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TMI Blog2014 (11) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... urther prayed to issue appropriate writ, order and/or direction directing the respondents, their agents and servants to forthwith issue a Central Excise Registration as a manufacture in favour of the petitioner No. 3 herein by quashing and setting aside the decision of the respondent No. 2 herein conveyed to the petitioner No. 3 herein vide letter F. No. (12)23/Reg/Ratnaveer/07-08, dated 22-10-2009. 2. Facts leading to the present Special Civil Application in nutshell are as under : 2.1 That at the relevant time, one M/s. Jem Ispat Ltd. had obtained Central Excise Registration for the premises being Plot Nos. 548 and 549, GIDC Estate, Vaghodia, Vadodara. That the duty liability came to be confirmed against the said M/s. Jem Ispat Ltd. vide Order-in-Original dated 4-12-1997 and 23-3-2000 respectively. That the said unit came to be closed. According to the Revenue, Central Excise dues amounting to more than Rs. 37.12 Lacs are still due and recoverable from the said M/s. Jem Ispat Ltd. along with interest leviable under the provisions of the Central Excise Act, 1944 (hereinafter referred to as "the Act" for short) and the Central Excise Rules, 1944 (hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said petitioner No. 3 - M/s. Ratnaveer Stainless Products Pvt. Ltd. applied for registration under the Act and Rules on 28-1-2008, however, the said application of the petitioner No. 3 for registration was not decided by the concerned authority and therefore, the petitioners preferred Special Civil Application No. 5923 of 2008 before this Court. In the said Special Civil Application, the learned counsel appearing on behalf of the appropriate authority made a statement that decision would be taken on the application within a period of four weeks, if not already taken, after affording an opportunity of hearing to the petitioners. In view of the aforesaid statement, the learned advocate appearing on behalf of the petitioners of the said Special Civil Application did not press the aforesaid Special Civil Application and consequently, this Court by order dated 30-9-2009 disposed of the said Special Civil Application. That thereafter vide communication dated 22-10-2009 (Anexure-J), the Assistant Commissioner has communicated to the petitioner that its application for the Central Excise Registration Certificate is rejected since M/s. Jem Ispat Ltd. who was issued Registration for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dues of erstwhile owner - M/s. Jem Ispat Ltd. It is submitted that properties of M/s. Jem Ispat Ltd. were attached by GIDC for its dues and were put to auction in exercise of powers under Section 29 of the State Financial Corporations Act, 1951 and therefore, considering the provisions of Section 11 of the Act, which was prevailing at the relevant time, Central Excise dues cannot have a priority and therefore, recovery proceedings initiated against the petitioner Nos. 1 and 2 for the Central Excise dues of erstwhile owner M/s. Jem Ispat Ltd. is absolutely illegal and most arbitrary. It is submitted that considering the provisions of Section 11 which was prevailing at the relevant time, Central Excise dues were not having any priority and/or having first charge and therefore, GIDC sold the properties of erstwhile owner - M/s. Jem Ispat Ltd. in an auction under Section 29 of the State Financial Corporations Act, 1951. Thereafter, it is not open for the respondents-department to initiate recovery proceedings to recover the dues of erstwhile owner - M/s. Jem Ispat Ltd. 3.1 Mr. Paritosh Gupta, learned Advocate appearing on behalf of the petitioners has heavily relied upon the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the Surat Metallics Ltd. and Another v. Commissioner of Central Excise, rendered in Special Civil Application No. 8734 of 2010 as well as another decision of the Division Bench in the case of M/s. Jahaan Steel Ltd. v. Union of India, rendered in Special Civil Application No. 5193 of 2009. It is submitted that the Bombay High Court in the case of TATA Metaliks Ltd. has specifically held that the authority is not justified in refusing to issue Registration Certificate in favour of subsequent purchaser solely on the ground that the person who has closed or sold the business or the premises has not applied for de-registration and/or earlier owner has defaulted in payment of excise duty. It is submitted that in the said decision the Bombay High Court has considered in detail the provisions of the Act and the rules, more particularly Section 6 of the Act and Rule 9 of the Rules. It is submitted that in the said decision Bombay High Court has also considered the Notification issued under Rule 9. 3.5 Mr. Paritosh Gupta, learned Advocate appearing on behalf of the petitioners has submitted that the decision of the Bombay High Court in the case of TATA Metaliks Ltd. has been sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Sicom Ltd. (supra) as well as recent decision of the Hon'ble Supreme Court in the case of M/s. Rana Girders Ltd. (supra) would not be applicable. It is submitted that in the aforesaid decision, the Hon'ble Supreme Court was considering the statutory liability of the obligation and not contractual liabilities/obligation. It is submitted that para 23 of the decision in the case of M/s. Rana Girders Ltd. (supra) makes the position very clear. It is submitted that in the case before the Hon'ble Supreme Court, there was stipulation in the sale deed/agreement that "all these statutory liabilities arising out of land shall be borne by the purchaser in the sale deed" and "all these statutory liabilities arising out of the said properties shall be borne by the vendee and vendor shall not be responsible in the Agreement-for-sale". It is submitted by Mr. Oza, learned counsel appearing on behalf of the respondents that to the aforesaid, the Hon'ble Supreme Court has observed that the expression in the sale deed as well as in the Agreement-for-sale for purchase of the plant and machinery talks of statutory liability "arising out of the said properties", and therefore, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners have prayed for two reliefs, one, challenging the action of the respondents in initiating recovery proceedings against the petitioner Nos. 1 and 2 to recover Central Excise dues of erstwhile owner - M/s. Jem Ispat Ltd. and another, challenging the action of the respondents/appropriate authority in rejecting the application of the petitioner No. 3 for issuance of the Registration Certificate under the Act and the Rules, on the ground that the Registration Certificate issued in favour of erstwhile owner - M/s. Jem Ispat Ltd. has yet not been de-registered and/or cancelled and there are dues/liabilities of erstwhile owner - M/s. Jem Ispat Ltd. 5.1 Now, so far as the challenge to the action of the respondents