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TMI Blog2011 (2) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no.1 and/or his subordinate offices to register the petitioners with all benefits under the Central Excise Act, 1944 and Rules framed thereunder for the property/premises situate at Plot No.8204, GIDC, Sachin, Surat. (B) to issue a writ of mandamus or any other appropriate writ, order or direction declaring that the respondent no.1 or his subordinate officers are not entitled to claim the outstanding dues of Excise of borrower company from the property/premises of the petitioners situate at Plot No.8204, GIDC, Sachin in any manner whatsoever & be further pleased to quash & set aside the attachment at the said premises. 2. The petitioner Company is engaged in the business of manufacturing metalized film, lacquered film, etc., and holds Central Excise Registration No.AAGCS6017GXM001 at the premises situated at Plot No.815, Road No.3, Rajkamal Chokdi, GIDC, Sachin, Surat. The subject property, situated at Plot No.8204, GIDC, Sachin was mortgaged by one Veenutex Dyeing & Printing Mills Pvt. Ltd. for financial assistance of Rs. 225 lakhs given by Panchsheel Mercantile Co-operative Bank Ltd. (respondent no.2 herein), on 05th June, 1988 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for registration referred to some outstanding dues of the borrower and attachment made, hence, the petitioners gave an application to the Assistant Commissioner to supply copies of the relevant documents based on which the application was rejected. The Superintendent of Central Excise thereafter supplied various documents to the petitioner comprising of notice of demand to defaulter, copy of panchnama dated 02nd December, 2004, notice of attachment dated 20th December, 2004 sent by the Deputy Commissioner, Central Excise to the Company, order of attachment dated 29th December, 2004 issued by the Assessing Officer as well as other documents. The Superintendent, Central Excise refused to grant registration to the petitioner on the ground of non-payment of duties of central excise by Veenutex Dyeing & Printing Mills Pvt. Ltd., the original borrower Company (hereinafter referred to as the defaulter unit). Being aggrieved by the action of the respondent No.1 in rejecting the application of the petitioner to register/recognise the newly purchased property/premises for the purpose of Central Excise, the petitioners have preferred the present petition. 4. In response to the petition, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation provided in the advertisement to the public notice appearing in the 'Times of India', Surat edition dated 30th December, 2008 as well as in Gujarati Vernacular newspaper daily 'Divya Bhaskar', Surat edition, dated 30th December, 2008. That, the respondent Bank on receipt of the legal notice issued by the Assistant Solicitor General on behalf of the respondent, published a corrigendum on 17th January, 2009 to the public notice dated 30th December, 2008 in both the above newspapers referring to the communication of the respondent about the claim against the Company. However, it was also stated there that the Bank did not admit the validity of the attachment and the Bank and the authorised officers of the Bank are advised that the alleged attachment by Assistant Commissioner, Central Excise & Customs, Surat does not create any charge on the said property. It is further averred in the affidavit-in-reply that the auction conducted by the respondent Bank is lacking bonafide/good faith and that it has misled the public by suppressing the relevant and material facts from the people at large. 5. The respondent No.2 - Bank has also filed an affidavit-in-reply, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Securitisation Act, the provisions of section 35 whereof overrides the other laws for the time being in force. 6. The petitioner has filed a rejoinder affidavit to the affidavit filed by the respondent. The respondent No.2 - Bank has also filed a counter affidavit to the affidavit filed by the respondent No.1 and the respondent No.1 has filed an affidavit in sur-rejoinder to the rejoinder affidavit filed by the petitioner and the respondent No.2 - Bank. An affidavit in sur-surrejoinder has also been filed on behalf of the petitioner in reply to the sur-rejoinder filed by the respondent No.1. 7. Mr. B. B. Naik, learned senior advocate appearing with Mr. Pawan S. Godiawala, learned advocate for the petitioners, invited attention to the averments made in the petition to submit that pursuant to the purchase of the property in question at the auction held by respondent No.2 - Bank, the petitioner Company by way of abundant caution had issued a public notice in the local newspaper 'Gujarat Mitra" on 6th May, 2009 inviting objections, if any, against the petitioner Company purchasing the property in question, however, no objections whatsoever were received. That subsequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies on the property for recovery of the duty. The so-called excise duty payable by the Company is not a secured debt and for recovery of which no charge lies on the subject property. In support of his submissions, the learned counsel placed reliance on a decision of the Andhra Pradesh High Court in the case of Sitani Textiles & Fabrics (P) Ltd., vs. Assistant Commissioner of Customs & Central Excise, Hyderabad - 1, 1999 (106) E.L.T. 292 (A.P.) as well as the decision of the Supreme Court in the case of Union of India vs. SICOM Ltd, (2009) 2 SCC 121. 