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2019 (5) TMI 510 - HC - Central ExciseRecovery of Excise dues from erstwhile owner - the movable and immovable assets purchased by auction purchaser/petitioner - HELD THAT - The petitioner cannot be made liable to pay the excise dues of the erstwhile owner of the property only because the petitioner has purchased the property in auction conducted under the provisions of the Securitization Act. Excise dues is not a liability arising out of land, building or machinery. The excise duty is payable on manufacture of excisable goods. The excise department cannot claim priority charge over the respondent No. 6/bank - at the time the movable and immovable assets of the respondent No. 5 were put to auction by the respondent No. 6 and the petitioner purchased the same in auction till then, the respondent Nos. 2 to 4/Excise Department had not attached any of the movable or immovable property of the respondent No. 5. No charge was created over the assets of the respondent No. 5 of the excise dues. The Central Excise dues were also not crystalized as on the date the property was put to auction and purchased by the petitioner. The order of recovery was passed by the Central Excise Department in the year 2012 that is after the sale of the assets of the respondent No. 5. Therefore, the respondent Nos. 2 to 4 cannot demand the payment of excise dues of the respondent No. 5/Karkhana from the petitioner on the ground that the petitioner is purchaser of the movable and immovable assets of the respondent No. 5 in auction at the behest of the respondent No. 6/secured creditor under the provisions of the Securitization Act. Impugned communication for demand set aside.
Issues:
1. Priority of claim between the bank and the Excise Department over dues. 2. Liability of the petitioner for Excise dues post-property purchase in auction. 3. Interpretation of relevant legal provisions under the Securitization Act and Central Excise Act. Issue 1: Priority of claim between the bank and the Excise Department over dues. The petitioner, a purchaser in an auction under the Securitization Act, contested the Excise Department's claim for outstanding dues against the previous owner. The court examined the actions of the bank, the secured creditor, and the Excise Department. It was noted that the bank did not sell the running business but only the assets, and the sale certificate did not mention Excise Department dues. The court emphasized that Excise duty does not take priority over the bank's claim, citing legal provisions and precedents. The judgment highlighted that the bank's claim as a secured creditor prevails over the Excise Department's claim. Issue 2: Liability of the petitioner for Excise dues post-property purchase in auction. The court analyzed whether the petitioner, as the auction purchaser, is liable for the Excise dues of the previous owner. The petitioner argued being a bonafide purchaser and that Excise Department's dues were not notified during the sale. The Excise Department claimed that the petitioner should pay the dues as per the Central Excise Act. However, the court ruled that the petitioner cannot be held responsible for the previous owner's Excise dues solely based on purchasing the property in the auction conducted under the Securitization Act. Issue 3: Interpretation of relevant legal provisions under the Securitization Act and Central Excise Act. The court delved into the legal provisions of the Securitization Act and the Central Excise Act to determine the priority of claims in this case. Section 11E of the Central Excise Act establishes the duty as the first charge on the property of the assessee, subject to the provisions of the Securitization Act. The judgment clarified that the bank's claim takes precedence over the Excise Department's claim. The court also discussed Section 37 of the Securitization Act and its inapplicability to benefit the Excise Department's claim. The judgment emphasized that the Excise Department cannot demand payment from the petitioner for the previous owner's dues post-property purchase in the auction. In conclusion, the court held that the Excise Department cannot demand payment from the petitioner for the previous owner's dues, as the petitioner's purchase in the auction under the Securitization Act does not make them liable for those dues. The judgment quashed the communications demanding payment and directed any amounts recovered to be refunded to the petitioner.
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