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TMI Blog2012 (11) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale deed dated 8-3-2002 of land and building and the agreement of plant and machinery dated 14-3-2002 were executed - penalty as a quasi criminal liability, was leviable on represented through its Board of Directors, and personally on director of the company - penalty, therefore, having been levied and imposed after the purchase of land & building and plant & machinery installed in the unit which earlier belonged to M/s. P.J. Steels Ltd., Muzaffarnagar, is not payable by the petitioner, and is not covered under the stipulation in the sale deed and agreement as statutory liability nor it arose out of plant and machinery of the industrial unit - writ petition is partly allowed to the extent that the petitioner shall not be liable to pay penalties imposed upon M/s. P.J. Steels Ltd. and its Director under the impugned orders. - 383 of 2005 - - - Dated:- 25-11-2011 - Sunil Ambwani and Pankaj Mithal, JJ. REPRESENTED BY : Shri Subham Agrawal, for the Petitioner. Shri S.P. Kesarwani, ACSC, for the Respondent. [Judgment]. We have heard Shri Subham Agrawal for the petitioner. Shri S.P. Kesarwani, Additional Chief Standing Counsel appears for the State respondents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner in terms of Rule 230 of the Central Excise Rules, 1944, to pay Rs. 1,00,72,442/- (Rs. 50,84,009/- as excise duty and Rs. 49,88,433/- as penalty) against the three adjudication orders referred to in the notice as follows :- Adj. Order No. Date Amount of Duty Confirmed Penalty Demand R.F. P. Penalty 1. 28/Commr/MRT/2002, dated 29-8-2002 4298571 4298571 - 1000000 2. 16/Jt. Commr/2003, dated 22-7-2003 669862 669862 - - 3. 82/Off/136/01/2002, dated 22-11-2002 115576 20000 - - 6. The petitioner by its letter dated 6-12-2004 submitted a reply against the recovery of dues stating that it had purchased the industrial unit in an auction from UPFC in March, 2002 free from all encumbrances. At the time of purchase of the unit there was no provision in the Central Excise Act relating to recovery of arrears of the erstwhile manufacturer from the buyer of the unit. At the time of purchase from UPFC there was no liability against the defaulting unit, of any central excise demand. The provisions of Section 11 of the Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the case was passed over on the illness slip of learned counsel of the petitioner on 26-9-2006. It went out of the list for about four years and re-appeared on 11-1-2010, when it was again passed over. After four more adjournments on the illness slips and adjournments of learned counsel for petitioner, the Court directed on 23-7-2010 that the case be listed peremptorily in the next cause list. Once again on 11-8-2010, 2-11-2010, 29-11-2010, 6-12-2010, 16-12-2010, 3-1-2011, 11-1-2011, 19-1-2011, 27-1-2011 and 2-2-2011 the case was passed over on the request of counsel of petitioner. Finally after about 13 adjournments, learned counsel for petitioner agreed to argue the case. We should not have given these dates, but sometimes when the Courts are unable to decide the cases on account of repeated illness, adjournments and pass overs, it is necessary to remind the counsels that the Court does not exist for them; it is they who have to assist the Court in deciding the cases. 11. It is submitted by Shri Subham Agrawal that the petitioner is a bona fide purchaser and was not aware of any central excise dues pending against M/s. P.J. Steels (P) Ltd. at the time when the land and build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction between the expressions tax payable and tax due . The tax is due when it becomes debt, owed to the taxing State after it is determined by assessment and is quantified, and a notice of demand is issued. He has also relied upon judgment in Luxmi Oil Vanaspati Pvt. Ltd. v. Commissioner, Central Excise - 2010 UPTC 1327 (All.) in which it was held that when a bona fide purchaser in good faith has purchased the business of the previous owner and had no knowledge of the central excise dues, Rule 230(2) of the Central Excise Rules is not applicable. He submits that the ratio in Macson Marbles Private Limited v. Union of India, AIR 2004 SC 4927 = 2003 (158) E.L.T. 424 (S.C.) not applicable to the present case. The Rule 230(2) of Central Excise Rules, does not create any charge. Even otherwise the charge stands on or lower pedestal than a deed of mortgage. In the absence of any provision creating a charge on the assets, in favour of the central excise department, the claim of secured creditor would prevail over the crown debts. The UPFC rightly exercised its preferential rights in acquiring the property and transferring it to the petitioner. The debt of UPFC had a priority be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be valid by the following Section 132 of the Finance Act, 2001. At the time of taking over possession of the plant, and machinery etc. of M/s. P.J. Steels by the petitioner, the provisions of Rule 230, were applicable by virtue of Section 38A of the Act and thus the sums recoverable from M/s. P.J. Steels were realisable from M/s. Rana Girders - the petitioner. 18. Shri Kesarwani submits that in M/s. Macson Marbles (P) Ltd. (supra) the Supreme Court has held that in case of transfer of business even by way of auction by a financial institution, the successor is liable for payment of dues in terms of Rule 230 of the Central Excise Rules, 1944. The recovery proceedings do not violate to the provisions of Section 11 of the Act. 19. In the present case we find from the Order-in-Original (Adjudication Order), dated 29-8-2002 that on noticing the shortages in the stocks of finished goods (viz. M.S. Girders and M.S. Waste scrap) and the raw material viz. M.S. Ingots a show cause notice was issued to M/s. P.J. Steels (P) Ltd. as well as Shri Rakesh Kumar Singhal, the Director of the firm on 19-11-2001 for imposing Central Excise duty amounting to Rs. 21,81,883/- under Section 11A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any agent or other person in trust for or for the use of the person carrying on such trade or business, may be detained for the purpose of exacting such duty; and any officer duly authorised by general or special order of the Central Board of Excise and Customs or the Commissioner may detain such goods, materials, preparations, plant, machinery, vessels, utensils and articles until such duties or any sums recoverable in lieu thereof are paid or recovered. (2) Where any such person transfers or otherwise disposes of his business in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in the business or trade or part thereof by any other person or persons, all excisable goods, materials, preparations, plant, machinery, vessels, utensils, implements and articles in the custody or possession of the person or persons succeeding may also be detained for the purpose of exacting duty due from the producer, manufacturer or dealer up to the time of such transfer, disposal or change, whether such duty has been assessed before such transfer, disposal or change, but has remained unpaid, or is assessed thereafter. 