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TMI Blog2015 (11) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by ARCIL. The petitioner has also challenged the show cause notice dated 23.2.2012 issued by the respondent calling upon the petitioner to show cause as to why action should not be taken for suspension/revocation of its Central Excise Licence bearing Registration No.AAPCS9919NEM002. 2. The facts as averred in the memorandum of petition are that the Assets Reconstruction Company India Ltd. (hereinafter referred to as "ARCIL") invited offers by giving public advertisement on 19.04.2011 from interested parties for the properties of GSL (India) Limited., viz., plant and machinery, spares, tools and accessories, other movables both lying or stored in or about the factory premises, godowns located at Village Amletha, Taluka Rajpipla, District Narmada and land and building structures standing thereon on "As is, what is and As is where is basis". It is the case of the petitioner that the petitioner participated in the auction held by ARCIL for the land, building, plant and machinery which are secured assets put for auction by ARCIL for the outstanding amount of approximately Rs. 1022 crores of GSL (India) Limited and the petitioner's offer of Rs. 9.41 crores for the land, building, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as"the rules") pursuant to which, on 18.10.2011, the respondent No.2 issued a licence in favour of the petitioner bearing Central Excise License No.AAPCS9919NEM002. Subsequently, by a notice dated 9.11.2011, the respondent No.2 called upon the petitioner to pay the outstanding dues of GSL (India) Limited in response to which the petitioner gave a detailed reply on 14.11.2011 and 18.11.2011 and stated that the petitioner is not liable to pay the outstanding dues of GSL (India) Limited as it had purchased the property under the provisions of the Securitisation Act. Thereafter, on 23.02.2012, the respondent No.3 issued a show cause notice for suspension/revocation of the Central Excise License issued to the petitioner. It is the case of the petitioner that for the purpose of its business it has purchased the subject property by making huge investment and that the respondents have been constantly pressuring it and hence, the petitioner was constrained to give a reply on 03.10.2012. According to the petitioner it cannot be held liable to pay the dues of GSL (India) Limited because it has not acquired the company and that the liability is of GSL (India) Limited which is still in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned must succeed the predecessor in such business or trade. It is only if these factors are satisfied that recovery can be made of the specified assets referred to in the proviso. Thus, it is only if the transferee succeeds in the business that the specified assets can be attached and such attachment can be made only to the extent of the specified assets. Moreover, a transferee is not an "assessee in default". Reverting to the facts of the case, it was submitted that admittedly ARCIL had taken possession of the secured assets of GSL (India) Limited and had sold them to the petitioners as assets only. ARCIL had neither taken over the management of the business of GSL (India) Limited nor sold the same to the petitioners. According to the learned counsel, sale of assets simpliciter is not covered within the ambit of section 11 of the Act. Referring to the reply given by the petitioner in response to the notice dated 09.11.2011 issued by the Assistant Commissioner, Central Excise and Customs calling upon the petitioner to pay the outstanding dues of GSL (India) Limited, it was pointed out that a specific contention had been raised that the petitioner had purchased the assets of GSL (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinction between taking over the possession and sale of assets of a borrower and taking over and sale of the management of the business of a borrower. Referring to the provisions of sub-section (4) of section 13 of the Securitisation Act which provide for the measures for recovery by a secured creditor, it was submitted that clause (a) thereof empowers a secured creditor to take possession of secured assets of a borrower including a right to transfer, inter alia, by sale. Clause (b) thereof empowers the secured creditor to take over the management of business of a borrower including a right to transfer such business provided that business would be transferred only if a substantial part thereof is a security for a debt. Adverting to the facts of the case, it was submitted that admittedly, ARCIL has acted under the provisions of section 13(4)(a) of the Securitisation Act by taking possession of the secured assets and not under section 13(4)(b), that is, by taking over the management of the business. Thus, what are brought to sale are the assets of the assessee in default and not its business and hence, it cannot be said that the petitioner has succeeded in the business of the defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme Court in the case of Dena Bank v. Bhikhabhai Prabhudas Parekh & Co. and another, (2000) 5 SCC 694 and more particularly paragraph 8 thereof. Referring to the auction notice it was pointed out that the sale of the assets of the defaulter company was on "As is what is and As is where is" basis and it was clearly stated therein that all liabilities dues of authorities and departments whether statutory or otherwise and any other dues in respect of the secured assets if payable in law or attachable to the secured assets shall be the responsibility of the buyer. Therefore, the petitioner had purchased the subject property with open eyes knowing that it would be liable to pay any statutory dues. Reference was made to the terms and conditions contained in the sale certificate issued by ARCIL and more particularly condition No.7 thereof to submit that it was clearly stated therein that ARCIL does not accept/undertake any responsibility for the dues enumerated thereunder, including excise dues and that all liabilities in respect of the secured assets if payable in law/attachable to the secured assets shall be the sole responsibility and to the account of the purchaser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the assets purchased by the petitioner belonged to the defaulter unit as predecessor in-title of the petitioner and that is what is relevant. Under the circumstances, as to whether or not the business and management was taken over under section 13(4)(b) of the Act by ARCIL is not relevant. According to the learned counsel, the intention of the legislature while enacting section 11 of the Act is clear, namely, that the Department can recover its dues from the successor in-title. 