2014 (11) TMI 622 - HC - Central Excise

Denial of registration - Whether the respondent is justified in passing the impugned order to clear the dues of the predecessor without affording an opportunity of hearing to the petitioner. - Whether the petitioner could be called upon to pay the dues liable to be paid by his lessees as a condition precedent to issue fresh registration certificate - Held that - registration stood in the name of three persons, who are the lessees and even according to the department, two of them are absconding and one of them who is the Managing Director, is unable to recover the dues. Therefore, they caught hold of the petitioner, when he applied for fresh registration certificate. Hence, the respondent has passed a non-speaking order without affording an opportunity of hearing to the petitioner, rejecting his claim. When the department having recognised those three as lessees, cannot claim the amount payable by them from the petitioner. If they are not recognised as lessees then the question is different. From the records produced it is seen that the name of three persons, in whose name registration certificate has been granted and they have been described as lessees of the tea factory. Therefore, if an opportunity for personal hearing had been granted to the petitioner, he would have placed all the records including the decisions relied on stating that the liability left behind by lessees cannot be fastened on the petitioner, when he seeks for a fresh registration certificate in the capacity of owner of the factory. Since on the first ground itself this Court is convinced, that the petitioner has not been afforded with a reasonable opportunity, the petition is entitled to be allowed. In the light of the above, the second question need not be gone into since that would require examination of the facts and this should be done by the second respondent after issuing a show cause notice to the petitioner - Decided in favour of assessee.

Summary

Issues:
1. Whether the respondent was justified in passing the order requiring the petitioner to clear the dues of the predecessor without granting an opportunity of hearing.
2. Whether the petitioner can be held responsible for paying the dues of the lessees as a condition for obtaining a fresh registration certificate.

Analysis:
1. The petitioner, a private limited company, sought a Writ of Certiorarified Mandamus to challenge the rejection of its registration application due to outstanding arrears from previous lessees. The petitioner argued that as the rightful owner of the factory premises, it should not be held liable for the lessees' debts. The petitioner's counsel referred to legal precedents to support the claim that liability does not automatically transfer to a successor in the absence of a change in ownership. The High Court found that the respondent had not provided the petitioner with a fair hearing before rejecting the application, leading to the decision to quash the impugned order.

2. The High Court further deliberated on whether the petitioner could be compelled to pay the dues of the lessees as a prerequisite for obtaining a new registration certificate. The court noted that the lessees were registered with the Central Excise Authorities, and two of them were absconding while the third was unable to settle the dues. The court emphasized that without affording the petitioner a chance to present their case, it was unjust for the department to demand payment from the petitioner. The court directed the respondent to issue a show cause notice specifying the names under which registration was granted and how the dues were linked to the lessees. The respondent was instructed to allow the petitioner a personal hearing to present their arguments and evidence, including relevant judgments. The court mandated the completion of the proceedings within four months from the date of the order.

In conclusion, the High Court allowed the writ petition, quashed the impugned proceedings, and directed a fair examination of the matter with due process, emphasizing the importance of affording the petitioner a reasonable opportunity to be heard and present their case effectively.