7.1 The learned counsel further submitted that the property in question is not 'excisable goods' as defined under section 2(d) read with section 11 of the Act and as such, the respondent No.1 does not have any authority in law to make any claim whatsoever on the subject property qua alleged recovery of the sums due to the Excise Department under section 11 of the Act. Reliance was placed upon a decision of the Supreme Court in the case of Triveni Engineering & Industries Ltd. and another vs. Commissioner of Central Excise and another, (2000) 7 SCC 29, for the proposition that if an article is an immovable property, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Bombay High Court in the case of Tata Metallics Ltd. vs. Union of India, 2009 (234) E.L.T. 596 (Bom.). 7.3 The learned counsel further invited attention to the provisions of section 142 of the Customs Act, 1962 which makes provision for recovery of sums due to the Government to submit that neither the respondent No.1 nor the Assistant Commissioner of Central Excise have powers under section 142 of the Customs Act, 1962 inasmuch as they are appointed and can exercise their powers under the Central Excise Act, 1944. It was submitted that the documents supplied by the office of the respondent No.1 reveal that the exercise of the so-called attachment is shown between the period 2nd December, 2004 to 30th December, 2004, whereas the respondent Bank had already resorted to the measures under the Securitisation Act, qua the mortgaged and hypothecated properties by issuing notice dated 31st July, 2004 under section 13(2) of the said Act, and had taken actual physical possession of the immovable and movable properties of the defaulter on 6th November, 2004 and published the possession notice as contemplated in the Securitisation Act on 12th November, 2004 in the daily newspape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was submitted that under the said provision, where an attachment has been made under the said rules, any private transfer or delivery of the property attached or of any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment. It was submitted that by operation of the said rule, the tender notice which has been issued subsequent to the attachment, was not valid and any action taken thereunder would be void in view of the provisions of sub-rule (ii) of rule 9 of the Rules. It was submitted that the attachment in question had been made way back in 2004 and that the same subsists till date and that no legal occasion has arisen for setting aside the attachment. It was strenuously argued that the attachment having been made much prior to the transfer of the subject property in favour of the petitioners, the petitioners have no locus to challenge the said attachment. 8.1 As regards the challenge to the authority of the respondent authorities to make the attachment in question under section 142 of the Customs Act, attention was invited to the provisions of section 12 of the Central Excise Act which provides for ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was placed upon a decision of the Supreme Court in the case of Dhurandhar Prasad Singh vs. Jai Prakash University and others, AIR 2001 SC 2552, for the proposition that one type of void acts, transactions, decrees are those which are wholly without jurisdiction, ab initio void and for avoiding the same, no declaration is necessary, law does not take any notice of the same and it can be disregarded in collateral proceedings or otherwise. It was submitted that by operation of the provisions of the statute, the transaction in question is void, hence the revenue is not required to take notice of the same. It was submitted that the Department is not challenging the preferential claim of the Bank, however, the Department is opposing the reliefs claimed in the petition in the light of the fact that action taken of sale of the subject property is null and void. 8.4 Inviting attention to the reliefs claimed in the petition, it was submitted that the prayer made vide paragraph 6(B) of the petition is not maintainable inasmuch as no demand has been made by the respondent No.1, seeking to recover the dues of the defaulter from the petitioners. 8.5 As regards the relief claiming registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector, Ahmedabad and others, 1972 (42) Company Cases 476. It was submitted that in view of the provisions of section 35 of he Securitisation Act, the provisions of the said Act would prevail over the provisions of the Central Excise Act and as such, the attachment made by the respondent is not legal and valid. 