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TMI Blog2014 (3) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... d the provisions of Section 142(1)(c)(ii) lays down that the proper officer of the Customs has power in accordance with the rules made in that behalf to destrain any movable or immovable property belonging to or under the control of such person for the recovery of amount payable by such person. Thus, it is very clear that any action under Section 142(1)(c)(ii) has to be in accordance with the rules and those rules are Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. Rules themselves make it clear that the property to be attached should be of the defaulter and it is more clearer from Rule 3 of the said Rules talks about the property owned by the defaulter. Rules 4 and 5 provide for the issuance of the Notice to be served upon the defaulter and then retaining the defaulter’s property until the amount due is recovered. To my mind, it is clear that the attachment, restrainment, etc. of immovable property under Section 142(1)(c)(ii) read with rules, can only be in respect of the property owned by the defaulter. To my mind the wordings used in the Section 142(1)(c)(ii) also very clearly mandate that the immovable property to be attached shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f pre-deposit ordered by the Tribunal. The land and building was leased from 21-9-1999 to 20-9-2005 vide lease deed dated 21-9-1999. However it was submitted by the appellant that Bhavya disappeared in the year 2000-2001 after vacating the leased land and building without informing the appellant and without clearing past unpaid lease rent also. The attachment has been made under the provisions of Section 142(1)(c)(ii) of Customs Act, 1962 made applicable to central excise matters by notification issued under Section 12 of Central Excise Act, 1944. 2. Heard both the sides. 3. The learned advocate submitted that Section 11 of Central Excise Act, 1944 (The Act) relates to recovery of sums due to Government. A proviso was introduced with effect from 10-9-2004 which provided for attachment of all excisable goods, materials, plants, machineries, vessels, utilities, implements and articles in the custody or possession of the person who had succeeded the assessee because of transfer, disposal or change in ownership. It was submitted that this section would not be applicable for recovery in view of the fact that the proviso came into effect from 10-9-2004 whereas the arrears had arisen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach the property belonging to or under the control of defaulter. Therefore the question to be decided boils down to whether the property in question can be considered to be under the control of the defaulter namely Bhavya. Obviously it does not belong to Bhavya. 8. At this juncture it would be worthwhile to reproduce the relevant clause in the lease deed which has been relied upon by the lower authorities to come to the conclusion that the property continues to be under the control of Bhavya. The lease deed made on 21-9-1999 between the appellant and Bhavya provides that the period of lease is six years starting from 21-9-1999 to 20-9-2005. In any case the factory shall not be vacated till the export obligation is discharged and consent is obtained from the authorities in respect of 100% EOU . The contention of the department is that the export obligation has not been discharged. Consequently Bhavya has become a defaulter and the duty liability and penalty liability have arisen. Since the factory cannot be vacated till the export obligation is discharged, it is deemed to have not been vacated unless the obligation to discharge duty liability and other liabilities are fulfilled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase deed and he knew very well that there was a risk involved in leasing the factory and land. In any case it was for the parties to contract to take necessary precautions and as far as department is concerned, the question is whether the department can consider that the land and building was not vacated and under the circumstances it appears that the stand of the department is correct. 12. It was for the lessee to ensure that no additional obligations and liabilities are created if the lessee vacated the premises in violation of the terms of lease deed. Having failed to incorporate such clauses to protect himself, the lessor cannot find fault with a third party who is affected. 13. It was also submitted that in the absence of specific statement that period of six years or discharge of export obligation and obtaining consent whichever is later, if the factory is vacated earlier, no right arises. In our opinion the absence of whichever is later would help the department since this clause in the lease deed has no time limit whatsoever and in the event of non-fulfilment of export obligation, it becomes obligatory for the lessee and the lessor to extend the lease deed. 14. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 2006 (195) E.L.T. 229 (Tri.-Bang.) it was held that proviso to Section 11 of the Act enabling demand from successor of business was incorporated after the period in dispute and hence not applicable. In the case of T.C. Spinners Pvt. Ltd. v. UOI the Hon ble High Court of Punjab Haryana had considered a situation where the petitioner purchased assets of the defaulter company through the bank reported in 2009 (243) E.L.T. 31 (P H). In the case of Bajaj Auto Ltd. reported in AIR 1989 (SC) 1806, the question was whether tenant was liable to be evicted on the ground that the original tenant had parted with possession in favour of another company. 19. Even though we do have sympathy for the plight of the appellant, it appears to us that legally the stand taken by the department is correct. Accordingly, the appeal filed by the appellant is rejected. (Pronounced in Court on ..) 20. [Per : Archana Wadhwa, Member (J)]. - Having gone through the order proposed by my learned Brother, I proceed to record a separate order, as I do not find myself in agreement with the same. 21. The facts are simple and are not in dispute. The tenancy was created by the appellant in the name of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of the dues in the hands of such successor. For the above proposition, he has relied upon various decisions of the Tribunal. Inasmuch as my learned Brother has accepted the above plea of the appellant by holding that the recovery proceedings by attaching property are not being made by invoking Section 11, I do not intend to go in detail of the above plea of the appellant. 