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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 ..... f petitioner 1. Respondent 1 is the Superintendent of Central Excise at Amravati and is discharging his duties under the Central Excise Act, 1944. Respondent 2 is Sicom Limited (for short, "SICOM"). It is a company registered under the Companies Act, 1956. It is a deemed State Financial Corporation and exercises powers under the State Financial Corporation Act, 1956. SICOM claims to have advanced large amounts to the Company known as Prudential Polywebs Limited (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 windin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property would be available for distribution to the creditors of the Company in Liquidation and as directed by the Company Court, the priorities of the creditors will be decided by respondent 3 as per the provisions of the Companies Act if the petitioners' prayers are granted by this court. 5. It appears that petitioner 1 learnt that there were Excise dues pending against respondent 3. Petitioner 1 by its letter dated 30/12/2005 inquired of respondent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold and the sale proceeds are received, it is for respondent 3 to decide the priorities and make payments to the creditors. 8. Mr. Dhond submitted that the argument that since the sale was at the instance of SICOM, the Excise Department can follow the said property in the hands of the petitioners is absurd. He submitted that if this interpretation is accepted then the Excise Department would sell the property of a defaulter, realize and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Central Excise Act, 1944. This section, inter alia, states that in respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of the Central Excise Act, 1944, the empowered officer may deduct the said 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 may recover the amount by attachment 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of 1998 at the instance of SICOM who had issued a Take Over notice under Section 29 of the State Financial Corporations Act, 1951 and taken possession of the said property. 17. We have already noted the submissions of Mr. