TMI Blog2011 (2) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... hority that in respect of the same premises, two persons cannot be registered being contrary to the provisions of law, cannot be accepted. Grounds for refusing to grant registration to the petitioners under section 6 of the Central Excise Act are held to be invalid. The petition, therefore, succeeds. The respondent No.1 shall consider the application dated 04th May, 2010 made by the petitioner No.1 company for registration under rule 9 of the Central Excise Rules, 2002 in accordance with law, in the light of the observations made hereinabove. Appeal allowed. - SPECIAL CIVIL APPLICATION No. 8734 of 2010 - - - Dated:- 23-2-2011 - MS. HARSHA DEVANI AND MR. H.B.ANTANI, JJ. FOR THE APPELLANT : MR BB NAIK, SR. ADVOCATE WITH MR PAVAN S GODIAWALA FOR THE Respondent : MR RJ OZA, MR AL SHAH with MR RAVNIDRA SHAH ORAL JUDGMENT (Per : HONOURABLE MS. JUSTICE HARSHA DEVANI) 1. This petition under Articles 226 and 227 of the Constitution of India has been filed with the following substantive prayers: 6. The petitioners therefore, pray that the Hon'ble Court be pleased (A) to issue a writ or certiorari or any other appropriate wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d advertised for sale of the same. The petitioners purchased the subject property for the purpose of expansion of its manufacturing activities as the said plot was situated very near to the first existing unit of the petitioner Company. 3. The petitioner Company being engaged in the business of manufacturing certain goods which compulsorily requires obtaining licence and registration from the Excise Department under the Central Excise Act, 1944 (the Act) and the Rules framed thereunder, the petitioner had been registered with the respondent No.1 Commissioner of Central Excise vide the above mentioned registration number at Plot No.815, GIDC, Sachin, Surat. The respondent No.1 required the petitioner to apply for registration of the newly purchased property/premises. The initial application made by the petitioner for addition of the subject property in the existing registered premises for the purpose of Central Excise came to be rejected by the Assistant Commissioner of Central Excise and Customs. The respondent No.1 thereafter required the petitioner to make a fresh application for registration of the newly purchased property/premises. Upon the petitioner making such an applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 10th May, 2010 in view of the fact that Plot No.8204, GIDC, Sachin of M/s. Veenutex Dyeing Printing Mills Pvt. Ltd. was licensed/registered as 100% EOU and against the said 100% EOU, Government dues amounting to ₹ 108.79 crores were outstanding. It is further averred that for recovery of dues, land and building of M/s. Veenutex Dyeing Printing Mills Pvt. Ltd. have been attached under section 142 of the Customs Act, 1962. That till date, the said premises of M/s. Veenutex Dyeing Printing Mills Pvt. Ltd. is not de-bonded nor has the said M/s. Veenutex Dyeing Printing Mills Pvt. Ltd. got its registration/licence cancelled/surrendered. In the circumstances, registration cannot be granted to the petitioner - M/s. Surat Metallics Ltd. It is further stated in the affidavit-in-reply that the respondent had requested the respondent No.2 Bank to take care of the central excise dues at the time of auction and the amount so recovered to be credited to the Government by way of issue of cheque/draft in the name of Commissioner, Central Excise Customs, Surat-I. The respondent Bank was well aware of the said proceedings and the Government dues of the Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not correct. It is further averred that the property in question is not attached and could not be attached, more particularly when the respondent No.2 had taken over its actual physical possession on 6th November, 2004 and since then the subject property was in the direct control and authority of the respondent No.2 Bank. It is contended that even otherwise the property in question being an immovable property is not excisable goods and the claim made by the respondent No.1 towards the so-called outstanding excise duty and penalty payable by Veenutex Dyeing Printing Mills Pvt. Ltd. cannot run counter to the first charge of the respondent No.2 bank over the property in question which is a secured asset. The property was given in equitable mortgage by the defaulter Company to the respondent No.2 Bank lastly on 15th February, 2000 whereas even as per the notice of demand of respondent No.1, the so-called claim of excise duty was of October, 2003 and thereafter, that is, much after the property was given as a secured asset by the Company to the respondent No.2 Bank. It is further stated that the respondent No.1 does not have any legal authority or sanctity in making any cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the refusal of the respondent No.1 to grant registration to the petitioners, the petitioners are put in a precarious condition and are unable to do their business resulting into loss of money and are facing other complications. It was submitted that the respondent No.1 or his officers do not have any legal authority or right to deny registration to the petitioners in respect of the subject property on account of the so-called outstanding dues of the defaulter unit or so called attachment made by the office of the respondent No.1. It was submitted that the so-called outstanding dues of the Company payable to the Excise Department pertain to the dates 6th October, 2003, 20th February, 2004 and 26th February, 2004 which are subsequent