2010 (2) TMI 402 - AT - Central Excise

Recovery of dues- The lower authorities denied the refund on the ground that the arrears owed to the Department by the original owner of the factory SQCL could be validly recovered from the appellant, it being the successor owner of the factory. The lower authorities invoked provisions of Section 11 of the Act and held that the appellants were not entitled to refund of the amount paid by them towards arrears owed by the original owner of the factory. Held that- finding of Commissioner (Appeals) that by taking over the property and selling it in auction, the DRT facilitated legal transfer of plant and property to present appellant. However no such transfer as envisaged under proviso to section 11 of the Act. Appellant not liable to pay dues and entitled to refund.

Summary

Issues:
Claim of refund under Central Excise Act, 1944; Interpretation of Section 11 regarding recovery of arrears from successor owner.

Analysis:
The appeal challenged the denial of a refund of Rs. 5,13,852/- by the lower authorities, which was paid by the appellant before registration under the Central Excise Act. The case involved the purchase of a cement plant in an auction from a company with unpaid loans. The lower authorities rejected the refund claim, citing Section 11 of the Act, stating that arrears owed by the original owner could be recovered from the appellant as the successor owner. The appellant contested this, relying on legal precedents such as the T.C. Spinners Pvt. Ltd. case and the New Tobacco Company Ltd. case.

During the hearing, the Commissioner (Appeals) held that the appellants were not entitled to the refund based on Section 11 of the Act. The Commissioner relied on the provision that allows recovery from the successor if there was a transfer or change in ownership by the predecessor. However, the appellate tribunal found that in this case, there was no such transfer as required by the provision. The tribunal also noted that previous judgments supported the appellant's position, such as the New Tobacco Company Ltd. case where liabilities were not transferred in a lease scenario, and the T.C. Spinners Pvt. Ltd. case where the court held that dues could not be enforced against purchased property.

The tribunal referred to a Supreme Court judgment regarding auction-purchasers not being liable for previous owner's dues. Following the legal principles established in these cases, the tribunal held that the appellants were not liable to pay the dues owed by the original owner and were entitled to the refund of the arrears. The appeal was allowed, granting the appellants consequential relief.