable for the dues of the previous owner. However, the court referred to the Supreme Court's decision in Union of India v. SICOM Ltd., which held that a secured debt prevails over Crown debt. Since GSFC, a secured creditor, had sold the property to the petitioners, the Central Excise Authorities could not claim the outstanding dues from the petitioners. Additionally, Section 11E, which provides for the first charge of Central Excise dues, was not applicable retrospectively to affect rights acquired before its enactment in 2011.

3. Whether the petitioner is a successor of the previous owner under Section 11 of the Central Excise Act:
The respondents claimed that the petitioners should be considered successors of M/s. Shri Pramukh Industries Private Limited. However, the court found that the petitioners had purchased the property from GSFC, a secured creditor, and not directly from the previous owner. Therefore, the petitioners could not be held liable for the dues of the previous owner under Section 11 of the Act.

4. Validity of the Central Excise Authorities' demand for indemnity bond:
The Central Excise Authorities demanded an indemnity bond from the petitioners for the outstanding dues of the previous owner. The court held that such a demand was unjustified, as the petitioners were not liable for the dues of the previous owner. The authorities' insistence on the indemnity bond as a precondition for registration was deemed improper.

5. Whether two parties can hold Central Excise Registration for the same premises:
The respondents argued that Central Excise Registration could not be granted to the petitioners because the registration of the previous owner had not been canceled. The court referred to its decision in Surat Metallics Ltd. v. Commissioner of Central Excise, which held that the failure of the previous owner to apply for de-registration should not prevent the new owner from obtaining registration. The court concluded that the Central Excise Authorities were not justified in refusing registration on this ground.

Conclusion:
The court allowed the petitions, directing the Central Excise Authorities to grant regular Central Excise Registration Licenses to the petitioners without insisting on the payment of the outstanding dues of the previous owner, M/s. Shri Pramukh Industries Private Limited. The court emphasized that the rights of the petitioners, acquired through the purchase from GSFC, a secured creditor, could not be affected by the retrospective application of Section 11E of the Central Excise Act. The rule was made absolute with no order as to costs.

 

 

 

 

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