2007 (6) TMI 151 - HC - Central Excise

Notice for attachment of property which was purchased by the petitioner from the Director of a company property has been purchased bonafidely, without knowing any liability of director on account of arrears of company There was no transfer of business so attachment notice u/s 11 is set aside.

Summary

Issues:
1. Validity of the notice dated 28-12-2006 served on the petitioner on 13-01-2007 regarding property attachment.
2. Interpretation of the proviso to Section 11 of the Central Excise Act, 1944 regarding liability of subsequent property owners for dues.

Analysis:

Issue 1:
The writ petition challenged the validity of the notice served on the petitioner regarding the attachment of a property that was not owned by the company but by one of its directors, who sold it to the petitioner. The petitioner contended that being a bona fide purchaser without knowledge of the property's liability, the notice was improper and should be struck down. The respondents argued that under the proviso to Section 11 of the Act, even a purchaser of property with existing liabilities is liable to settle dues.

Issue 2:
The proviso to Section 11 of the Act states that if a person transfers their business or trade, the subsequent owner is responsible for settling any recoverable dues. However, in this case, there was no transfer of business, and the petitioner merely bought personal property from a director of the company. The court interpreted that the proviso applies only to business transfers, not personal property sales. As the petitioner purchased the property in good faith without knowledge of the director's liabilities, the court held that the notice could not be sustained, setting it aside.

In conclusion, the High Court of Andhra Pradesh ruled in favor of the petitioner, setting aside the impugned notice dated 28-12-2006 regarding property attachment. The court held that the proviso to Section 11 of the Central Excise Act does not apply in cases where personal property is sold, and the subsequent owner is not aware of any existing liabilities.