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TMI Blog2015 (9) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... The said unit was taken over by the appellant in April 2006. The background of the case is that the demand was officially confirmed against M/s. Sumit Rerolling Mills Pvt. Ltd. and the said unit was taken over by the bank against their dues. The bank has auctioned the unit and in such auction one Zia Iron Stores has purchased the property of the unit. Thereafter the present appellant has purchased the unit from Zia Iron Stores. The department vide their letter dated 25/7/2008 and 23/10/2008, 6/2/2008 asked the appellant to pay the Central Excise dues which was outstanding against the M/s. Sumit Rerolling Mills Pvt. Ltd. in terms of Section 11 of the Central Excise Act, 1944. Aggrieved by the said demand appellant filed appeal before the Commissioner (Appeals), who vide the impugned order directed the appellant to pay the remaining of government dues and rejected the appeal. 3. Shri Sanjay Agarwal, Ld. Counsel for the appellant submits that they have only purchased the immovable assets that too not from M/s Sumit Rerolling Mills Pvt. Ltd but from Zia Iron Stores. He further submits that they have not succeeded the business of M/s. Sumit Rerolling Mills Pvt. Ltd. appellant have only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be undertaken by the purchaser is only in respect of those dues, tax revenue charges and legal charges which is related to transfer of property and not in respect of Central Excise dues. Therefore the liability of Central excise arrears has not been transferred to the present appellant, for this reason also they are not liable to discharge, the arrears of Central Excise. He further submits that as per the deed of assignment between Zia Iron Stores and the appellant in condition No. 6 it is stated that assignor having paid, up to this date all dues among other dues, Central Excise dues also and if there remain arrear to be paid assignor undertake to pay the same. Therefore even in view of this assignment deed the appellant has not under taken under deed of assignment to clear arrears of Central Excise therefore under any circumstances the appellant is not liable for payment of arrears which is against M/s. Sumit Rerolling Mills Pvt. Ltd. He further submits that it has been held by the Hon'ble Supreme Court in the case of UOI vs. Sicom Ltd. [2010 18 STR 673 (SC)] wherein Hon'ble Apex Court held that Government dues have no priority over the secured creditor. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant, therefore the appellant was liable to pay arrears. In this regard, it is his submission that the appellant blindly following instruction of the departmental officer given such undertaking the appellant has reserved their legal rights. Therefore merely by giving under taking the appellant cannot be deprived from contesting the recovery of arrears on the basis of legal provisions. He also submits that mere undertaking cannot be brushed aside statutory provisions for recovery of arrears. In this support he placed reliance on the judgment of this Tribunal in the case of Shri Kesav Cements & Infra Ltd. vs. Commissioner of C. Ex, Belgaum [2010 (256) ELT 585 (Tri.Bang)], wherein it was held that recovery cannot be made from auction purchaser of the assets even though the appellant was force to pay dues of defaulter by withholding registration. 4. On the other hand, Shri. Asuthosh Nath, Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that since the assets which was purchased by the appellant was originally owned by M/s. Sumit Rerolling Mills Pvt.Ltd. therefore arrears of Central Excise dues of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfers 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 excisable 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 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 duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change. (2) (i) The Central Excise Officer may, by a notice in writing, require any other person from whom money is due to such person, or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held, or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Zia Iron Stores and subsequently the appellant has purchased the assets from M/s. Zia Iron Stores. In this transaction, neither M/s. Sumit Rerolling Mills Pvt. Ltd is the predecessor nor the appellant is successor. With regard to the proviso to Section 11 recovery under Section 11 and proviso thereto cannot be made from appellant. I also observe that in the proviso to Section 11 it is clearly provided that the recovery of arrears pending against predecessor can be made from the successor only in case when there is transfer of business or trade either in whole or in part, the proviso to Section 11 does not stipulates applicability in case of sale of assets of the predecessor to successor. In the present case, it is undisputed fact that firstly appellant has not taken over the business or trade which was being run by M/s. Sumit Rerolling Mills Pvt. Ltd. For this reason also proviso Section to 11 is not applicable. I am in agreement with the submission of the Ld. Counsel that in view of the Krishna Lifestyle Technologies Ltd (supra) case the recovery from the successor can only be made when the business or trade is transferred either in whole or in part from the predecessor to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership of business" requires that the business be sold as a going concern". 15. We may also consider some other Judgments and commentaries as to the expression "business". In Kanga and Palkhivala's Law and Practice of Income Tax, Eighth Edition, Volume I at page 459 considering Section 2(13) of the Income Tax Act, the learned authors have in the context of the expression "business" noted that the definition is wide, but underlying each of them is the fundamental idea of the continuous exercise of an activity. It connotes some real, substantive and with a set purpose. There is something organic about the whole which does not exist in its separate parts. Business may include activity of taking a market place or godowns. The proviso to Section 11 of the Central Excise Act not only speaks of transfer of business or trade, but uses the expression "in whole or in part". In other words, there need not be transfer of the whole of the ownership of business.It is sufficient if there is transfer or disposal of part of the business or any change in the ownership. The consequences must be that the person who purchases must succeed in such business or trade from the reason who was carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies that substantially the identity and the continuity of the business are preserved. If there is a transfer of a business, any arrangement between the transferor and the transferee in respect of some of the assets and liabilities not with a view to enable the transferor to run a part of the business transferred but to enable the transferee to run the business unhampered by the load of debts or for any other appropriate collateral purpose cannot detract from the totality of succession". It would thus appear that whether there is whole or part transfer of business and succession thereto what has to be established is that identity and continuity of the business so transferred is preserved. The High Court of Rangoon in Commissioner of Income Tax v. N. N. Firm((1934) 2 ITR 85(Rangoon) was again considering the expression "Business". It held there where a business is split up and thereafter another person carries on part of the business he does not succeed his predecessor in carrying on the business. Considering the language of our statute, in our opinion, that really would not apply. In Industrial Development & Investments Co. Ltd. v. Commissioner of Excess Profits Tax (1957) 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further it must be continuation of the original business either wholly or in part. It would thus be clear from the above, that these tests will have to be met, before it can be said that a person has succeeded to a business. This would require the facts to be investigated as to whether there has been transfer of the whole of the business or part of the business and succession to the original business by the transferee. 