2012 (1) TMI 120 - AT - Central Excise

Duty demand - Held that - The fixed assets of M/s. Jain Biscuits Industries Ltd. were purchased by the appellant on 19-4-2001. By this time the old Central Excise Rules 1944 had been rescinded and new Central Excise Rules 2001 had been notified vide Notification No. 9/2001-C.E. (N.T.) dated 1-3-2001. We notice that the decision in the case of Macson Marbles Pvt. Ltd. (2003 (11) TMI 71 - SUPREME COURT OF INDIA) relied upon by Revenue was given with reference to Rule 230(2) of Central Excise Rules 1944. Further it was a case where department proceeded to attach plant and machinery which belonged earlier to the defaulter. Nothing is coming out from case records that any attachment of plant machinery or excisable goods has been done in this case. The effect of the impugned order of the lower authority is to hold the appellants liable to pay revenue arrears of M/s. Jain Biscuits Industries Pvt. Ltd. without examining the issue whether the appellant is a successor in business of M/s. Jain Biscuits Industries Pvt. Ltd. and without attaching any property mentioned in the said provision. Further there is the issue that a legal provision brought into statute in 2004 cannot apply to a transaction done on 19-4-2001 - Decided in favour of assessee.

Summary

Issues:
1. Liability of the appellant to pay outstanding liabilities of the predecessor.
2. Interpretation of Rule 230 of the erstwhile Central Excise Rules, 1944 and proviso to Section 11 of the Central Excise Act, 1944.
3. Applicability of legal provisions to transactions predating their enactment.

Analysis:

Issue 1: Liability of the appellant to pay outstanding liabilities of the predecessor
The appellants purchased fixed assets previously owned by a company that owed revenue arrears to the Central Excise Department. The Commissioner (Appeals) held that the appellant's liability should be restricted to the dues outstanding against the predecessor on the date of acquisition of the property. The Commissioner relied on Rule 230 of the Central Excise Rules, 1944 and the proviso to Section 11 of the Central Excise Act, 1944. The Commissioner concluded that the appellant is liable to pay the outstanding liability of the predecessor as on the date of acquisition and not any liabilities accrued after the purchase of the property. The Tribunal upheld this finding, emphasizing that the appellant should not be liable for arrears in excess of the outstanding amount against the predecessor as of the acquisition date.

Issue 2: Interpretation of Rule 230 and proviso to Section 11
The Tribunal considered the applicability of Rule 230 of the erstwhile Central Excise Rules, 1944 and the proviso to Section 11 of the Central Excise Act, 1944. The Tribunal noted that the proviso to Section 11, which allows for recovery from a successor in business, applies only to excisable goods, materials, and other specified items obtained from the defaulter. There was no mention of immovable property like land and buildings in this provision. The Tribunal highlighted that the provision does not apply to assets the successor had in possession from other businesses. Moreover, there was no evidence of any attachment of property with proper sanction as required by the provision. The Tribunal concluded that the lower authority erred in holding the appellants liable without examining if they were the successors in business and without attaching any property as specified in the provision.

Issue 3: Applicability of legal provisions to past transactions
The Tribunal addressed the issue of whether a legal provision introduced in 2004 could apply to a transaction that occurred in 2001. The Tribunal observed that the legal provision introduced in 2004 could not retroactively apply to a transaction from 2001. Therefore, the Tribunal found merit in the appellant's contention that they should not be held liable for the predecessor's arrears without proper examination and attachment of specified property.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant should not be held liable for arrears beyond what was outstanding against the predecessor at the time of property acquisition. The Tribunal highlighted the limitations of the legal provisions in attaching specific assets and clarified that provisions introduced after a transaction cannot retroactively apply to that transaction.