in initiating recovery proceedings against the petitioner Nos. 1 and 2 for recovery of Central Excise dues of the erstwhile owner - M/s. Jem Ispat Ltd. is concerned, number of submissions have been made by the learned advocates appearing on behalf of both the parties. The learned advocate appearing on behalf of the petitioners has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Sicom Ltd. (supra) as well as in the case of M/s. Rana G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d whether in light of Clause Nos. 1 and 14 of the sale/auction, decision of the Hon'ble Supreme Court in the case of M/s. Rana Girders Ltd. (supra) and Macson Marbles Pvt. Ltd. (supra) would be applicable or not and the aforesaid question is kept open. It is not in dispute that Orders-in-Original against the erstwhile owner - M/s. Jem Ispat Ltd. on the basis of which recovery proceedings are initiated, have been passed in the year 1996 and 2000, respectively and the impugned recovery proceedings have been initiated against the petitioner Nos. 1 and 2 subsequent purchasers in the year 2010-2011 i.e. after a period of almost 10 years. Nothing has come on record whether any recovery proceedings have been initiated against the erstwhile owner - M/s. Jem Ispat Ltd. under the provisions of Section 11 of the Central Excise Act, which was prevailing at the relevant time. It is true that as such there is no specific limitation provided for initiating recovery proceedings, however, the question which is posed for consideration is, whether the respondents-department can initiate recovery proceedings to recover the dues of erstwhile unit from the subsequent purchasers after a delay of almost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex Court in a catena of decisions such action has to be taken within a reasonable time. In the case of State of Gujarat v. Patil Raghav Natha (supra) the Apex Court has held that when there is no period of limitation prescribed, the power must be exercised within reasonable time. In the said case the power exercised beyond a period of one year was held to have been exercised beyond a reasonable time. In the circumstances, this Court is not satisfied that the respondents have exercised powers under Section 11 of the Act within a reasonable period of time. The lapse of a period of five years in seeking to recover the dues of the erstwhile unit from the auction purchaser, namely, the petitioner, is certainly not a reasonable time for exercise of power, even if it is not hedged in by a period of limitation. Therefore, the impugned order cannot be permitted to stand." 17. In the facts of the present case, admittedly, the respondents have sought to initiate recovery of the dues of the erstwhile unit from the petitioners after a delay of almost 10 years. The respondents cannot sit on the fence and allow equities to be created in favour of the third parties and then, seek to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proviso of Section 11 of the Act in respect of dues which have crystallized prior to the introduction of the proviso to Section 11 of the Act vide the Finance Act, 2004, even then as held by the Apex Court in a catena of decisions such action has to be taken within a reasonable time. In the case of State of Gujarat v. Patil Raghav Natha (supra) the Apex Court has held that when there is no period of limitation prescribed, the power must be exercised within reasonable time. In the said case the power exercised beyond a period of one year was held to have been exercised beyond a reasonable time. In the circumstances, this Court is not satisfied that the respondents have exercised under Section 11 of the Act within a reasonable period of time. The lapse of a period of five years in seeking to recover the dues of the erstwhile unit from the auction purchaser, namely, the petitioner, is certainly not a reasonable time for exercise of power, even if it is not hedged in by a period of limitation. Therefore, the impugned order cannot be permitted to stand." 5.5 We are in complete agreement with the view taken by the Division Bench in the case of Valley Valvet P. Ltd. (supra) and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons. - Any prescribed person who is engaged in - (a) the production of manufacture or any process of production or manufacture of any specified goods included in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), or (b) the wholesale purchase or sale (whether on his own account or as a broker or commission agent) or the storage of any specified goods included in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)." In terms of the Act therefore, a person who is engaged in the occupation or manufacture or in the process of production of specified goods included in the first schedule and second schedule to the Central Excise Tariff Act, 1985 or the wholesale purchase or sale (whether on his own account or as a broker or commission agent) or the storage of any specified goods included in the first schedule and the Second Schedule) the Central Excise Tariff Act, 1985 (5 of 1986), must get himself registered with the proper officer. The next relevant provision is Rule 9 of the Central Excise Rules which reads as under : "Rule 9. Registration. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid the outstanding excise duties and fails to surrender registration certificate with respect to the same factory premises, no other unit in the same premises can be registered under the Rules unless earlier registration is deregistered or cancelled or surrendered by such registrant and all excise dues are cleared. On behalf of the Revenue, the learned Counsel has relied on this judgment to contend that in the instant case, there is a subsisting registration in favour of Respondent No. 7, Usha Ispat and once there be registration in their favour, the Registrar was right in rejecting or returning the application for registration made by the Petitioner herein. Let us consider the ratio of the said judgment. On a reading of the said judgment, the following facts emerge. There was a company known as Ludhiana Woolen and Silk Mills Pvt. Ltd. who were owners of the premises. They firstly leased out the premises on rent to M/s. Swastik Dyeing and Printing Mills Limited who had obtained excise registration on 1-10-1996 and failed to clear their dues. Subsequent thereto, M/s. Ludhiana Woolen and Silk Mills Pvt. Ltd. leased out the very same premises to M/s. Jagruti Textile Processors who a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 another person, the transferee shall get himself registered afresh as well as clauses (6) and (7) thereof which provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the notification confers such power. The right of revenue however, would subsist for recovery of dues both against the defaulter or the transferee if the predicates for recovery are met. An inci ..... 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