2011 (2) TMI 1343 - HC - Central Excise

Central excise registration denied - Held that - In case the Central Excise authorities were prevented from proceeding further pursuant to the attachment by any other reason, viz., by an order of a court of competent jurisdiction staying further proceedings, etc., the matter would stand on a different footing. But properties cannot be simply attached for years together without taking any further action. More so, in a case like the present one, where the Central Excise have permitted third party interests to be created. In the circumstances, the respondent No.1 was not justified in refusing to grant registration to the petitioners on the ground of attachment made under section 142 of the Customs Act, 1962. Merely because the defaulter unit, though it had ceased to carry on business on the premises in question, had failed to apply for de-registration, the same should not, in any manner, come in the way of the petitioners in obtaining central excise registration in respect of the premises in question. The stand adopted by the respondent authority that in respect of the same premises, two persons cannot be registered being contrary to the provisions of law, cannot be accepted. Grounds for refusing to grant registration to the petitioners under section 6 of the Central Excise Act are held to be invalid. The petition, therefore, succeeds. The respondent No.1 shall consider the application dated 04th May, 2010 made by the petitioner No.1 company for registration under rule 9 of the Central Excise Rules, 2002 in accordance with law, in the light of the observations made hereinabove. Appeal allowed.

Issues Involved:
1. Validity of attachment under Section 142 of the Customs Act, 1962.
2. Entitlement to registration under the Central Excise Act, 1944 for newly purchased premises.
3. Priority of secured creditor's rights over government dues.
4. Applicability of Rule 9 of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995.
5. Legality of denying registration based on existing registration of the defaulter unit.

Detailed Analysis:

1. Validity of Attachment under Section 142 of the Customs Act, 1962:
The court examined whether the attachment of the property under Section 142 of the Customs Act was valid. The attachment was made on 29th December 2004, but the respondent bank had already taken possession of the property on 6th November 2004 under the Securitisation Act. The court found that the attachment was not valid as the property was not in possession of the defaulter at the time of attachment. Furthermore, the attachment could not continue indefinitely without further action, and the Central Excise authorities failed to proceed with the sale of the attached property within a reasonable period.

2. Entitlement to Registration under the Central Excise Act, 1944:
The petitioner sought registration for the newly purchased premises under the Central Excise Act. The court noted that the refusal to grant registration was based on the attachment of the property and the existing registration of the defaulter unit. The court held that the attachment was no longer valid, and the petitioners were entitled to registration. The court emphasized that Section 6 of the Central Excise Act and Rule 9 of the Central Excise Rules mandate registration of the person and not the premises. Hence, the petitioners should be granted registration irrespective of the existing registration of the defaulter unit.

3. Priority of Secured Creditor's Rights over Government Dues:
The court recognized that the respondent bank, as a secured creditor, had a first and prior charge over the secured asset. The court referred to the provisions of the Securitisation Act, which override other laws, including the Central Excise Act. The court concluded that the bank's rights as a secured creditor took precedence over the government dues, and the sale of the property to the petitioners was valid.

4. Applicability of Rule 9 of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995:
The court examined Rule 9, which voids any private transfer of attached property. The court found that the transfer of the property to the petitioners was not a private transfer but an auction sale conducted under the Securitisation Act. Therefore, Rule 9 did not apply, and the transfer was valid.

5. Legality of Denying Registration Based on Existing Registration of the Defaulter Unit:
The court rejected the argument that two persons cannot be registered for the same premises. The court cited the Bombay High Court's decision in Tata Metalliks Ltd. vs. Union of India, which held that registration is for the person and not the premises. The court concluded that the existing registration of the defaulter unit should not prevent the petitioners from obtaining registration for the newly purchased premises.

Conclusion:
The court quashed the impugned order dated 10th May 2010 and directed the respondent to consider the petitioner's application for registration in accordance with the law. The court held that the attachment was invalid and that the petitioners were entitled to registration despite the existing registration of the defaulter unit. The relief claimed for declaring that the respondents are not entitled to claim outstanding dues from the petitioner's property was not addressed as there was no indication of such a claim. The petition was allowed to the extent of granting registration, with no order as to costs.

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