2024 (5) TMI 1333 - AT - Central Excise

Attachment of immoveable property owned by the appellant and his brothers jointly - recovery of dues, of which 80% share stands in the name of persons who have nothing to do with the government recovery - levy of interest and penalty - HELD THAT - The order of attachment of immovable property has been done under the Rules of 1995, which were made in exercise of the powers conferred by Section 156 r/w. Section 142 of the Customs Act, 1962. Rule 2(vi) of the said Rules of 1995 defined defaulter as any person from whom Government dues are recoverable under the Act. Chapter II of the said Rules deals with the procedure for the attachment of property. The issuance of certificate under rule 3 of chapter II is for the dues not paid by the defaulter to the government and the amounts specified as the amounts due from such person . Such person can only be the defaulter as defined u/r. 2(vi) and no one else. Rule 10 is very relevant for the situation herein as it stipulates that where the property to be attached consists of the share or interest of the defaulter in property belonging to him and another as coowners, the attachment shall be made by a notice to the defaulter prohibiting him from transferring the share or interest or charging it in any way . Whether the duty amount with interest and penalty which has become due and payable by the defaulting firm, could be recovered by attaching the entire property in which the appellants personal share is on 20%? - HELD THAT - The answer to this question should be in the negative. A partnership firm under the Indian Partnership Act, 1932 is not a separate legal entity and the liability of the partners is joint and several u/s 25 ibid - Here the share of the appellant in the attached personal property is merely 20% whereas 80% of the share therein is that of his brothers who have nothing to do with the defaulting firm or their activities - In the absence of any specific provision under the Rules for recovery of the dues by attaching the personal property of some other partnership in which the majority of the shareholders have nothing to do with the recovery of the government dues, the notice of attachment of said property is bad in law. Interest imposed u/s 11AB of Central Excise Act, 1944 is applicable when the duty became payable before the enactment of the said section - HELD THAT - The interest has been imposed under section 11AB of Central Excise Act, 1944. Here it is interesting to note that duty demand has been made and confirmed for the goods cleared during the year 1993 and the show-cause notice was issued on 04.03.1994. Admittedly during the period Section 11AB ibid was not brought into force by the legislature as the same has been introduced w.e.f. 28.09.1996 - there is no whisper about charging of interest u/s 11AB ibid in the show-cause notice. Not only that, sub-section (2) of interest under Section 11AB stipulates that the provisions of sub-section (1), which provides for charging of interest on excise duty, shall not apply to cases where the duty became payable before the date on which the Finance (no.2) Bill, 1996 receives the assent of the President. As the duty and penalty on M/s Turbo Micro System has been satisfied by the appellant along with personal penalty, the attachment of the immovable property in issue herein is set aside. Accordingly, the impugned order is also set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether the Department can attach a jointly owned immovable property for recovery of its dues when 80% of the share belongs to persons not involved in the government recovery.
2. Whether the attachment of the entire property is valid when the appellant's share is only 20%.
3. Whether the interest imposed u/s 11AB of Central Excise Act, 1944 is applicable when the duty became payable before the enactment of the said section.

Summary:

Issue 1: Attachment of Jointly Owned Property
The Department issued an order for attachment of the property owned jointly by the appellant and his brothers for recovery of dues from M/s. Turbo Micro Systems. The appellant argued that his share in the property is only 20%, and the remaining 80% belongs to his brothers, who have no connection with the firm or the recovery. The Commissioner rejected the appeal, upholding the attachment.

Issue 2: Validity of Attachment of Entire Property
The Tribunal noted that Rule 10 of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995, stipulates that attachment should be confined to the share of the defaulter. The Commissioner's decision to attach the entire property was found to be violative of the Rules of 1995. The Tribunal held that recovery should be limited to the appellant's 20% share in the property, as his brothers, who own the remaining 80%, are not involved in the defaulting firm.

Issue 3: Applicability of Interest u/s 11AB
The interest was imposed u/s 11AB of the Central Excise Act, 1944, which was not in force during the period when the duty became payable. The Tribunal observed that Section 11AB was introduced later and was not mentioned in the show-cause notice. Invoking Rule 41 of the Customs, Excise & Service Tax Appellate Tribunal (Procedure) Rules, 1982, the Tribunal set aside the demand of interest confirmed against M/s. Turbo Micro Systems u/s 11AB.

Conclusion:
The Tribunal set aside the attachment of the immovable property and the impugned order, allowing the appeal with consequential relief. The Tribunal also directed that the Revenue authorities are at liberty to initiate recovery proceedings against the defaulting partners who have not yet paid the personal penalty.