2014 (3) TMI 483 - AT - Central Excise

Recovery of arrears of excise duties - Attachment of property - There was a lease agreement between M/s. Bhavya Apparels Pvt. Ltd. and the appellant herein for leasing out the property - Lease agreement was an unregistered document as there is no stamp duty paid nor it is registered with the authorities - M/s. Bhavya Apparels Pvt. Ltd. stopped then operation from March, 2000 and also that M/s. Bhavya Apparels Pvt. Ltd has not paid the lease rent from March, 2000 - Department has not relied upon this lease agreement as a sole basis for grant of EO permission or any other licences to M/s. Bhavya Apparels Pvt. Ltd. - appellant herein is in possession and control of the premises which is attached - Whether the provisions of Section 142(1)(c)(ii) of the Customs Act, 1962 stand rightly invoked by the authorities below for attaching property in question for recovering the duty confirmed against the tenant. Held that - Provisions of Section 142 of Customs Act, 1962 provides for recovery of some dues to the Government from any person and the provisions of Section 142(1)(c)(ii) lays down that the proper officer of the Customs has power in accordance with the rules made in that behalf to destrain any movable or immovable property belonging to or under the control of such person for the recovery of amount payable by such person. Thus, it is very clear that any action under Section 142(1)(c)(ii) has to be in accordance with the rules and those rules are Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. Rules themselves make it clear that the property to be attached should be of the defaulter and it is more clearer from Rule 3 of the said Rules talks about the property owned by the defaulter. Rules 4 and 5 provide for the issuance of the Notice to be served upon the defaulter and then retaining the defaulter s property until the amount due is recovered. To my mind, it is clear that the attachment, restrainment, etc. of immovable property under Section 142(1)(c)(ii) read with rules, can only be in respect of the property owned by the defaulter. To my mind the wordings used in the Section 142(1)(c)(ii) also very clearly mandate that the immovable property to be attached should be owned by the defaulter and not under his possession. Under these circumstances, mere possession does not give the control of the property because of the control of property always rests with the legal owner and not with the possessor. In case of lease hold properties, the legal control of the property remains with the lessor, even though the possession may be with the lessee and it cannot be said that the lessee has control over the property. It is undoubted that in this case, the lessee has got only the possession of the property by virtue of his right under the lease deed and the same are limited to the extent lease deed indicates. Lease agreement was not the only sole document for granting licence and various permissions to run an EOU and I agree that there is nothing on record to show that the said lease deed was placed before the authorities for grant of permission to the EOU. In such a situation, the Revenue authorities cannot invoke a clause which is an agreement between the lessor and lessee, and was not the only clause which prompted the Department to issue the licence to M/s. Bhavya Apparels Pvt. Ltd. There is also nothing on record to indicate that M/s. Bhavya Apparels Pvt. Ltd. was in possession and control of the said premises, when the authorities initiated the proceedings on 2-2-2006 for attachment of the said property - Therefore, attaching property is not legal. The same is neither just nor fair even on the basis of principle of justice, equity and good conscious. The same is, accordingly, set aside - Decided in favour of appellant.

Issues Involved:
1. Applicability of Section 142(1)(c)(ii) of the Customs Act, 1962 for recovery of dues.
2. Validity and impact of the lease deed clause regarding control of property.
3. Rights of the Revenue to attach property under the lease agreement.
4. Effect of non-registration of the lease deed.
5. Legal possession and control of the property after the lease period.

Issue-wise Detailed Analysis:

1. Applicability of Section 142(1)(c)(ii) of the Customs Act, 1962 for recovery of dues:
The Tribunal examined whether the provisions of Section 142(1)(c)(ii) of the Customs Act, 1962, which allows for the attachment of property for recovery of government dues, could be invoked against the appellant. It was argued that the property was neither belonging to nor under the control of the defaulter, M/s. Bhavya Apparel Pvt. Ltd. The Tribunal concluded that the property could not be considered under the control of the defaulter since the lease had expired, and the lessee had vacated the premises.

2. Validity and impact of the lease deed clause regarding control of property:
The lease deed contained a clause stating that the factory shall not be vacated until the export obligation is discharged and consent is obtained from the authorities. The Tribunal noted that this clause was intended to protect the interests of the government but found that it did not extend the lease period beyond six years. The Tribunal held that the property was not under the control of the defaulter after the lease expired.

3. Rights of the Revenue to attach property under the lease agreement:
The Tribunal discussed whether the Central Excise Department could claim any right or advantage from the lease agreement between the appellant and M/s. Bhavya Apparel Pvt. Ltd. It was determined that the department, being a third party to the lease agreement, could not enforce the lease terms to attach the property for recovery of dues. The Tribunal emphasized that the lease agreement was a private contract between the lessor and lessee, and the department had no privity to it.

4. Effect of non-registration of the lease deed:
The lease deed was not registered, which was required under Section 17(i) of the Registration Act, 1908. The Tribunal considered the effect of non-registration and concluded that the document could not be received as evidence of any transaction affecting the property. The proviso to Section 49 of the Registration Act allows an unregistered document to be used as evidence of a collateral transaction, but the Tribunal found that this did not apply to the department's claim.

5. Legal possession and control of the property after the lease period:
The Tribunal examined whether the possession of the property by the appellant after the lease expired was valid. It was concluded that the lease agreement did not create any obligation for the lessor to ensure the lessee fulfilled export obligations. The Tribunal held that the appellant's possession of the property after the lease expired was lawful and could not be deemed as being under the control of the defaulter.

Separate Judgments:
The judgment includes a dissenting opinion by one member, who disagreed with the majority view and provided a detailed analysis supporting the department's position. The dissenting member argued that the lease clause should be enforced to protect government interests and that the property should be considered under the control of the defaulter until the export obligations were fulfilled.

Conclusion:
The majority view of the Tribunal was that the provisions of Section 142(1)(c)(ii) of the Customs Act, 1962, could not be invoked to attach the appellant's property for recovery of dues from M/s. Bhavya Apparel Pvt. Ltd. The lease agreement did not extend the lessee's control over the property beyond the lease period, and the department had no right to enforce the lease terms. The appeal was allowed, and the attachment order was set aside.

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