1999 (2) TMI 84 - HC - Central Excise

Summary

Issues Involved:
1. Legality of the detention order under Rule 230(1) of the Central Excise Rules, 1944.
2. Liability of the petitioner to discharge the duty demanded from the lessee.
3. Bona fide nature of the lease transaction.
4. Applicability of the limitation period under Section 11A of the Central Excise Act, 1944.

Detailed Analysis:

1. Legality of the Detention Order under Rule 230(1) of the Central Excise Rules, 1944:
The petitioner argued that the detention order dated 7-2-1991, issued by the Superintendent of Central Excise, Podanur Range, was not sustainable as the plant and machinery were not in the possession of the lessee, Modern Steel Industries, on the relevant date. The petitioner had resumed possession on 10-1-1991. However, the court noted that the detention order was executed on 13-2-1991 and served on the partner of Modern Steel Industries. The lessee did not disclose the lease arrangement to the authorities or the court during the contestation of the detention order. Thus, the court upheld the detention order.

2. Liability of the Petitioner to Discharge the Duty Demanded from the Lessee:
The court examined Rule 230(2) of the Central Excise Rules, 1944, which states that all excisable goods, materials, plant, machinery, etc., in the possession of a person succeeding the business may be detained to exact duty due from the previous manufacturer. The court found that neither the petitioner nor Modern Steel Industries produced any legal documents evidencing the lease transaction. Hence, the petitioner was held liable to discharge the duty demanded from the lessee.

3. Bona Fide Nature of the Lease Transaction:
The respondents contended that the lease transaction appeared to be a device to circumvent the detention order. The court observed that the lessee did not inform the authorities about the lease arrangement during the detention or while contesting the detention order. The petitioner also failed to produce any document relating to the lease transaction. Therefore, the court concluded that the transaction did not appear bona fide.

4. Applicability of the Limitation Period under Section 11A of the Central Excise Act, 1944:
The petitioner argued that the action taken by the respondents in 1991 was barred by the six-month limitation period prescribed under Section 11A of the Central Excise Act, 1944. However, the court noted the proviso to Section 11A(1), which extends the limitation period to five years in cases involving fraud, collusion, or willful misstatement. Given the lack of bona fide action and the absence of disclosure regarding the lease transaction, the court held that the extended limitation period applied. Thus, the respondents' action was not barred by limitation.

Conclusion:
The court dismissed the writ petition, upholding the detention order and the liability of the petitioner to discharge the duty demanded from the lessee. The court found no error or infirmity in the impugned proceedings and rejected the petitioner's contentions on all grounds.