17. Our attention was also invited to the Judgment in Municipal Corporation of Delhi v. Gurnam Kaur (1989) 1 SCC 101) as to what can be said to be a binding precedent. The Court noted that Quotability as to law applies to the case, its ratio the only thing binding on an authority is the principle upon which the case was decided. Statements which are not part of the ratio decidendi are distinguished as obiter dicta and are not authoritative. The Court also quoted with approval, P. J. Fitzgerald, 12th edition as to the concept of sub silentio which reads thus:- "A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cannot be held liable for payment of the arrears of the previous owner of the property. This issue has been dealt in various following judgments, wherein Hon'ble Courts have held as under: Rana Girders Ltd. Vs. Union of Inda [2013 (295) ELT 12 (S.C.)] 23. We may notice that in the first instance it was mentioned not only in the public notice but there is a specific clause inserted in the Sale Deed/ Agreement as well, to the effect that the properties in question are being sold free from all encumbrances. At the same time, there is also a stipulation that "all these statutory liabilities arising out of the land shall be borne by 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 held responsible in the Agreement of Sale." As per the High Court, these statutory liabilities would include excise dues. We find that the High Court has missed the true intent and purport of this clause. The expressions in the Sale Deed as well as in the Agreement for purchase of plant and machinery talks of statutory liabilities "arising out of the land" or statutory liabilities "arising out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (305) ELT 36] 4. While right to prefer Appeal is statutory, the same can be exercised to the extent Statute has granted. While a time limit has been fixed for preferring the Appeal, upon expiry of that period, the right to prefer Appeal stands extinguished. If the Appellate Authority has been authorized to condone delay of a limited period as prescribed, the same itself prescribes that he has no authority to condone delay beyond the limit so prescribed. However, the right exercised by a citizen under Article 226 of the Constitution of India is not a statutory right, but is a constitutional right. If the Constitution has limited that right, of course, then the right has to be exercised within that limit. The fact remains that the Constitution, while conferring the right under Article 226 of the Constitution, did not fetter such right by any limitation whatsoever. In those circumstances, there cannot be a contention that the writ petition is not maintainable because it is belated. If the action complained of is non est from the day one, the same can be challenged even after 100 years. The question is, whether the action complained of in the writ petition is non est or not? The Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials, 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 to here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Thereafter, in State of Karnatka and another v. Shreyas Papers Pvt. Ltd. & others reported as JT 2006 (1) SC 180, the Hon'ble Supreme Court stated the following questions :- "1.1 Firstly, whether the purchaser of assets of a concerns old by a State Financial Corporation, in exercise of its powers under Section 29 of the State Financial Corporations Act, 1951 (hereinafter "the SFC Act) would be liable under the Karnataka Sales Tax, 1957 (hereinafter "the KST Act"), for the arrears of sales tax of the concern whose assets have been transferred? 1.2 Secondly, under what circumstances does a charge created on a property become unenforceable against a transfree of such a property?" The Hon'ble Court held as follows :- "In these circumstances, we are of the view that the first respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent charge on the property. This would, therefore, attract the principle laid down by this Court in Ahmedabad Municipal Corporation, which is also embodied in the proviso to Section 100 of the TP Act. Thus, the property in the hands of the first respondent was free of the charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of secured creditor will prevail over Crown's debits." In view of our above conclusion, the petitioner UTI Bank being secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent therein." 7. It may be specifically noted here that no such "first charge" has been pleaded by the Excise Authorities in the present case also. Lastly, reference may be made to the decision of this Court in Union of India v Punjab Financial Corporation reported as 2007(1) ISJ (Banking) 258. In this case, the Court held as follows : "The result of the above discussion is that the plea raised by the petitioners in regard to its priority of recovering excise dues or the other such like dues under the Excise Act cannot be upheld either on the applicability of doctrine of priority of Crown debts or that any such priority has been so created under any of the provisions of the Excise Act or Rules or the Customs Act." 8. In the circumstances, the inescapable conclusion is that the Excise Department cannot enforce the payment of their dues against the property purchased by the petitioner though they would have the liberty to see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to land revenue/ non agricultural assessment, Central Excise dues, M.S.E.B. Charges, Sales Tax, Income Tax dues, other leviesw, Labour P.F. E.S.I.C. other taxes and ccesses etc. levied on the property hereby assigned, and in the event if it is discovered that there remain any arrears to be paid, the ASSIGNOR undertakes to pay the same to the ASSIGNEE. Therefore the aforesaid deed and agreement and terms and conditions thereof have no relevance in the present case. Moreover even if any such clause exist the same cannot be used for making recovery. For recovery of arrears of the M/s. Sumit Rerolling Mills Pvt. Ltd if at all can be made in terms of proviso to Section 11 which under the present set of the facts does not apply. On going through the under taking given by the appellant while obtaining registration regarding the payment of arrears, I find that the appellant has given such under taking without prejudice to the legal rights of the appellant therefore in my considered view though the under taking is given by the appellant, the same is not sufficient for enforcing the recovery of arrears as the appellant is not legally liable for payment of arrears of M/s. Sumit Rerolli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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