2005 (12) TMI 41 - HC - Central Excise

Mfg. unit purchased by assessee in auction Notice issued to recover govt. dues related to seller unit In view of apex court decision held that even if period of limitation is not mentioned u/s 11 though 5 years is not a reasonable time to exercise the power of recovery

Summary

Issues:
Challenge to Order-in-Original under Articles 226 and 227 of the Constitution of India.

Analysis:
The petitioner challenged the Order-in-Original passed by the Commissioner of Central Excise under Articles 226 and 227 of the Constitution of India. The petitioner, engaged in manufacturing Elastic Tapes, purchased a manufacturing unit from an auction held by the Gujarat State Financial Corporation in 1999. Subsequently, the petitioner received a notice demanding payment of government dues of the previous owner, M/s. Urmi Enterprise. The petitioner approached the Court through a writ petition, which was disposed of with directions to make a representation before the Commissioner. After the representation, the Commissioner rejected it and ordered recovery of dues by attaching plant and machinery. The petitioner contended that the notice did not fall within the purview of the amended proviso to Section 11 of the Central Excise Act and that the recovery action was time-barred. The petitioner argued that the recovery of dues prior to 1999 using the amended provisions introduced in 2004 was impermissible. The petitioner also highlighted that the machinery purchased at the auction was not usable for their manufacturing process, rendering the recovery unjust.

The Court noted that the recovery proceedings were initiated under the amended Section 11 of the Act, even though the dues had arisen earlier. The Court emphasized that Section 11 does not prescribe a time limit for taking action. However, it reiterated that all powers must be exercised reasonably within a reasonable period. The Court observed that the recovery notice issued in 2004, beyond five years from the petitioner's acquisition of the unit, was not within a reasonable period. Citing legal precedents, the Court held that even when no specific limitation period is prescribed, actions must be taken within a reasonable time. The Court concluded that the recovery action against the petitioner was time-barred and that the impugned order was unjustifiable. Consequently, the Court allowed the petition, quashed the impugned order, and made the rule absolute with no order as to costs.