25. It was further contended that the provisions of Section 142 of the Customs Act, 1962 cannot be applied to the recovery of the Central Excise duty, inasmuch as only part provisions of Clause (b) and Clause (1)(c)(ii) of the said Section were applied to Central Excise matters without making entire Section applicable to such recovery. However, as rightly observed by learned Member (Technical), the above issue does not fall within the jurisdiction of the Tribunal, inasmuch the Tribunal is not the right forum to declare any provisions of law as ultra vires. 26. Accordingly, the only issue remaining to be decided is as to whether the provisions of Section 142(1)(c)(ii) of the Customs Act, 1962 stand rightly invoked by the authorities below for attaching property in question for recovering the duty confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant clause from lease deed is reproduced below. (i) The Period of Lease is 6 (Six) Years starting from 21st September, 1999 to 20th September 2005. In any case, the factory shall not be vacated till the Export obligation is discharged and consent is obtained from the authorities concerned in respect of 100% EOU. 29. As is coming from the above, the period of lease is 6 years up to 20-9-2005. The use of the words in the said lease deed, nowhere grant extension of the period of 6 years. The same is to the effect that in any case the factory shall not be vacated till the export obligation is discharged. This can also be interpreted in a manner that even if both the parties decide to shorten the period of lease, the same shall not be vacated till the export obligation is discharged. It can also mean that if the export obligation is discharged prior to the period of completion of 6 years, the factory premises may be vacated subject to the consent of the Lessor and Lessee. There is no indication in the said clause that period of lease which is undisputedly for a period of 6 years, can be extended. Admittedly, the lease expired on 20-9-05 and the show cause notice issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as such cannot be held to be a valid and legal instrument. In terms of provisions of Section 107 of Transfer of Property Act, 1882, a lease of immovable property from year to year or for a term exceeding 1 year, or reserving a yearly rent, can be made only by a registered instrument. As such, in terms of said section of the Transfer of Property Act, lease deed between the appellant and M/s. Bhavya Apparel Pvt. Ltd. was required to be registered, being an agreement for a period of more than 1 year. Now, what is the effect of such non-registration of the lease deed. The answer lies in the provisions of Section 17(1) of Indian Registration Act, 1908 and the provisions of Section 49 of Registration Act, which talk about the effect of non-registration of the document required to be registered in terms of Section 17 of the Act or by any provision of Transfer of Property Act, 1882. The proviso, to the said section already stand reproduced in the order of learned Brother, holding that the department is using the said lease agreement as an evidence of collateral transaction to show that the Lessee deemed to be in the control of land and building. The exception provided in the proviso i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lease is not using it as a collateral purpose. 8. The learned counsel for the appellant attempted to meet the point by saying that so far the consent of the landlord permitting sub-letting is concerned, it does not require registration and the clause, therefore, must be excepted from the requirement of registration and consequent exclusion from evidence. We do not see any force in this argument. The question whether a Lessee is entitled, to create a sub-lease or not is undoubtedly a term of the transaction of lease, and if it is incorporated in the document, it cannot be disassociated from the lease and considered separately in isolation. If a document is inadmissible for non-registration, all its terms are inadmissible including the one dealing with landlord s permission to his tenant to sub-let. It follows that the appellant cannot, in the present circumstances, be allowed to rely upon the clause in his unregistered lease deed. 35. By applying the ratio of the above decision to the facts of the present case, where the lease deed was admittedly unregistered, it has to be held that if the said lease deed was inadmissible for non-registration, all its terms are inadmissible i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Member (Technical)? (Pronounced) 37. [Per : M.V. Ravindran, Member (J)]. - This difference of opinion is listed before me as per orders of Hon ble President for deciding the points of difference arose between the Bench while deciding the appeals No. E/855/2009. 38. Following difference of opinions are indicated :- (i) Whether in the facts and circumstances of the case the provisions of Section 142(1)(c)(ii) of Customs Act, 1962 can be invoked against the appellant as held by learned Member (Technical) or the same are inapplicable as held by Member (Judicial)? (ii) Whether the clause of lease deed relied upon by the Revenue can be invoked in favour of the Revenue for attaching property for tax recovery against tenant as held by learned Member (Technical) or the said clause of agreement will have not bearing on the disputed issue in question as held by Member (Judicial)? (iii) Whether the Revenue can take the benefit of said clause in agreement, which is primarily and basically an agreement between the landlord and the tenant, without any intervention of the Government? (iv) Whether the said lease agreement was sole basis for grant of EOU permission to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue, the appellant s property cannot be seized or attached as the period of lease between M/s. Bhavya Apparels Pvt. Ltd. and the appellant expired before the attachment of the property could take place. It his submission that the lease agreement does not provide as to that M/s. Bhavya Apparels Pvt. Ltd. was de jure in control of the property. It is submission that the duty of export obligation is not sought on lessee i.e. M/s. Bhavya Apparels Pvt. Ltd. and but on lessor i.e. Shri R.I. Rajbara, for failure to fulfil the export obligation, if any, and to obtain consent. It is his submission that there is no clause in the lease deed that prescribes for the rights/obligation/liability of the lessor if the lessee vacates the premises in