to the properties being mortgaged and hypothecated by the Company to the respondent Bank, who is a secured creditor. Under the Central Excise Act, no charge is created on the land, plant and machinery. Moreover, that mortgage in favour of the respondent Bank is prior to the date of the alleged dues. The learned counsel has further submitted that the respondent Bank being a secured creditor has a primary right to sell the secured asset namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the facts and circumstances of the present case. The learned counsel also invited attention to the provisions of section 6 of the Act which makes provision for Registration of certain persons as well as rule 9 of the rules which makes provision for Registration to submit that on a conjoint reading of section 6 of the Act with rule 9 of the Rules, the requirement is that the registration must be of the person. A perusal of section 6 makes it absolutely clear that who has to be registered is the prescribed person. Under rule 9 also, it is the person who is to get registered. It was submitted that the notification issued under rule 9 of the Rules only sets out that if a registered person has more than one premises, then each of such separate premises would require registration certificate for each of such premises, that is, it is the person who has to obtain separate registration certificate for each of the separate premises. Thus, both section 6 of the Act as well as rule 9 of the Rules and the notification issued thereunder contemplate that it is the person who must be registered. Neither section 6, nor rule 9, nor the notification, are provisions for enforcing the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. It was submitted that as per section 6 of the Central Excise Act, it is mandatory for the petitioners to get licence from the Excise Department for production or manufacture of any process of any specified goods included in the Schedule to the Central Excise Tariff Act, 1985 etc. and that as per rule 9 of the Rules, it is mandatory for the petitioners to get the newly purchased property registered as an extension of the existing registration or to get new registration as indicated by respondent No.1 and that the respondents were not justified in denying registration to the petitioners without any valid or legal basis. 8. The petition was vehemently opposed by Mr. R.J. Oza, learned senior standing counsel appearing on behalf of the respondent No.1. It was submitted that after issuing attachment notice on 20th December, 2004, the subject property had been attached on 29th December, 2004 in exercise of powers under section 142 of the Customs Act. It was submitted that in the present case, the offer made by the petitioners had been accepted by the respondent Bank on 4th May, 2009 whereas the order of attachment had been made on 29th December, 2004, much before the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers that the respondent has no authority to attach immovable property for recovery of central excise duties in view of the provisions of section 11 of the Act, the learned counsel referred to the provisions of section 142 of the Customs Act, 1962 to submit that under clause (c) of subsection (1) thereof, the proper officer is empowered on an authorisation by a Commissioner of Customs and in accordance with the rules made in this behalf to distrain any immovable or movable property belonging to or under the control of such person from whom the amount is sought to be recovered and detain the same until the amount payable is paid and in case any part of the said amount payable remains unpaid for a period of thirty days next after such distress, he is further empowered to cause the said property to be sold. It was submitted that in the light of the said provision, it is permissible for the Central Excise officer who has been empowered under a notification issued under section 12 of the Act to recover the sums due to the Government by resorting to the provisions under section 142 of the Customs Act even against immovable property belonging to such person. It was submitted that in the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court, Special Leave Petition had been filed before the Supreme Court which came to be withdrawn vide the order reported in 2005 185 E.L.T. A.227. It was submitted that in the circumstances, the action taken by the respondent is in consonance with the above referred decision of the Bombay High Court and as such, there is no warrant for any interference by this Court. 9. On behalf of the respondent No.2 Bank, Mr. A.L. Shah, learned advocate appearing with Mr. Ravindra Shah, learned advocate for the respondent No.2 submitted that the Bank is a secured creditor. At the point of time when the property in question was mortgaged in favour of the Bank, there were no excise liabilities. The excise liabilities arose only in 2004. It was submitted that when the mortgage in favour of the respondent No.2 Bank was first in point of time, the Central Government being an unsecured creditor would not have priority over the secured creditor. It was submitted that once a person purchases property under the provisions of the Securitisation Act, he gets a clear title. In support of the said submission, reliance was placed upon the decision of the Supreme Court in the case of Kerala Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and the Rules framed thereunder. Reliance was also placed upon the decision of the Delhi High Court in the case of Industrial Finance Corporation Ltd v. M/s Agra Construction Co. Ltd. and others, AIR 1997 Delhi 90; the decision of this High Court in the case of M/s Bharat Chemical Works and others v. Gujarat State Financial Corporation, Ahmedabad, AIR 1983 Gujarat 104. 