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2013 (8) TMI 206 - AT - Central ExciseRecovery of duty from the successor of the defaulter - Section 11 of the Central Excise Act read with Section 142 of the Customs Act, 1962 - Property of Vaishnavi was taken over by Gujarat Industrial Investment Corporation Ltd. (GIICL) and on an occasion transferred to M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. on as is whereas basis as per the agreement of sale. The central excise duty initiated an action of recovery of central excise duty against M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. as dupe of defaulter company from transferring company Held that - Appellant cannot be considered as successor as neither the business or trade of Vaishnavi is transferred to the appellant hence conditions of proviso to Section 11 of the Central Excise Act will not apply and are not sustainable. Though assets were sold, sale of assets by itself would not be transfer of business in whole or in part. There must be material on record to show that the business has been transferred to the Petitioner and consequent thereto the Petitioner has succeeded in said business - In the facts and circumstances of this case, M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. are not successors in business or trade of Vaishnavi relying upon the decision in the case of Krishna Lifestyle Technologies Ltd. 2008 (2) TMI 2 - HIGH COURT, BOMBAY . The facts of the present case is clearly distinguishable from the facts of the case Rana Girders Ltd. 2012 (11) TMI 478 - ALLAHABAD HIGH COURT , wherein there was a clear and unequivocal stipulation; in the deed of sale and in the agreement of sale of plant & machinery; that all statutory liabilities arising out of said property (land & building) shall be borne by purchaser and that the corporation shall not be held responsible for the same and have held that central excise dues and penalties are statutory liabilities and hence M/s. Rana Girders Ltd. are liable to pay the said statutory dies as they have agreed for discharge of all statutory liabilities. In the case in hand, agreement does not talk about any statutory liabilities that may be undertaken to be paid by the appellant M/s. Sachin Dyeing & Printing Mills Pvt. Ltd. The facts of the case in hand are totally different - Hon ble High Court of Bombay in the case of Krishna Lifestyle Technologies Ltd. has specifically dealt with the succession of the business as is referred to in proviso to Section 11 of the Central Excise Act, 1944 Decided in favor of appellant.
Issues Involved:
1. Whether the central excise duty of the defaulting company (Vaishnavi) can be recovered from the transferee company (Sachin Dyeing & Printing Mills Pvt. Ltd.). 2. Applicability of Section 11 of the Central Excise Act, 1944 in determining the liability of the transferee company. 3. Interpretation of the sale deed clauses regarding the liability of government dues. 4. Consideration of precedents and judicial interpretations regarding the concept of "successor" in business. Issue-wise Detailed Analysis: 1. Recovery of Central Excise Duty from Transferee Company: The primary issue was whether the central excise duty of the defaulting company, Vaishnavi, could be recovered from Sachin Dyeing & Printing Mills Pvt. Ltd., the appellant, which had purchased the property from Gujarat Industrial Investment Corporation Ltd. (GIICL). The Tribunal noted that the appellant had purchased the plant and machinery through an auction conducted by GIICL, and not directly from Vaishnavi. The lower authorities had issued a show cause notice to the appellant labeling it as the successor of Vaishnavi for the demand of the duty confirmed against Vaishnavi. 2. Applicability of Section 11 of the Central Excise Act, 1944: The Tribunal examined whether the appellant could be considered a successor under the proviso to Section 11 of the Central Excise Act, 1944. The proviso to Section 11 allows for the recovery of dues from a successor if there is a transfer of business or trade. The Tribunal found that the appellant had not purchased the business or trade of Vaishnavi but had bought the property from GIICL, which had taken over the defunct unit of Vaishnavi. The Tribunal relied on the decision of the Bombay High Court in Krishna Lifestyle Technologies Ltd., which clarified that the transfer of assets alone does not constitute a transfer of business or trade. 3. Interpretation of Sale Deed Clauses: The Tribunal scrutinized the specific clauses in the sale deed, which stated that the purchaser would be liable for government claims/liabilities found payable in accordance with law. The Tribunal noted that the sale was conducted on an "as is where is basis," and the clauses did not explicitly state that the appellant was liable for the statutory liabilities of the previous owner. The Tribunal found that the lower authorities had misinterpreted these clauses to hold the appellant liable for the dues of Vaishnavi. 4. Consideration of Precedents and Judicial Interpretations: The Tribunal considered several judicial precedents, including the decisions in Krishna Lifestyle Technologies Ltd., SICOM Ltd., and Sri Jayajothi Co. Ltd., which supported the appellant's contention that they could not be considered a successor in business. The Tribunal also distinguished the case from the decision of the Allahabad High Court in Rana Girders Ltd., noting that the facts were different and the sale deed in the present case did not include a clear stipulation regarding the payment of statutory liabilities by the purchaser. Conclusion: The Tribunal concluded that the appellant, Sachin Dyeing & Printing Mills Pvt. Ltd., was not a successor in business or trade of Vaishnavi and, therefore, could not be held liable for the central excise dues of Vaishnavi. The impugned order was found to be unsustainable and was set aside, allowing the appeal in favor of the appellant.
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