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2016 (7) TMI 889 - AT - Central ExciseRecovery of tax dues of the defaulter - Liability of the auction purchaser of the assets - Held that - the erstwhile owner, Hans Pharmaceuticals & Chemicals, had not sold the unit directly to the appellant. It was the pickup which auction sold the unit in exercise of their statuary power under Section 29 and 30 of the State Finance Corporation Act. Accordingly I allow the appeal and I also quash the notice dated 24/8/2004, issued by the range Superintendent, Jhansi. The appellant will be entitled to refund of the amount of ₹ 10 lakhs (Rupees Ten Lakhs) deposited under the Interim Order of the Honourable High Court. Thus the appeal is allowed with consequential benefits. - Decided in favor of appellant.
Issues:
1. Liability of buyer for seller's dues in asset purchase. 2. Interpretation of statutory provisions regarding excise duty recovery. 3. Applicability of Central Excise Rules in case of business transfer. 4. Precedents on liability for statutory dues in asset acquisition. Issue 1: Liability of buyer for seller's dues in asset purchase The appellant, a Private Limited Company, acquired assets from another company under statutory powers exercised by the State Finance Corporation. The agreement specified that the buyer would not be responsible for any pending dues of the seller. However, the Revenue demanded tax dues from the buyer related to the seller's liabilities. The Commissioner (Appeals) upheld the demand, stating that the buyer was liable for the seller's dues. The Tribunal found that there was no appealable order before the Commissioner (Appeals) and set it aside as non-est. The Tribunal referred to a similar case where the High Court held that the Central Excise Department did not have the right to recover such dues from a subsequent bonafide purchaser. Issue 2: Interpretation of statutory provisions regarding excise duty recovery The Revenue relied on Rule 230 of the Central Excise Rules, which allows for the detention of goods for exacting duty from successors in case of business transfer. However, the Tribunal noted that in this case, the assets were sold by the State Finance Corporation through auction, not directly by the seller to the buyer. The Tribunal distinguished the situation from the ruling of the Gujarat High Court and allowed the appeal, quashing the notice issued by the Range Superintendent and ordering a refund of the amount deposited by the appellant. Issue 3: Applicability of Central Excise Rules in case of business transfer The Tribunal analyzed Rule 230 of the Central Excise Rules, which allows for the detention of goods for duty recovery in case of business transfer. The Revenue relied on a ruling of the Gujarat High Court supporting detention for duty recovery from successors in case of business transfer. However, the Tribunal found that this ruling was not applicable in the present case as the assets were sold by the State Finance Corporation through auction, not directly by the seller to the buyer. Issue 4: Precedents on liability for statutory dues in asset acquisition The Tribunal considered precedents, including a case where the High Court held that the Central Excise Department did not have the right to recover dues from a subsequent bonafide purchaser. The Tribunal also referred to a Supreme Court ruling stating that excise duties are not statutory liabilities arising out of the land or property but are related to the items produced. The Tribunal concluded that the buyer was not liable for the seller's excise dues in this case and allowed the appeal with consequential benefits. In conclusion, the Tribunal set aside the Commissioner (Appeals) order, quashed the notice issued by the Range Superintendent, and ordered a refund to the appellant, emphasizing the buyer's non-liability for the seller's statutory dues in this asset acquisition scenario.
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