12. The facts are not in dispute. The defaulter, M/s. Veenutex Dyeing Printing Mills (P) Ltd., took a term loan of ₹ 225 lakhs from the respondent Bank against land and building and hypothecation loan against plant and machinery. The said loan was secured by the respondent Bank by equitable mortgage of the leasehold rights of plots and buildings as well as hypothecation of the plant and machinery and the first charge of the respondent Bank was registered with the Registrar of Companies on 16th July, 1998. Subsequently, the financial facility was rescheduled by M/s. Veenutex Dyeing Printing Mills (P) Ltd. on 15th February, 2000 for an amount of ₹ 250 lakhs and the same was secured by equitable mortgage of leasehold rights on plots and buildings as well as hypothecation of plant and machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores to purchase the subject property. The said offer came to be accepted vide communication dated 4th May, 2009. Thereafter, after paying various outstanding charges, the respondent Bank upon receipt of the total sale consideration issued a sale certificate dated 30th March, 2010 under rule 9(6) of the Security Interest (Enforcement) Rules, 2002. Since the petitioners wanted to utilise the said premises for the purpose of manufacturing excisable goods, they applied for registration of the newly purchased premises under the provisions of the Central Excise Act. However, as noted hereinabove, the registration has been refused on the ground that the subject property already stands registered in the name of the borrower unit. 13. In the aforesaid backdrop, the main issue that arises for consideration is as to whether the respondent No.1 is justified in refusing to grant registration to the petitioners under the Central Excise Act in respect of the subject property. 14. A perusal of the order/communication dated 10th May, 2010 of the respondent No.1 indicates that the main reason for rejecting the application for registration of the petitioners is that M/s. Veenutex Dyeing P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent Bank on 6th November, 2004. 17. Section 11 of the Central Excise Act makes provision for recovery of sums due to Government. The said section provides that in respect of any duty and any other sums of any kind payable to the Central Government under any of the provisions of the Act or the rules made thereunder, the Officer empowered by the Central Board of Excise and Customs to levy such duty or require the payment of such sums may: (i) deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control; or (ii) may recover the amount by attachment and sale of excisable goods belonging to such person; and (iii) if the amount payable is not so recovered he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue. The proviso thereto lays down that where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 12 of the Central Excise Act, 1944 the said provision has been made applicable to recoveries under the Central Excise Act also. It has, therefore, been contended that under the provisions of clause (c) of sub-section (1) of section 142, it is permissible for the Central Excise authorities to attach and sell immovable properties also for the purpose of recovering Central Excise dues and as such, the attachment has been made in exercise of powers under section 142 of the Customs Act read with rules 9 and 10 of the Attachment Rules. 19. Section 142 of the Customs Act, 1962 insofar as the same is relevant for the present purpose reads thus: 142. Recovery of sums due to Government. (1) Where any sum payable by any person under this Act including the amount required to be paid to the credit of the Central Government under Section 28-B is not paid, (a) xxx (b) xxx (c) if the amount cannot be recovered from such person in the manner provided in clause (a) or clause (b) (i) the Assistant Commissioner of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of recovering the amount so payable by the predecessor in title of the person who has obtained the property by way of transfer from the original owner. 21. In exercise of powers conferred under section 156 read with section 142 of the Customs Act, 1962, the Central Government has made rules namely the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. Chapter II of the said Rules makes provision for Procedure for attachment . Rule 3 thereof makes provision for issue of certificate in case where Government dues are not paid by any defaulter. Rule 4 thereof provides for issue of notice to be served upon the defaulter requiring the defaulter to pay the amount specified in the certificate within the prescribed period and in default, the subordinate officer is authorised to take steps to realise the amount mentioned in the certificate in terms of the rules. Rule 5 makes provision for Attachment of property and lays down that if the amount mentioned in the notice issued in terms of rule 4 is not paid within seven days from the date of service of notice, the proper officer may proceed to realise the amount by attachment and sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of defaulter's property. For this purpose, the proper officer may detain the defaulter's property until the amount mentioned in the certificate together with cost of detention is paid by the defaulter. In the facts of the present case, the demand notice had been issued way back on 2nd December, 2004 calling upon the defaulter to pay the outstanding amount within seven days of the date of service of the