2009 (11) TMI 784 - AT - Central Excise

Attachment of leased factory - recovery of amount from the lessee to the lessor - Held that - Commissioner (Appeals) has held that appellants are liable in terms of the provisions of Section 142 of Customs Act and held that only lessee is deemed to be in possession of the factory premises. We find that observation of the Commissioner (Appeals) about the applicability of Section 142 is not proper - detailed legal position as to the applicability of Section 142 and also the observation of Commissioner (Appeals) that Section 11 of Central Excise Act is not applicable is required to be examined at the time of final hearing of appeal - appeal allowed by way of remand.

Summary

Issues:
1. Validity of attaching leased factory for recovery of arrears.
2. Tribunal's power to grant stay in such cases.
3. Interpretation of lease deed conditions regarding factory premises.
4. Applicability of Section 142 of the Customs Act.
5. Direction to not dispose of property during appeal.

Analysis:
1. The case involved the validity of attaching a leased factory for recovery of arrears owed by the lessee to the lessor. The lease deed contained conditions preventing the factory from being vacated until export obligations were met. The lessees were found engaged in irregularities, resulting in duty demands and penalties. Orders confirming these amounts had already been finalized.

2. After a show cause notice, the appellant faced the attachment of the factory for recovery. The Commissioner (Appeals) initially allowed the attachment, leading to appeals. The appellant sought a stay on property disposal during the appeal. The Revenue argued against the Tribunal's power to grant such stays, citing Section 35F.

3. The Tribunal considered Rule 41 of CESTAT Procedure Rules, granting inherent powers to give effect to orders or secure justice. The Tribunal disagreed with the Revenue's contention, asserting its authority to grant stays in such cases. The lease deed's conditions regarding factory premises and export obligations were also analyzed.

4. The Commissioner (Appeals) had held the appellants liable under Section 142 of the Customs Act, deeming only the lessee in possession of the factory. However, the Tribunal found this interpretation improper and decided to examine the legal position of Section 142 and the applicability of Section 11 of the Central Excise Act during the final hearing.

5. Ultimately, the Tribunal allowed the stay petition, directing the department not to dispose of the property during the appeal. The appellants were instructed not to create any fresh encumbrances on the property. This decision aimed to ensure the factory's continued operation and prevent it from lying idle during the resolution of the issues.

This comprehensive analysis of the judgment highlights the key legal issues addressed and the Tribunal's decisions regarding the attachment of the factory, grant of stay, interpretation of lease deed conditions, and the application of relevant statutory provisions.