2006 (2) TMI 66 - HC - Central Excise

Mfg. premises purchased by petitioner in auction Dept. took action to recover central excise dues of erstwhile company from petitioner after 10 years 10 year period is not reasonable time to take action of recovery even if there is no period of limitation u/s 11 Recovery is time-barred

Issues Involved:
1. Timeliness of the action taken by the respondents.
2. Application of the proviso to section 11 of the Central Excise Act, 1944.
3. Applicability of the Supreme Court decision in Macson Marbles Pvt. Ltd. v. Union of India.
4. Recovery of dues related to periods after the transfer of assets.
5. Recovery of penalty dues from the petitioners.

Detailed Analysis:

1. Timeliness of the Action Taken by the Respondents:
The petitioners argued that the action taken by the respondents is time-barred, as it was initiated almost ten years after the transfer of the assets. It is a settled legal position that when no time limit is prescribed for the exercise of a power under a statute, it must be exercised within a reasonable time. The court referred to the Apex Court's decision in Ibrahimpatnam Taluk Vyavasaya Coolie Sangham v. K. Suresh Reddy, which stated that "at any time" must be understood as within a reasonable time depending on the facts and circumstances. The court also referenced its own decision in ANI Elastic Industries v. Union of India, which held that a lapse of five years in seeking to recover dues was not reasonable. Therefore, the court concluded that the respondents' action was time-barred.

2. Application of the Proviso to Section 11 of the Central Excise Act, 1944:
The petitioners contended that the proviso to section 11, which allows the recovery of dues from the transferee, was introduced on 10/9/2004 and could not be applied retrospectively to transfers made prior to its enactment. The court did not find it necessary to address this issue in detail, as the petition was allowed on the ground of limitation.

3. Applicability of the Supreme Court Decision in Macson Marbles Pvt. Ltd. v. Union of India:
The petitioners argued that the decision in Macson Marbles was based on Rule 230(2) of the erstwhile Central Excise Rules, 1944, and should not apply to the present case. The respondents, however, relied on this decision to justify their actions. The court did not delve into this issue due to the petition's resolution on the limitation ground.

4. Recovery of Dues Related to Periods After the Transfer of Assets:
The petitioners pointed out that a substantial portion of the demand related to amounts that became due after the transfer of the unit in March 1995. The court noted that the proviso to section 11 contemplates the recovery of sums due at the time of the transfer, not amounts that became due subsequently. This further supported the petitioners' case.

5. Recovery of Penalty Dues from the Petitioners:
The petitioners highlighted that the penalty component of the demand could not be recovered from them, as established in the Macson Marbles case. The court acknowledged that the Apex Court had held that penalties could not be imposed on parties who had no opportunity to participate in the adjudication proceedings. Therefore, the dues towards penalties could not be recovered from the petitioners.

Conclusion:
The court allowed the petition on the ground of limitation, holding that the action of the respondents in seeking to recover the dues of the erstwhile unit from the petitioners was time-barred. The impugned communication dated 10th December 2004 was quashed and set aside. The rule was made absolute with no order as to costs.

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