notice. Since the amount was not paid by the defaulter within seven days from the service of the notice, attachment was made by the authorised officer on 29th December, 2004, whereas the subject property came to be transferred in favour of the petitioners in April, 2009, much after the period of thirty days from the date of attachment had expired. In the interregnum, between the date of the attachment and the date of sale in favour of the petitioners, several public notices for sale of the subject property came to be issued by the respondent Bank. But, throughout the said period from the date of making attachment till the sale in favour of the petitioners, the central excise authorities remained passive and indolent. Though rule 5 of the Attachment Rules read with section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities have woken up from their slumber and now seek to deny the registration on the ground that the property had been attached. 24. On behalf of the respondent No.1, reliance had been placed upon rule 9 of the Attachment Rules to submit that in the light of the said rules, once attachment has been made by the central excise authority, any transfer or delivery of property attached shall be void as against all claims enforceable under the attachment. Reliance is placed upon a decision of the Supreme Court in the case of Dhurandhar Prasad Singh vs. Jai Prakash University and others, AIR 2001 SC 2554 for the proposition that if an auction is void ab initio, for avoiding the same, no declaration is necessary as law does not take notice of the same and it can be disregarded in collateral proceedings. The said contention has to be tested in the light of the provisions of rule 9 of the Attachment Rules which reads thus: Rule 9. Private alienation to be void in certain cases.- (i) Where a notice has been served on a defaulter under rule 4, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t now be permitted to contend that the attachment still continues. It appears that for reasons best known to them, such a situation has arisen on account of lack of will on the part of the Central Excise authorities to recover the Central Excise dues from the defaulter. 27. As regards the refusal to grant registration under the provisions of the Central Excise Act to the petitioners in relation to the subject property on the ground that the same has been attached under rule 142 of the Customs Act on 29th December, 2004, as noted hereinabove, the lands in question having been sold to the petitioners, in exercise of powers under the Securitisation Act, any attachment made prior thereto would no longer survive. In any case, the attachment made in the year 2004 would not continue till the year 2009, in the absence of any further action having been taken by the respondent authorities under the relevant provisions of the Act and the rules. In case the Central Excise authorities were prevented from proceeding further pursuant to the attachment by any other reason, viz., by an order of a court of competent jurisdiction staying further proceedings, etc., the matter would stand on a diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate must surrender registration certificate in respect of that premises, then only can a new person get registered in respect of that premises. However, on behalf of the petitioners, reliance had been placed upon a decision of the Bombay High Court in the case of Tata Metalliks Ltd. vs. Union of India and others, 2009 (234) E.L.T. 596 (Bom.) wherein the Court after considering the provisions of section 6 of the Act , Rule 9 of the Central Excise Rules, and the notification issued thereunder, has interalia held thus: 7. A perusal of Section 6 makes it absolutely clear that who has to be registered is the prescribed person. Under the rules also, it is the person who has to get registered. The notification in Clause (2) only sets out that if such registered person has more than one premises, then each of such separate premises would require registration certificate for each of such premises. In other words, it is the person who has to obtain separate registration certificate for each of the said premises. It is open to a person who has ceased to carry on the business to apply for deregistration. Would that mean in the absence of the person who has closed or sold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me premises, two persons cannot be registered being contrary to the provisions of law, cannot be accepted. 30. Thus, for the reasons stated hereinabove, both the grounds for refusing to grant registration to the petitioners under section 6 of the Central Excise Act are held to be invalid. The petition, therefore, succeeds in relation to the relief claimed vide paragraph 6(A) of the petition and is accordingly allowed to the following extent. The impugned order dated 10th May, 2010 (Annexure 'B' to the petition) is hereby quashed and set aside. The respondent No.1 shall consider the application dated 04th May, 2010 made by the petitioner No.1 company for registration under rule 9 of the Central Excise Rules, 2002 in accordance with law, in the light of the observations made hereinabove. Insofar as the relief claimed vide paragraph 6(B) of the petition is concerned, there is nothing to indicate that the respondents are seeking to recover any outstanding dues of the borrower company from the petitioners and as such, the question of grant of the said relief does not arise. Rule is made absolute accordingly to the aforesaid extent, with no order as to costs. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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