2018 (11) TMI 14 - AT - Central Excise

Liability of successor - Attachment of plant, machinery and the finished goods - recovery under Section 11 of Central Excise Act, 1944 - Central Excise duty not paid - Applicability of Section 11 and Rule 230(2) of Central Excise Rules 1944 - whether in case where the assets of a company have been taken over by State Finance Corporation and then sold to another company, the liabilities of the central excise dues of the previous company will pass on to the bidder who takes over the assets? Held that - Section 11 of Central Excise Act deals with the recovery of sums due to the government - The proviso thereof provides that a duty or any other sums of any kind is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached for the purpose of recovering such duty or other sums. Whether such liability continues where the assets are attached by State Finance Corporation and then sold to another company? - Held that - Hon ble Supreme Court has held so in the case of Macson Marbles Pvt. Ltd. 2003 (11) TMI 71 - SUPREME COURT OF INDIA . It is true that in the case of Macson Marbles Pvt. Ltd., Rule 230(20 of Central Excise Rules 1944 were referred to. However, Section 11 of Central Excise Act and its proviso are similarly worded and we find no reason to distinguish these provisions from the erstwhile Rule 230 of Central Excise Rules 1944. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Liability of central excise dues on a company purchasing assets from another company through a financial corporation.

Analysis:

1. Facts of the case: The appellant purchased assets from a company that defaulted on central excise duty payments. The department claimed the appellant was liable for the dues, leading to an attachment order. The first appellate authority set aside the attachment order based on the test of business succession.

2. Business Succession Test: The first appellate authority emphasized the need to prove a change of ownership, integrity, identity, and continuity of business for liability transfer. It was concluded that the appellant did not continue the business of the previous company, absolving them of the dues.

3. Legal Precedent: The Department argued that based on the Supreme Court judgment in the case of Macson Marbles Pvt. Ltd., the liability for central excise dues passes to the new company when assets are transferred by a financial corporation. The Department referred to Section 11 of the Central Excise Act and Rule 230(2) of the Central Excise Rules to support their position.

4. Interpretation of Legal Provisions: The Tribunal analyzed Section 11 of the Central Excise Act, which allows attachment of assets when a business is transferred, and compared it to Rule 230(2) of the Central Excise Rules. Relying on the Supreme Court precedent, the Tribunal found that the liability indeed extends to the new company even if assets were acquired through a financial corporation.

5. Decision: The Tribunal determined that the liability for central excise dues does pass on to a company purchasing assets from another company through a financial corporation, based on the legal precedent set by the Supreme Court. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the judgment clarifies the legal position regarding the transfer of liability for central excise dues in cases of asset acquisition through financial corporations, aligning with the precedent set by the Supreme Court.