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2015 (8) TMI 293 - HC - Central ExciseRecovery of dues from the successor - Liability of Purchaser of property for which dues were pending - Held that - There was no embargo upon the erstwhile Company, M/s. Ram Shiv Industries Ltd., in selling its property to the petitioner. When the property was sold off on 11-2-2008 there were no Central Excise dues against the said Company. The dues came into existence after the Order-in-Original was passed by the excise authorities on 18-9-2008. Consequently, Section 142 of the Customs Act is not applicable in the instant case - running business of M/s. Ram Shiv Industries Ltd. was not transferred to the petitioner. Only land, building and old scraps of machinery was sold. The petitioner has not stepped into the shoes of the erstwhile Company nor has taken the liability of the erstwhile Company. We find support of this reasoning from a decision of the Supreme Court in the case of M/s. Rana Girders Ltd. v. Union of India - 2013 (8) TMI 540 - SUPREME COURT wherein the Supreme Court held that where the buyer purchases the entire business only then he was liable for Central Excise Duty and not otherwise. - impugned notice demanding the Central Excise dues of M/s. Ram Shiv Industries Ltd. from the petitioner is wholly illegal and cannot be sustained and is quashed - Decided in favor of assessee.
Issues:
1. Transfer of liability for Central Excise dues from one company to another. 2. Applicability of Section 142 of the Customs Act. 3. Interpretation of liability in cases of sale of business assets. Analysis: Issue 1: Transfer of liability for Central Excise dues from one company to another. The petitioner, a company, purchased land, building, and machinery indicated as scrap from another company, M/s. Ram Shiv Industries Ltd. Subsequently, a demand for Central Excise dues was raised against M/s. Ram Shiv Industries Ltd., and the Central Excise Department sought to recover the amount from the petitioner. The High Court examined whether the petitioner could be held liable for the dues of the erstwhile company. The Court observed that at the time of sale, there were no Central Excise dues against M/s. Ram Shiv Industries Ltd. The dues arose after an order was passed by the excise authorities. The Court concluded that the petitioner did not inherit the liability of the erstwhile company as only specific assets were sold, and the petitioner did not take over the entire business or liabilities of M/s. Ram Shiv Industries Ltd. Issue 2: Applicability of Section 142 of the Customs Act. The Court further analyzed the applicability of Section 142 of the Customs Act in the present case. It was determined that since the Central Excise dues were not in existence at the time of the sale transaction between the two companies, Section 142 of the Customs Act, which deals with recovery of duties from successors in business, was not applicable. The Court emphasized that the liability for Central Excise dues does not automatically transfer to a new entity unless the entire business, including liabilities, is taken over. Issue 3: Interpretation of liability in cases of sale of business assets. Drawing on a precedent set by the Supreme Court in the case of M/s. Rana Girders Ltd. v. Union of India, the High Court reinforced the principle that liability for Central Excise Duty is incurred by a buyer only when the entire business is purchased. In the present case, as the petitioner did not acquire the running business of M/s. Ram Shiv Industries Ltd. but only specific assets, the Court held that the petitioner was not liable for the Central Excise dues of the erstwhile company. Consequently, the Court deemed the notice demanding the dues from the petitioner as illegal and quashed it, allowing the writ petition in favor of the petitioner. In conclusion, the High Court ruled that the petitioner was not responsible for the Central Excise dues of M/s. Ram Shiv Industries Ltd. and directed the Central Excise department to pursue the recovery of dues from the erstwhile company in accordance with the law.
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