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TMI Blog2022 (12) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... UPSSCL. Therefore, can such liability for transactions prior to the Slump Sale Agreement dated 17.7.2010 be fastened on to the purchaser. In the case in hand, the business liability for the Amroha unit had definitely arisen out of the operation of the unit during the period before the same was sold to the appellant, although the liability is to be quantified and discharged at a future date. When the liability is capable of being estimated with reasonable certainty, the liability is not to be treated as a contingent one and should be considered as a liability which may be discharged at a future date. Such being the position in law and the liability in question not being a contingent one, the same cannot in our view be fastened on the purchaser who were not operating the unit, prior to the Slump Sale Agreement dated 17.7.2010. The liability of the purchaser for the dues relating to activities and operations of the unit for the period anterior to 17.7.2010, could not therefore have been fastened on the appellant in view of the clear provisions made in clause 9 of the Sale Deed read with Clause 12.1 and 12.2 of the Slump Sale Agreement as both are specific in nature. In the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,41,169/-penalty, and Rs.1,40,459/- interest, amounting to Rs. 5,68,797/- is declared to be borne by M/s Wave Industries Pvt. Ltd. (Purchaser) and not by the Seller i.e. UPSSCL . 4. This appeal relates to the Amroha sugar mill which was one of the four loss making sugar mills owned and operated by the UPSSCL. For the unit at Amroha, a Slump Sale Agreement dated 17.7.2010 was entered into, followed by the sale deed dated 4.10.2010, between the UPSSCL and the appellant. 5. The above arrangements were preceded by the advertisement dated 29.6.2009 in the newspaper proposing slump sale of the loss making sugar mills of UPSSCL. A pre-bid meeting was next held on 10.7.2009 with the prospective buyers where, inter alia, concern was raised on outstanding liabilities against the units on sale. The appellant submitted bid for Rs.13.94 crores for the Amroha Unit and as per Clause 12 of the Slump Sale Agreement dated 17.7.2010, all liabilities referred to in the said clause, accruing before the date of signing agreement were to be borne by the Seller and those of subsequent period, were to be borne by the Purchaser. The sale agreement was registered accordingly on 9.8.2010 and poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontingent and disputed, in relation to the Unit, any claims by or due to third parties, and labour, excise, sales tax claims etc. Signing Date: Signing Date shall mean the date of signing of this Agreement. Purchase Price: Purchase Price shall mean bid amount plus Net Working Capital Adjustment plus all other amount mentioned in clause3 of this Agreement. Taxes: Taxes shall mean all and any statutory or other governmental levies, taxes charges, cess, penalties, rates, stamp duties and other dues pertaining or relating to the Sale of the Unit as contemplated herein, including but not limiting to sales tax, income tax, registration charges etc. Bid Amount Bid amount shall mean that sum of Rs. 17.01 Crores (Rupees Seventeen crores one lakh only) as mentioned by the purchaser in the Financial Proposal (RFP Application) 8. Clause 2.1 provided that the unit is being sold as a going concern on as is where is basis and all rights, title and interest of the seller in the unit together with all assets and liabilities except excluded liabilities are to be transferred by the seller and delivered to the purchaser. Clause 2.1 reads as under:- 2.1 In c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration charges and sales tax or any other applicable tax, if any payable, on or in respect of the Transfer of the Unit. 12.4 Capital Gains Tax, if any payable in connection with the Transfer contemplated under this Agreement, shall be borne by the Seller. 11. The sale deed was executed on 4.10.2010 for a total consideration of Rs. 13.94 crores and the agreement dated 17.7.2010 was made part of the sale deed. Clause 8(d) of the sale deed reads as under:- 8(d) All taxes, levies, cesses or any charges in respect to the Unit/Land, whether levied by a government authority, such as municipal or property tax that are due up to the date of Agreement ( Signing Date ) have been paid in full by seller. Further Clause 9 of the sale deed reads as under:- 9. The Seller shall be liable to bear all assessments, rents, rates, taxes outgoing and imposition of whatsoever nature relating or pertaining to the Unit up to the Signing Date and thereafter, the same shall be the liability of the Purchaser. 12. In the speaking order dated 7.6.2016, the appellant s representation was rejected and the liability of duty, interest, and penalty, for the period prior to the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n issued by the taxing authorities in the name of the UPSSCL. Therefore, can such liability for transactions prior to the Slump Sale Agreement dated 17.7.2010 be fastened on to the purchaser. 16. In Bharat Earth Movers vs. Commissioner of Income Tax, Karnataka (2000) 6 SCC 645, on the issue of contingent liability, Justice R C Lahoti in his opinion, which has stood the test of time, on behalf of the three Judge Bench stated the following:- 4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain. 17. In the case in hand, the business liability for the Amroha unit had definitely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of post-sale transactions, we are unable to agree with the impugned order dated 1.11.2017 which erroneously in our view, held that the liabilities for the transactions made prior to the sale agreement, are to be borne by the purchaser. 20. That apart, prior to 17.7.2010, the appellant was neither a dealer nor a manufacturer and therefore, had no tax or duty obligations to satisfy for the operation of the Amroha unit. It is the UP State Sugar Corporation Limited which had collected all the dues from their customer on behalf of the State Government and they are under an obligation to deposit the collected sum in the government treasury. But for those transactions, for the period prior to 17.7.2010, the UPSSCL are trying to usurp the collected sum and are trying to pass on the burden to the appellant who was neither the dealer nor they had anything to do with the operation of the unit prior to 17.7.2010. In such circumstances, the rejection of the representation of the appellant appears to be arbitrary and the speaking order could not therefore have been sustained by the High Court in the impugned judgment. In view of the foregoing, the liability in question, not being a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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