10. Mr. B.B. Naik, learned counsel appearing on behalf of the petitioner, in rejoinder, invited attention to the provisions of rule 3 and rule 4 of the Attachment Rules to point out that the said rules provide for a procedure for attachment of property. Referring to rule 3 and rule 4 of the said rules, it was submitted that no such procedure as laid down under the rules have been followed and as such, even the basic conditions precedent for attaching the property are not satisfied in the facts and circumstances of the case. It was further submitted that attachment can be made provided possession is of the defaulter. In the facts of the present case, the respondent No.2 - Bank has taken over possession from the defaulter prior to the attachment and as such, the alleged attachment is without any authority of law. Reliance was placed upon a decision in the case of Tata Metallik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004, 26th February, 2004 and 18th March, 2004, which are subsequent to the said properties being mortgaged and hypothecated by the defaulter to the respondent Bank. Since the financial facility was not repaid by the borrower, the Bank issued notice on 31st July, 2004 under section 13(2) of the Securitisation Act calling upon the defaulter to repay the outstanding dues. Since the secured dues were not repaid, the respondent Bank took over the actual physical possession of the property given by way of security, viz., land, building and machineries, on 6th November, 2004 and public notices in this regard came to be published in two daily newspapers. The respondent Bank thereafter got the immovable properties valued through the Government Resolution approved valuer and published second notice dated 24th December, 2004 for sale which came to be published in two daily newspapers on 28th December, 2004. Subsequent thereto, on 29th December, 2004, the respondent No.1 passed an order of attachment of immovable property attaching the subject property in exercise of powers under section 142(1)(c)(ii) of the Customs Act, 1962 and rule 4 of the Attachment Rules. Pursuant to the sale notice date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, 1962 on 29th December, 2004. 15. Thus, the main reason for refusing to grant registration to the petitioners is that the subject property has been attached under section 142 of the Customs Act, 1962. Another reason stated during the course of hearing of the petition is that in respect of the same premises two persons cannot be registered. Since the registration of the defaulter company has still not been cancelled, the petitioner cannot be granted registration in respect of the same premises. It would, therefore, be necessary to examine as to whether the respondent No.1 was justified in refusing registration to the petitioner in respect of the subject property on the aforesaid grounds. 16. As noted hereinabove, before making the order of attachment, the Deputy Commissioner, Central Excise Div-V, Surat-I had issued a notice of attachment dated 20th December, 2004 to the defaulter company under rules 9 and 10 of the Attachment Rules calling upon it to pay the amount of Rs. 1,08,75,50,067/- within a period of seven days of service of notice which appears to have been issued in terms of rule 4 of the Attachment Rules. The said notice states that the borrower was required to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining written approval from the Commissioner of Central Excise for the purposes of recovering such duties or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change. In the facts of the present case, admittedly, it is not the person from whom the amounts were recoverable or due, who has transferred the property in question to the petitioner. The property had been sold to the petitioners under the provisions of the Securitisation Act, by the respondent Bank who is a secured creditor. Moreover, what has been sold to the petitioners is the immovable property of the defaulter company and not the business or trade, in whole or in part. The petitioner, therefore, has not succeeded the defaulter in the business or trade. In the circumstances, the proviso to section 11 of the Act would not be attracted in the present case. Insofar as the first and second contingencies referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person: Provided that where the person (hereinafter referred to as predecessor), by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government under Section 28-B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by the proper officer, after o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, it is an admitted position that the attachment of the subject property has been made under rule 5 of the Attachment Rules which empowers the proper officer to proceed to realise the amount by attachment and sale of the defaulter's property, if the amount mentioned in the notice issued in terms of rule 4 is not paid within seven days from the date of service of the notice. In the facts of the present case, on a perusal of the demand notice dated 2nd December, 2004, it appears that the same has been issued under rule 4 of the Attachment Rules. However, there is nothing on record to indicate the issuance of any certificate as contemplated under rule 3 of the Rules. While the demand notice issued under rule 4 of the Rules speaks of the Commissioner, Central Excise and Customs, Surat-I having designated the Assistant Commissioner as "Authorised Officer" under section 142(1)(c)(ii) of the Customs Act, 1962 for attachment and sale of immovable and movable property, the same does not speak of receipt of any certificate mentioned in rule 3 of the Rules. 