2013 (8) TMI 540 - SUPREME COURT

Recovery of demand from successor of Unit - Priority of dues - Liability under the provisions of Excise Act and State Financial Corporation Act - Whether liability arises in law (de-hors the stipulation in Sale Deed /Agreement of Sale) having regard to the legal provisions contained in the Excise Act and State Financial Corporation Act - Held that:- UPFC being a secured creditor had priority over the excise dues - the appellant had not purchased the entire unit as a business, as per the statutory framework he was not liable for discharging the dues of the Excise Department - the subsequent purchaser cannot be fastened with the liability relating to the dues of the Government unless there was a specific provision in the Statute, claiming “first charge for the purchaser - As far as Central Excise Act was concerned, there was no such specific provision as noticed in SICOM as well - Proviso to Section 11 was now added by way of amendment in the Act only w.e.f. 10.9.2004.

Dues payable – Interpretation of Stipulation - Whether the appellant had agreed to discharge the dues payable to the excise department by the borrower on the interpretation of stipulation contained in the Sale Deed of the land and building and Agreement of Sale of plant and machinery - Held that:- Statutory liability arising out of the plant and machinery could be the sales tax etc. payable on the said machinery - dues of the Central Excise were not related to the plant and machinery or the land and building and thus did not arise out of those properties - Dues of the Excise Department became payable on the manufacturing of excisable items by the erstwhile owner.

The statutory dues were in respect of those items produced and not the plant and machinery which was used for the purposes of manufacture - 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 the said properties” (i.e. the machinery) - it was only that statutory liability which arises out of the land and building or out of plant and machinery which is to be discharged by the purchaser - Excise dues were not the statutory liabilities which arised out of the land and building or the plant and machinery - Statutory liabilities arising out of the land and building could be in the form of the property tax or other types of cess relating to property - The appeal was allowed and the judgment of the High Court was set aside - the notice of the Excise Department calling upon the appellant to pay the dues of the erstwhile owner of the unit was also stands quashed.