22. Section 11 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty, penalty, interest, or any other sum payable by an assessee or any other person under this Act or the rules made thereunder shall, save as otherwise provided in Section 529A of the Companies Act, 1956, Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 and Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002, be the first charge on the property of the assessee or the person, as the case may be. 24. In Macson Marbles Pvt. Ltd. (supra) an industrial unit run by M/s. Diamond Marbles Pvt. Ltd. was brought to sale in terms of Section 29 of the State Financial Corporation Act, 1951 by Rajasthan Financial Corporation. The Macson Marbles Pvt. Ltd. the appellant participated in auction. Its bid was accepted after which it took possession of the unit on 28-8-1987. On 4-12-1987, the Additional Collector of Central Excise adjudicated in a proceeding arising out of show cause notice issued under Section 11A of the Central Excise Act in relation to certain goods which were removed between 13-8-1986 and 23-8-1986. The excise duty and penalty was levied and demanded. Pursuant to the adjudication order a letter was sent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. P.J. Steels (P) Ltd. on 13-7-2001, 19-11-2001 and 9-9-2002 respectively in pursuance to which the adjudication orders came to be passed on 29-8-2002, 22-11-2002 and 22-7-2003. The UPFC executed the sale deed of the land and building on 8-3-2002 and of plant and machinery dated 14-3-2002, stipulating in clause-8 (sale deed dated 8-3-2002 of land and building), and clauses-4 and 5 (agreement dated 14-3-2002 of plant and machinery) as follows : (sale deed dated 8-3-2002 of land and building) 8. All the statutory liabilities arising out of the said property shall be borne by the vendee and vendor shall not be held responsible for the same. (agreement dated 14-3-2002 of plant and machinery) 4. That all the statutory liabilities arising out of the plant and machinery of the industrial unit shall be borne by the purchaser and corporation shall not be held responsible for the same. 5. That the sale of assets is on AS IS WHERE IS 26. Clause-9 of the sale deed dated 8-3-2002 and clause-15 of the agreement dated 14-3-2002, also stipulate that all liabilities in respect of rates, rents, taxes and dues of Municipality and other local authorities etc. in respect of the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge stands on a lower pedestal than a deed of mortgage. The rule does not talk of charge and by implication it cannot be said that if any duty leviable on any goods or owing to any person in custody or possession of business is not paid, then a charge would be created over those goods. The word detained cannot be interpreted to mean that it creates a charge on the goods in respect of the amount of the arrears of excise dues. The only power given in this rule is to detain the goods which are in custody or possession of the person carrying on such trade or business. There is no other provision under the Central Excise Act or the Rules which envisages to create any charge over the assets of a unit to enable the realization of the excise duty on top priority. The petitioner having not succeeded to the erstwhile owners in business or trade and having acquired the property, without any charge independent of the business or trade of previous owners is not a person in custody or possession of the property as successor of the previous owners against whom there was a demand of excise duty. The Court thus held that the debt of UPFC had a priority being a secured creditor by virtue of a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s over the contract, but also other laws. If a company had subsisting interest despite the lawful seizure there could not be a doubt whatsoever that a charge/mortgage over the immovable property will have the same consequence. 31. In Agrawal Metal Works v. Deputy Commissioner, Jaipur, 2011 (263) E.L.T. 397 (Del.) the High Court held that the central excise duty liability was of the original owner of plot of land. The subsequent purchaser from auction purchase could not be fastened with the liability in absence of specific clause claiming first charge over the purchaser in the Central Excise Act, 1944. Rule 230 of the erstwhile Central Excise Rules, 1944, now incorporated in the proviso to Section 11 w.e.f 10-9-2004 will not be applicable. The Court distinguished Macson Marbles (supra) on the reasoning that what was decided in that case was that only in those cases where the buyer had purchased the entire unit, he would be so liable, whereas in the case to be decided by the Delhi High Court, the appellant had purchased only the plot and not the entire unit. The Delhi High Court relied upon T.C. Spinners Pvt. Limited v. Union of India - 2009 (243) E.L.T. 31 (P H) in which it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd articles in the custody or possession of the person, so succeeding to the business or trade in whole or in part and effect in the change of ownership in consequence to which he succeeds in such business or trade of any other person. In the present case even if it may be taken that there is no charge on the property on the plant and machinery, of the Excise duty, for which show cause notices were given prior to the sale of the UPFC, the petitioner as a purchaser under the terms of the agreement dated 14-3-2002, of the plant and machinery had agreed to bear all statutory liabilities arising out of plant and machinery of the industrial unit. 34. The facts of this case are distinguishable from the facts of the case in M/s. Luxmi Oil Vanaspati Pvt. Ltd. (supra) in which the property was transferred free from all charges and encumbrances. The observations made in Luxmi Oil Vanaspati Pvt. Limited that the debt of UPFC had a priority being a secured creditor by virtue of a deed of mortgage over the dues of central excise is not applicable to the present case inasmuch as UPFC had taken over the property and had sold the plant and machinery subject to the charge of the government dues o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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