23. Be that as it may, on a plain reading of the provisions of section 142(1)(c)(ii) of the Customs Act, it is apparen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attachment had been made in December, 2004 the authorised officer could have proceeded further in exercise of powers under section 142 of the Act. However, for some inexplicable reason, he has chosen not to do so and has remained satisfied with making the attachment and does not appear to have taken any steps to cause the subject property to be sold so as to recover the Central Excise dues. Had any action been taken by the authorised officer at the relevant time, no supervening events would have intervened. The inter se claims of the Central Excise department and the respondent Bank in respect of the subject property would have been decided without third party rights coming into existence. If the respondent Bank had a better charge over the subject property the same would have been decided at that point of time. The initial lethargy on the part of the Central Excise authorities in recovering the dues from the defaulter at the relevant time after making attachment under the Rules is difficult to fathom and is also highly prejudicial to the interests of the revenue. When the Act empowers sale of the attached property after the period prescribed, such action has to be taken within a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laims enforceable under the attachment. 25. On a plain reading of rule 9 of the Attachment Rules, it is apparent that the same pertains to private alienation and as such would apply in case where there is a private transfer of the property attached. Sub-rule (i) prohibits a defaulter or his representative in interest from dealing with the property which is subject matter of attachment and sub-rule (ii) provides that any private transfer in relation to property attached under the rules shall be void. In the present case, the subject property has been transferred to the petitioners by the respondent No.2 - bank, who is neither a defaulter nor the representative in interest of the defaulter and as such, sub-rule (i) of rule 9 of the Attachment Rules would not be attracted. Besides, the subject property has been sold to the petitioners in auction proceedings, in exercise of statutory powers under the Securitisation Act, hence the transfer in favour of the petitioners cannot be said to be by way of a private transfer as contemplated in rule 9 of the Attachment Rules. Thus, the transfer in favour of the petitioners not being a private transfer, the prohibition under sub-rule (ii) of rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration to the petitioners on the ground of attachment made under section 142 of the Customs Act, 1962. 28. Though not expressly stated in the order refusing registration, before the Court, on behalf of the respondent No.1, it has been contended that premises can be registered under the Central Excise Act only in relation to one person; that the defaulter M/s. Veenutex Dyeing & Printing Mills Pvt. Ltd. having already been registered in relation to the subject premises, unless such registration is revoked and cancelled, registration cannot be granted to the petitioners in relation to the said property. Attention was invited to notification No.35/2001 C.E. (N.T.) dated 26th June, 2001 as amended from time to time, issued in exercise of powers under rule 9 of the Central Excise Rules, 2001 which provides for the conditions, safeguards and procedures for registration and exemption in specified cases. Reference was made to clause (2) thereof which says that if the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises; clause (4) thereof which says that where a registered person transfers his business to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of excise dues. Section 6 and Rule 9 and the notification contemplates that it is the person who must be registered. Neither Section 6 nor Rule 9 and the Notification is a provision for enforcing the claim for dues of the department. That is contained in different provisions. An immovable property by itself cannot be sold unless the owner of the premises is defaulter and that too under a certificate as arrears of land revenue. That sale would be subject to the priority of claims. In case of a lease hold property given for a particular period, there would be no question of sale of the property except the limited interest. In our opinion, the case of bona fide transferee was not in issue in the case of M/s. Manibhadra Processors (supra) or the instances we have cited above. The Respondent No. 3 has therefore, clearly acted without jurisdiction in refusing to grant registration on the specious plea that M/s. Usha Ispat whose assets has been sold and purchased by the Petitioners has not applied for deregistration. In the absence of a specific power to deny registration, the alternate would be whether there would be implied power. Neither Section 6 or Rule 9 or for that matter th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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