5.4 The next limb of Mr. Oza's argument was that since section 11E of the Act creates a statutory charge on the property of the defaulting company, the charge would continue on the properties, even if it changes hands by transfer. Reliance was placed upon an unreported decision of this court in the case of Gujarat Industrial Development Corporation Ltd. v. Union of India, rendered on 27.06.2014 in Special Civil Application No.18529 of 2007, for the proposition that on the date on which section 11E has come into force there is a statutory first charge of the central excise dues. That the decisions on which reliance has been placed by the learned counsel for the respective parties would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . dues are pending against the said M/s. GSL (I) Ltd. In paragraph 8 of the notice it is stated that however, the petitioner has failed to pay the Government due pending against M/s GSL (I) Ltd. which are due from them in terms of para 1 of Schedule -II of Sale Certificate and hence, they had not complied with the "Terms & Conditions" annexed in Schedule -II of the Sale Certificate. In paragraph 9 it is recorded that M/s GSL (I) had by a letter dated 4.8.2011 submitted to the Department that only specific secured assets of M/s GSL (i) Ltd. mortgaged to ARCIL were sold by ARCIL to the petitioner without following the procedure laid down under law; and that the petitioner had illegally and forcibly taken over all assets of M/s GSL (I) Ltd. and was illegally using the premises and other assets without proper licence and that they had challenged the sale of secured assets before the High Court of Bombay and the DRT Mumbai and that M/s GSL (I) Ltd. was still in existence. In paragraph 10 it is stated that in terms of the provision of rule 12 of the rules, the monthly return filed for the month of October, 2011 submitted by the petitioner showed no production or clearance of excisable go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for suspension/revocation of its central excise registration certificate. 7. From the contents of the show cause notice dated 23.11.2012 it is apparent that the same has been issued on two grounds: firstly that the petitioner has not complied with the "Terms and Conditions" of Schedule-II to the Sale Certificate issued by ARCIL by not paying the dues of GSL (I) Ltd.; and secondly that the petitioner has not started production and clearance of excisable goods. Insofar as production and clearance of excisable goods is concerned, no submission has been advance before this court by either side, and it appears that the main ground for issuance of the show cause notice is the non-payment of dues of GSL (I) Ltd. Insofar as the second ground is concerned, another significant aspect is that the registration certificate has been issued only on 18.10.2011 and it is stated that the monthly return for the month of October, 2011 does not show any production or clearance of excisable goods and till the date of issuance of the show cause notice, viz. 23.2.2012 as per the records available no ER-1 returns are filed and that on visit of the factory premises, the same were found to be closed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 7 of the terms and conditions set out in Schedule II to the sale certificate on which reliance appears to have been placed by the respondents, which read thus: "1) The sale of the Schedule Property as described in Schedule I has been made with all dues, encumbrances and liabilities, including all workers dues, known or unknown." "7) The Secured Assets are offered for sale strictly on"as is where is and what is" basis. Neither Arcil nor the Authorised Officer undertakes any responsibility to procure any permission/license etc. in respect of the assets offered for sale. Further, Arcil does not accept/undertake any responsibility for, nor shall the sale proceeds be subject to any pending/outstanding dues and any other dues such as water/electricity/service charges, transfer fees, dues of the Municipal Corporation/local authority dues, workmen's dues including Provident Fund Dues, LTC, Gratuity dues, unpaid salary etc., taxes including excise dues, sales tax or any other cess, duties, levies by whatever name it is called including interest etc, if any. The Secured Assets are being sold with all known and unknown encumbrances. Further, all liabilities, dues of authorities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to show cause as to why its central excise registration should not be suspended-revoked for non compliance with the terms and conditions of the sale certificate issued by ARCIL, namely, nonpayment of the outstanding dues of GSL (India) Limited. Essentially, therefore, the statutory power sought to be exercised in respect of both, the demand notice as well as the show cause notice, originates from section 11 of the Central Excise Act, 1944 which makes provision for recovery of sums due to Government. The crucial question that arises for consideration is whether on the facts and circumstances of this case, resort could be made to section 11 of the Act for which purpose a survey of the applicable provisions of the Central Excise Act as well as the Securitisation Act becomes necessary. 