violation of the terms of lease deed. It is his submission that the lease deed is deemed to have same to an end the day the lessee vanish from the scene and discontinues operation and the said lease deed stand discharged by the law of frustration. It is his submission that this view is expressed by the Hon ble High Court of Mumbai in the case of UOI v. Customs Central Excise Settlement Commission, Kolkata - 2010 (254) E.L.T. 647 (Bom.). He would ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed that the lease will be valid till 20-9-2005, along with the order that the factory shall not be vacated till the export obligation is discharged and consent is obtained from the concerned authorities in respect of said EOU. It is his submission that the lease deed specifically stated that the factory was given on lease for specific purpose of setting up of 100% EOU. It is his submission that M/s. Bhavya Apparels Pvt. Ltd. was granted various permissions and licences under Customs Act, Central Excise Act, Export-Import Policy, based upon the various documents submitted by M/s. Bhavya Apparels Pvt. Ltd. and one of the documents was the lease deed to indicate that they have lease arrangement for running the factory from such premises. It is his submission that the action of recovery of proceedings was initiated under the provisions of Section 142(1)(c)(ii) read with the Rule 4 of Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. It is his submission that existence, legality and validity of the lease deed is not questioned by the appellant and therefore the premises are still under the control of M/s. Bhavya Apparels Pvt. Ltd. in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not denied which are as under : (i) That there was a lease agreement between M/s. Bhavya Apparels Pvt. Ltd. and the appellant herein for leasing out the property which is under attachment by the Department. (ii) That the said lease agreement was an unregistered document as there is no stamp duty paid nor it is registered with the authorities. (iii) That M/s. Bhavya Apparels Pvt. Ltd. stopped then operation from March, 2000 and also that M/s. Bhavya Apparels Pvt. Ltd has not paid the lease rent from March, 2000. (iv) That the Department has not relied upon this lease agreement as a sole basis for grant of EO (??) permission or any other licences to M/s. Bhavya Apparels Pvt. Ltd. (v) That the appellant herein is in possession and control of the premises which is attached. 43. In order to appreciate the correct position of law, I reproduce herein below the provisions of Section 142(1)(c)(ii). Section 142. Recovery of sums due to Government. - (1) Where any sum payable by any person under this Act in including the amount required to be paid to the credit of the Central Government under Section 28B is not paid, - (a) the proper officer may deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under Section 142(1)(c)(ii) has to be in accordance with the rules and those rules are Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. The ratio has been clearly laid down by the Tribunal in the judgment in the case of Gem Nuts Produce Exports Co. Pvt. Ltd. - 2003 (162) E.L.T. 165 (Tri.-Mum.). The relevant paragraphs of the said judgment are reproduced below : 5. Section 142 of the Act and the rules made thereunder contains the provisions for recovery of the sums due to Government under the Act. Sub-clause (i) of clause (c) of sub-section (ii) provides that if the sum cannot be recovered from the person in the manner specified in the proceedings, provisions of the sub-section, the proper officer may on authorisation by the Commissioner of Customs and in accordance with the rules made in this behalf distrain any movable or immovable property belonging to or under the control of that person, and detain the same until the amount is paid. 6 The Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 have been framed to carry out the provisions of this section. Rule 3 provides for issue of a cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the origin of this money can be traced back to the fraudulently obtained drawback. We have not examined the correctness of the claim because in our view proceed to the next claim that even assuming that this was act of money is paid as drawback the attachment is still not covered by the rules. 45. It is also to be noted that the rules themselves make it clear that the property to be attached should be of the defaulter and it is more clearer from Rule 3 of the said Rules talks about the property owned by the defaulter. Rules 4 and 5 provide for the issuance of the Notice to be served upon the defaulter and then retaining the defaulter s property until the amount due is recovered. To my mind, it is clear that the attachment, restrainment, etc. of immovable property under Section 142(1)(c)(ii) read with rules, can only be in respect of the property owned by the defaulter. To my mind the wordings used in the Section 142(1)(c)(ii) also very clearly mandate that the immovable property to be attached should be owned by the defaulter and not under his possession. The words under control of such person clearly shows that such person should have the control to deal with the property. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her side. On perusal of the record, I find that the lease has expired on 20-9-2005 and the Show Cause Notice was issued to the appellant herein on 2-2-2006 i.e. after expiry of 6 years period wherein the lease agreement has already come to its end in my view, the ld. Member (Judicial) was correct in coming to the conclusion that the clause which is invoked by the Revenue for attachment of the property of the appellant cannot be invoked in such a way to cast duty on the lessor to pay the dues which were not legally due from him. In my view, since no ownership right was created on the lessee, it cannot be said that the said factory premises were still under the control of M/s. Bhavya Apparels Pvt. Ltd. It is also seen that despite the clause that the factory premises shall not be vacated till the export obligation is discharged and consent is obtained from the authorities concerned in respect of 100% EOU, there is no clause which indicate that the obligation of the lessee will pass on to the lessor if he vacates the premises in contravention of the lease deed. There is not even a murmur as to the liability of the lessor to discharge the duty liability of the lessee to the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X
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