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2015 (9) TMI 576 - AT - Central ExciseRecovery of excise duty - Liability of successor - Purchase of immovable property assets - Held that - In the present case it is not under dispute that firstly the duty is recoverable from M/s. Sumit Rerolling Mills Pvt. Ltd but the assets was purchased by the appellant, not from M/s. Sumit Rerolling Mills Pvt. Ltd but from Zia Iron Stores. As per the provisions, if the asset is sold by M/s. Sumit Rerolling Mills Pvt. Ltd to the appellant then only proviso to provisions of Section 11 will attract. The asset was neither sold by M/s. Sumit Rerolling Mills Pvt. Ltd, nor it was purchased by appellant from M/s. Sumit Rerolling Mills Pvt. Ltd, for this reason the proviso to Section 11 shall not attract. I also observed that in the whole chain of transaction of the immovable assets M/s. Sumit Rerolling Mills Pvt. Ltd has no locus standi because the assets was not sold by M/s. Sumit Rerolling Mills Pvt. Ltd whereas it was first acquired by the bank, who under auction sold the asset not to the appellant but to the Zia Iron Stores and subsequently the appellant has purchased the assets from M/s. Zia Iron Stores. In this transaction, neither M/s. Sumit Rerolling Mills Pvt. Ltd is the predecessor nor the appellant is successor. It is undisputed fact that firstly appellant has not taken over the business or trade which was being run by M/s. Sumit Rerolling Mills Pvt. Ltd. For this reason also proviso Section to 11 is not applicable. I am in agreement with the submission of the Ld. Counsel that in view of the Krishna Lifestyle Technologies Ltd (2008 (2) TMI 2 - HIGH COURT, BOMBAY) case the recovery from the successor can only be made when the business or trade is transferred either in whole or in part from the predecessor to the successor. - Immovable assets were first sold in auction by the bank to Zia Iron Stores and thereafter the appellant has purchased the property from Zia Iron Stores. It has been held in the numerous judgment that if any property is sold under auction buyer cannot be held liable for payment of the arrears of the previous owner of the property. Therefore the deed and agreement and terms and conditions thereof have no relevance in the present case. Moreover even if any such clause exist the same cannot be used for making recovery. For recovery of arrears of the M/s. Sumit Rerolling Mills Pvt. Ltd if at all can be made in terms of proviso to Section 11 which under the present set of the facts does not apply. On going through the under taking given by the appellant while obtaining registration regarding the payment of arrears, I find that the appellant has given such under taking without prejudice to the legal rights of the appellant therefore in my considered view though the under taking is given by the appellant, the same is not sufficient for enforcing the recovery of arrears as the appellant is not legally liable for payment of arrears of M/s. Sumit Rerolling Mills Pvt. Ltd. - appellant is not liable for payment of dues which is pending against M/s. Sumit Rerolling Mills Pvt. Ltd. therefore impugned order is set aside - Decided in favour of assessee.
Issues Involved:
1. Liability of the appellant for the outstanding Central Excise dues of the predecessor company. 2. Applicability of Section 11 of the Central Excise Act, 1944. 3. Validity of the appellant's undertaking to pay the arrears while obtaining Central Excise registration. Issue-wise Detailed Analysis: 1. Liability of the Appellant for the Outstanding Central Excise Dues of the Predecessor Company: The appellant, M/s. Rajaram Steel Industries Pvt. Ltd., contended that they only purchased the immovable assets from Zia Iron Stores and not from M/s. Sumit Rerolling Mills Pvt. Ltd., the predecessor company. The appellant argued that they did not succeed the business of M/s. Sumit Rerolling Mills Pvt. Ltd. and hence were not liable for its dues. The appellant relied on the judgment of the Hon'ble Bombay High Court in Krishna Lifestyle Technologies Ltd. vs. Union of India, which held that the sale of assets alone does not amount to the transfer of business, and thus, recovery of dues cannot be made from the buyer of the assets. The Tribunal agreed with the appellant's argument, noting that the assets were first acquired by the bank, sold in auction to Zia Iron Stores, and then purchased by the appellant. Therefore, the appellant did not succeed the business of M/s. Sumit Rerolling Mills Pvt. Ltd., and the recovery of arrears could not be made from the appellant. 2. Applicability of Section 11 of the Central Excise Act, 1944: The Tribunal examined the proviso to Section 11 of the Central Excise Act, which allows recovery of dues from the successor if the business or trade is transferred in whole or in part. It was found that the assets were not sold by M/s. Sumit Rerolling Mills Pvt. Ltd. but were acquired by the bank and then sold to Zia Iron Stores, from whom the appellant purchased them. The Tribunal concluded that since the appellant did not purchase the assets directly from M/s. Sumit Rerolling Mills Pvt. Ltd., the proviso to Section 11 did not apply. The Tribunal also noted that the transfer of mere assets does not constitute the transfer of business or trade, as established in the Krishna Lifestyle Technologies Ltd. case. Thus, the recovery of arrears under Section 11 could not be enforced against the appellant. 3. Validity of the Appellant's Undertaking to Pay the Arrears While Obtaining Central Excise Registration: The appellant had given an undertaking to pay the arrears while obtaining Central Excise registration, but they argued that this was done without prejudice to their legal rights. The Tribunal agreed with the appellant, stating that such an undertaking could not override statutory provisions and legal rights. The Tribunal referred to the judgment in Shri Kesav Cements & Infra Ltd. vs. Commissioner of C. Ex, Belgaum, which held that recovery cannot be made from an auction purchaser of assets even if an undertaking was given under coercion. Consequently, the Tribunal found that the appellant was not legally liable for the payment of arrears based on the undertaking. Conclusion: The Tribunal concluded that the appellant, M/s. Rajaram Steel Industries Pvt. Ltd., was not liable for the outstanding Central Excise dues of M/s. Sumit Rerolling Mills Pvt. Ltd. The impugned order demanding the payment of dues from the appellant was set aside, and the appeal was allowed with consequential relief in accordance with the law.
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