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TMI Blog2009 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... imited (In Liquidation), (for short, "the Company in Liquidation"), who is represented by respondent 3 i.e. the Official Liquidator, High Court, Bombay. Respondent 4 is the Union of India. 2. The petition relates to property consisting of land, building and plant and machinery situated at C42, MIDC, Amravati (for short, "the said property"). The said property belongs to the Company in Liquidation. The Company in Liquidation made a reference to BIFR which was dismissed by the BIFR by its order dated 16/8/2000. By the said order, the BIFR recommended that the Company in Liquidation be wound up. An appeal preferred from the said judgment was dismissed by AAIFR on 24/11/2000. On 7/10/2003, in Company Petition No.163 of 1998 winding up of the Company in Liquidation was ordered and respondent 3 was appointed as liquidator. 3. The Company in Liquidation has borrowed large amounts from various banks and financial institutions. To secure their advances, its assets including the said property were mortgaged. The said property was mortgaged to SICOM, IDBI, MSFC and the Bombay Mercantile Cooperative Bank Limited. As the Company in Liquidation failed to make payment to SICOM, SICOM invoked it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent 1 as to what were their dues. Respondent 1 by its letter dated 3/1/2006 informed petitioner 1 that against the Company in Liquidation, the total outstanding dues of Central Excise duty, penalty and interest amounting to Rs.1,96,99,848/were pending. The letter further conveyed to petitioner 1 that the department had lodged claims before respondent 3 and that as per Section 11A of the Central Excise Act, 1944, the liability of the payment of Government's outstanding dues will be on the borrower. Learned counsel for respondent 1 has conceded that Section 11A is mentioned inadvertently. It should read as Section 11. With letter dated 3/1/2006, the petitioners had no quarrel because in terms of Section 11 of the Central Excise Act, it correctly placed the liability of payment of the outstanding dues on the Company in Liquidation. However, by a further letter/notice of the same date, respondent 1 informed petitioner 1 that the liability to pay the said sum of Rs.1,96,99,848/was that of respondent 3 (the Company in Liquidation) and whoever succeeds respondent 3 in acquiring the said property. The relevant portion of the said letter/notice reads thus: "As per Section 11A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receive the sale proceeds; transfer the property to a purchaser, and immediately thereafter pursue it's claim for the remainder of Excise dues in the hands of the very purchaser to whom it sold the property. Such a situation cannot be countenanced. Mr. Dhond submitted that therefore the identity of the person at whose instance the sale is effected is not material. 9. In the alternative, Mr. Dhond submitted that proviso to Section 11 is inapplicable to the present case as it only applies to "a successor of the business". It does not apply to "a purchaser of the assets". He submitted that inasmuch as in the present case, what is sold to the petitioners are the assets of the company, the said proviso is not applicable to it. In this connection, learned counsel relied on the judgments of this court in Krishna Lifestyle Technologies Ltd. v. Union of India, 2008 (229) ELT 173 and Tata Metaliks Ltd. v. Union of India 2009 (234) ELT 596. Learned counsel submitted that in the circumstances the letter/notice sent by respondent 1 intimating his intention to pursue his demands in the sum of Rs.1,96,99,848/against the said property in the hands of petitioner 1 is illegal and unjustified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and sale of excisable goods belonging to such person. Proviso to section 11 is of relevance to the present petition. It reads as under: "[Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of any kind, as specified in this section, 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, 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.]" 14. The proviso enables the empowered officer to attach and sell, after obtaining permission from the Commissioner of Central Excise, excisable goods, materials, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on it. 18. In Macson' csase (supra), an industrial unit run by respondent 4 therein was brought to sale in terms of Section 29 of the State Financial Corporations Act, 1951 by the Rajasthan Financial Corporation, respondent 3 therein. The appellant participated in auction and its bid was accepted on 28/8/1987. On 4/12/1987, the Excise Department issued show cause notice under Section 11A of the Central Excise Act to respondent 4 in relation to its liability for Excise duty of Rs.1,04,586.17. The appellant by its letter contended that it had no liability to pay Excise dues of respondent 4. The Department not having accepted the appellant' scontention, the appellant filed a writ petition in the High Court. The High Court took the view that it was open to the Department to proceed against the plants and machineries of the appellant. Before the Supreme Court, it was argued that the sale having taken place under the State Act was free from encumbrances and the transferors' rights or liabilities cannot be that of transferee. The Supreme Court rejected this contention by observing that Section 29(2) of the State Financial Corporations Act, 1951 makes it clear that the property pledged, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person who is liable to pay Excise duty enters into a clandestine sale with another person to defeat the Excise Department's dues, the proviso to Section 11 will clearly be attracted. Fraudulent inter parties sales would come within the purview of the proviso. Genuine sales conducted under the orders of the court which are not vitiated by fraud or collusion have a sanctity and must convey a clear and marketable title to the buyer. There is another vital aspect of this question. Though we are not directly concerned with it in this matter, it cannot be ignored. Quite often, such sales are conducted for the benefit of a body of creditors. Sometimes, it is difficult to get buyers due to market conditions. If sales which are not vitiated by fraud or collusion are made so vulnerable by putting a wrong interpretation on proviso to Section 11, it would be counterproductive. We are, therefore, of the opinion that the Excise Department cannot contend that liability of payment of its dues will be on whosoever owns the property of the borrower successively till it's dues are completely paid off. 23. We also feel that Mr. Dhond's alternative submission deserves to be accepted. The proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners have purchased the business or trade of the Company in Liquidation, we are of the opinion that proviso to Section 11 of the Central Excise Act, 1944 will not be attracted. 27. While concluding, we may also add that learned Company Judge of this court has noted in his order dated 15/12/2003 that SICOM had issued an advertisement for the sale of the said property on 27/3/2001, 2/6/2001 and 26/2/2002. There was no response to the advertisement. Effort to sell the said property by private treaty was also futile. Offers received were below the valuation. Global Net Services who had offered Rs.1.11 crores backed out and ultimately the petitioners' bid was accepted. Learned Single Judge has rightly observed that the court must be mindful of the fact that the property is situated in Amravati region; that no higher bid is forthcoming and that further delay would lead in deterioration of the assets. Learned Single Judge has also observed that dues of the workmen have yet to be paid and their entitlement will have to be protected by respondent 3 upon adjudication. 28. Primarily considering the fact that proviso to Section 11 of the Central Excise Act, 1944 is not attracted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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