13. Section 11 of the Central Excise Act, reads thus : "11. Recovery of sums due to Government. In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder, the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 ] (54 of 1963 ) to levy su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first lot comprised of land and building and the second lot was comprised of plant and machinery and structures of the defaulter unit and the third lot was a composite lot comprised of Lot 1 and Lot 2. It is, therefore, clear that it was the assets of the defaulter company that had been sold to the petitioner and that the erstwhile unit has not been sold as a going concern. 16. At this juncture, reference may be made to the decision of the Supreme Court in the case of State of Karnataka and another v. Shreyas Papers (P) Ltd. (supra), wherein the court was considering the liability of the respondent therein for sales tax arrears of the defaulting company, in the context of the provisions of the Karnataka Sales Tax Act, 1957. Section 15(1) of the Karnataka Sales Tax Act provides that when the ownership of the business of a dealer liable to pay the tax or penalty, or any other amount under the provisions of that Act, is transferred, the transferor and the transferee shall jointly and severally be liable to pay any tax or penalty or any other amount payable in respect of such business and remaining unpaid at the time of transfer, and for the purpose of recovery from the transferee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere transfer of one or more species of assets does not necessarily bring about the transfer of the business. The transfer of a business requires that the business be sold as a going concern which is clearly not the position in the present case. Besides, on a perusal of the provisions of sub-section (1) of section 15 of the Karnataka Sales Tax Act, it is apparent that the provisions thereof are more rigorous, inasmuch as, the same envisage that the transferor and transferee shall be jointly and severally liable to pay any tax or penalty or any other amount payable in respect of such business and remaining unpaid at the time of transfer. Under the said provision, the transferor is deemed to be the dealer liable to pay the tax or penalty or other amount under the Act. However, under the proviso to section 11 of the Act, in case where the person from whom the duty or any other sums of any kind is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, as a consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e;-vis the central excise dues. On a harmonious reading of the judgments in Macson case and SICOM Ltd. case, the court concluded that it is only in those cases where the buyer had purchased the entire unit i.e. the entire business itself, that he would be responsible to discharge the liability of central excise dues as well. Otherwise, the subsequent purchaser cannot be fastened with the liability relating to the dues of the Government unless there is a specific provision in the statute, claiming "first charge for the purchaser". The above decision would also be squarely applicable to the facts of the present case, inasmuch as, what has been purchased by the buyer are the assets of the erstwhile unit and not the entire unit, that is, the entire business itself. 19. Coming to the next limb of argument raised by the learned counsel for the respondent, namely, that section 11E of the Act creates a charge on the property of the defaulting company which would continue on the properties, even if it changes hands by transfer, in the opinion of this court, the question of applicability of section 11E of the Act would arise provided, the proviso to section 11 of the Act is attracted, in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate 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 provide for de-registration and revocation or suspension of registration, to submit that on a conjoint reading of the said clauses it is apparent that unless registration in relation to the same premises granted to another person is revoked, no registration can be granted to another person in respect of the same unit as two persons cannot be simultaneously registered in respect of the same premises. In support of the said contention, the learned counsel had placed reliance upon a decision of the Bombay High Court in the case of Manibhadra Processors v. Additional Commissioner of Central Excise (supra) wherein it has been held that one and the same premises cannot be registered in the name of two different persons. That the person holding earlier registration certificate must surrender registration certificate in respect of that premises, then only can a new person get registered in respect of that premises. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 incidental aspect of the matter would be if the licence is for a particular period, on expiry of that period, the registration certificate would cease to be operative. In such cases, there would be no question of cancelling the certificate of registration." 29. This Court is in agreement with the aforesaid view expressed by the Bombay High Court and as such, is of the opinion that merely because the defaulter unit, though it had ceased to carry on business on the premises in question, had failed to apply for deregistration, the same should not, in any manner, come in the way of the petitioners in obtaining central excise registration in respect of the premises in question. The stand adopted by the respondent authority that in respect of the same premises, two persons cannot be registered being contrary to the provisions of law, cannot be accepted." Thus, the said issue stands squarely covered by the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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