2011 (12) TMI 687 - HC - Central Excise

Summary

Issues Involved:
1. Validity of recovery notices issued to the petitioner.
2. Applicability of Section 11 of the Central Excise Act, 1944.
3. Liability of the petitioner as a successor to pay dues of the predecessor.
4. Interpretation of auction terms and conditions regarding dues.

Detailed Analysis:

1. Validity of Recovery Notices Issued to the Petitioner:
The petitioner, M/s. Navjeevan Industries, filed a writ petition to quash the recovery notices dated 17-3-2006, 12-5-2006, 1-8-2006, 23-8-2006, and 10-4-2007. The court examined whether these recovery notices were justifiable under the provisions of the Central Excise Act, 1944.

2. Applicability of Section 11 of the Central Excise Act, 1944:
The petitioner argued that Section 11 of the Central Excise Act, 1944, was not applicable as they had only purchased the land and building of M/s. Pinkcity Leminart (P) Ltd. in an auction and not the running business. The respondent contended that under Section 11, the successor is liable for the dues of the predecessor. The court noted that Section 11 allows for the recovery of sums due to the government by attachment and sale of excisable goods belonging to the person liable to pay the same. The proviso to Section 11 clarifies that if a person disposes of their business or trade, the successor can also be held liable for the dues.

3. Liability of the Petitioner as a Successor to Pay Dues of the Predecessor:
The petitioner maintained that they were not liable for the dues of M/s. Pinkcity Leminart (P) Ltd. as they had not purchased the running business. They cited the case of State of Karnataka v. Shreyas Papers (P) Ltd. to support their argument. However, the respondents relied on the Supreme Court decisions in Macson Marbles Pvt. Ltd. v. Union of India and Dena Bank v. Bhikabhai Prabhudas Parekh & Co., which held that the successor is liable for the predecessor's dues. The court upheld the respondents' view, indicating that the sale by the Rajasthan Financial Corporation was deemed a sale by the owner, thus making the petitioner liable under Rule 230(2) of the Central Excise Rules.

4. Interpretation of Auction Terms and Conditions Regarding Dues:
The court examined the auction notice and found that Clause 18 exempted the purchaser from paying dues related to the State Electricity Board, State Commercial Taxes Department, and State Excise, but not Central Excise. Therefore, the petitioner could not claim exemption from Central Excise dues based on the auction terms. Additionally, the conveyance deed did not specify any exemption from Central Excise dues.

Conclusion:
The court concluded that the recovery notices issued to the petitioner were justified. The provisions of Section 11 of the Central Excise Act, 1944, and Rule 230(2) of the Central Excise Rules were applicable, making the petitioner liable for the dues of M/s. Pinkcity Leminart (P) Ltd. The auction terms did not exempt the petitioner from Central Excise dues. Consequently, the writ petition was dismissed with costs of Rs. 10,000.