CESTAT IS EMPOWERED TO STAY ATTACHMENT ORDER

[Mr. M. GOVINDARAJAN]

Sec. 11 of the Central Excise Act, 1944 deals with recovery of sums due to Government. The said section provides that in respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made there under including the amount required to be paid to the credit of the Central Government under Sec. 11D, the officer empowered by Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) to levy such duty or require the payment of such sums may deduct the amount so payable from the money owing to the person from whom such sums may be recoverable or dues which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person and if the amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the District in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were in arrear of land revenue.

A proviso to this section was inserted by Sec. 80 of the Finance (No.2) Act, 2004 which provides that where the person (hereinafter referred to as predecessor) from whom duty or any other sums of any kind as specified in this section 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, machines, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such offier empowered by the Central Board of Excise and Customs, after obtaining written approval from the Commissioner of Central Excise for the purposes of recovery of such duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change.

In case of filing an appeal before CESTAT, the appellant is to file stay petition from depositing the tax, interest or penalty, if any, along with the appeal. CESTAT after considering the facts and circumstances it may waive the pre deposit or partially stay the pre deposit and direct to deposit the entire amount. The issue taken for discussion in this article is whether CESTAT is empowered to stay the attachment order under Sec. 11 of the Central Excise Act, 1944 with reference to decided case laws.

In 'Rajabali Ismail Rajbara V. Commission of Central Excise, Surat' - 2010 -TMI - 77537 - (CESTAT, AHMEDABAD) the appellant had leased out the factory to M/s Bhavay Apparels Pvt. Ltd., against whom the department has made out a case for payment of Rs.35.94 crores on the ground that export obligation, was not discharged. Since M/s Bhavay Apparels Pvt. Ltd., has not paid the dues, factory premises has been attached for recovery of the same. Lower Authorities have passed the order holding that department has power to attach factory leased out to M/s Bhavay Apparels Pvt. Ltd., under Section 11 of the Central Excise Act, 1944, even though the appellant has got possession back. In the lease deed there was a specific condition that factory shall not be vacated till the export obligation is discharged and consent is obtained from the authorities concerned in respect of 100% EOU. The Lower Authorities have observed that export obligation has not been discharged and consent has not been obtained and hence the department can sell the same to recover the dues.

The appellant contended that the amended provisions of Sec. 11 making the successor liable to dues were not available during the relevant time. They cannot be held responsible for the dues payable by the lessee. The appellant prayed the Tribunal to grant stay against the attachment order.

The Department contended that in view of specific provision in the lease deed M/s Bhavay Apparels Pvt. Ltd., could not have vacated the premises in terms of the lease deed, department has the liberty to attach the factory. The consent has not been obtained and notice has been issued to the appellants only because they hold the possession of the premises and in the absence of M/s Bhavay Apparels Pvt., Ltd., In reality and in the eyes of law M/s Bhavay Apparels Pvt., Ltd., can be said to be still in possession of premises. In this case stay cannot be granted since there is no duty demand is involved and appellant is not seeking waiver of pre deposit or stay against recovery of dues.

The Tribunal considered the arguments on both sides and agreed to the contention of the Department that the lessee in the eyes of law can be said to be still in possession of the property, therefore, department does not seem to have lost the right of attaching the property. The Tribunal held that the Department has made out a strong prima facie case and did not find this to be a fit case for grant of stay.

However the Tribunal did not agree with the contention of the Department that the Tribunal cannot pass order against stay order. It considered that the Tribunal has inherent powers to pass an order. The Tribunal asked the appellant whether the appellant is willing to give undertaking that they would not dispose of or encumber the property in full or part thereof during the pendency of the appeal. The appellant agreed to do so. The Tribunal held that subject to giving an undertaking to the Jurisdictional Assistant Commissioner the Tribunal allowed the application and stay the action to dispose of the property by the Revenue during the pendency of appeal.

In 'Riddhi Prints V. Commissioner of Central Excise, Surat' - 2010 (253) ELT 463 (Tri. Ahmd) the facts are similar to the case law discussed above. The Tribunal took the same stand as taken in the case law cited above.