2014 (4) TMI 914 - HC - Central Excise

Duty demand - Whether the amount of central excise duties which is for the period prior to 2005 can be recovered from the petitioner or not - Held that - In pursuance of the notice referred herein above the petitioner has filed the reply on which no order has been passed and without passing any order the respondent no. 1 proceeded to attach 300 bags of sugar which was not justified. However in view of the interim order on furnishing of security 300 bags which were attached have been released in favour of the petitioner - the writ petition is disposed of directing the respondent no. 1 to adjudicate the issue whether the petitioner is at all liable for the payment of excise dues which accrued prior to 28th May 2005. The petitioner is directed to file certified copy of this order before the Assistant Commissioner within a period of two weeks and the respondent no. 1 is directed to pass appropriate order in accordance with law after giving opportunity of hearing and considering the submissions of the petitioner by a reasoned order in accordance with law. In case if on adjudication it is found that the petitioner is not liable for the payment of any central excise dues the securities furnished by the petitioner be discharged - Decided in favour of assessee.

Summary

Issues:
Recovery of central excise duty from a company under rehabilitation scheme.

Analysis:
The case involves a company declared sick by the BIFR under SICA, with a rehabilitation scheme sanctioned but later failed due to non-infusion of funds. Subsequently, a notice for winding up was issued, leading to an advertisement for change of management. The petitioner and another company submitted proposals, with the petitioner's proposal being sanctioned by BIFR. The company challenged this order in appellate authority and Delhi High Court, both dismissing the appeal. The petitioner took over one unit in 2005, and later, faced demands for central excise duty predating the takeover. The petitioner argued that under the rehabilitation scheme, they were only liable for dues of specific units taken over, not for pre-takeover liabilities. The respondent issued orders for duty payment and attachment of sugar bags, which the petitioner challenged through a writ petition.

The court noted that the central issue was whether central excise dues predating the petitioner's management takeover could be recovered. It criticized the respondent for attaching sugar bags without disposing of the petitioner's reply, deeming it unjustified. The court acknowledged the release of attached bags due to interim orders but emphasized the pending adjudication on the petitioner's liability for pre-2005 excise dues. Consequently, the court directed the respondent to adjudicate the issue of the petitioner's liability within two weeks, requiring a reasoned order after considering submissions and providing a hearing. If the petitioner is found not liable, the securities furnished should be discharged.

In conclusion, the judgment highlights the importance of proper adjudication before recovery actions, ensuring fair treatment and legal compliance. It underscores the need for reasoned orders based on thorough consideration of submissions, safeguarding parties' rights in legal proceedings.