2009 (3) TMI 13 - HC - Central Excise

As the Company in Liquidation failed to make payment to SICOM, SICOM took possession of said property & repeatedly advertised the same for sale - sale in favour of petitioner 1 was confirmed by this court noting that all secured creditors had approved it - there is nothing to indicate that the petitioners have purchased the business or trade of the Company in Liquidation sale of the said property to petitioners duly sanctioned by this court is not subject to proviso to Section 11 of CEA, 1944

Issues Involved:
1. Liability of excise dues on the purchaser of auctioned property.
2. Applicability of Section 11 of the Central Excise Act, 1944.
3. Interpretation of proviso to Section 11 concerning the transfer or disposal of business or trade.
4. Validity of the sale sanctioned by the court.

Detailed Analysis:

1. Liability of Excise Dues on the Purchaser of Auctioned Property:
The petitioners purchased property at an auction sanctioned by the court. The Excise Department issued a notice claiming outstanding excise dues from the Company in Liquidation, asserting that the liability extends to the purchaser of the property. The petitioners contested this, arguing that the sale gave them a clear title free from such liabilities.

2. Applicability of Section 11 of the Central Excise Act, 1944:
Section 11 states that sums due to the Central Government can be recovered by attaching and selling excisable goods belonging to the person from whom such sums are recoverable. The proviso allows the empowered officer to attach and sell goods in the custody or possession of the successor of the business for recovering dues. The petitioners argued that this section does not override the provisions of the Companies Act and should not apply to court-sanctioned sales.

3. Interpretation of Proviso to Section 11 Concerning the Transfer or Disposal of Business or Trade:
The court examined whether the proviso to Section 11 applies to the sale of assets in liquidation. The proviso enables recovery of excise dues from the successor of the business. The petitioners argued that they purchased assets, not the business, and hence the proviso should not apply. The court agreed, noting that the proviso applies to transfers of business or trade, not mere assets.

4. Validity of the Sale Sanctioned by the Court:
The court sanctioned the sale of the property to the petitioners, who paid the sale proceeds. The sale was confirmed noting that all secured creditors had approved it. The court directed that the sale proceeds be used to settle the creditors' claims, including those of the Excise Department, as per the priorities determined by the Official Liquidator.

Conclusion:
The court concluded that the sale of the property to the petitioners, sanctioned by the court, is not subject to the proviso to Section 11 of the Central Excise Act, 1944. The petitioners acquired a clear and marketable title free from the liability of the excise dues of the Company in Liquidation. The Excise Department can file its claim with the Official Liquidator, who will adjudicate it in accordance with the law.

Order:
1. The sale of the property to the petitioners is not subject to the proviso to Section 11 of the Central Excise Act, 1944.
2. Upon depositing the entire sale proceeds, the Official Liquidator shall take necessary steps as directed by the court.
3. The Excise Department can file its claim before the Official Liquidator, who shall adjudicate it in accordance with the law.

The petition was disposed of in these terms.

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