2017 (11) TMI 722 - HC - Central Excise

Recovery of Central Excise Dues - auction of secured assets - Held that - the two Companies are distinct entities and it is not a case where the name of M/s. Unipex Electrochem Private Limited was changed to M/s. Unipex Bio-Chem Private Limited - the demand has to be set aside for the reason Excise dues of M/s. Unipex Electrochem Private Limited cannot be fastened on M/s. Unipex Bio-Chem Private Limited. A proviso was inserted to Section 11 of the Central Excise Act, 1944 on 10th September, 2004 - A bare reading of the proviso shows that it is applicable to a transfer inter vivos and not where a secured creditor enforces the right under a statute. Petition allowed - decided in favor of petitioner.

Summary

Issues: Challenge to a demand raised by the Excise Department concerning recovery of Central Excise dues from a company after its assets were auctioned by a secured creditor under the State Financial Corporation Act.

Analysis:
1. Ownership Dispute: The judgment addresses the challenge to a demand raised by the Excise Department for Central Excise dues from a company whose assets were auctioned by a secured creditor. The court noted that the land was initially allotted to one company but later changed to another company, establishing them as distinct entities. This distinction is crucial as it determines the liability for the Excise dues, preventing the dues of one company from being imposed on another.

2. Legal Precedent: The judgment also refers to a Supreme Court decision (AIR 2013 SC 3422) which states that when a secured creditor sells assets under the State Financial Corporation Act, the purchaser is not liable to pay any Central Excise dues. This legal principle is significant in determining the liability of the purchaser who acquired the assets through auction conducted by the secured creditor.

3. Proviso Interpretation: The court analyzed a proviso added to Section 11 of the Central Excise Act, 1944, post a Supreme Court decision. The proviso pertains to the transfer of business or change in ownership and the recovery of dues. The court interpreted that the proviso applies to transfers inter vivos and does not extend to situations where a secured creditor enforces rights under a statute. This interpretation clarifies the scope and applicability of the proviso in cases involving auction of assets by secured creditors.

4. Final Decision: Based on the above analysis, the High Court allowed the writ petition, quashing the demand notice dated 27th August, 2007 raised by the Excise Department. The judgment concludes that the petitioner, as the purchaser of the auctioned assets, is not liable for the Central Excise dues of the company whose assets were auctioned. Additionally, no costs were awarded in this case.

This detailed analysis of the judgment highlights the key legal issues, interpretations of relevant laws, and the final decision rendered by the High Court in resolving the challenge to the demand raised by the Excise Department post-auction of assets by a secured creditor.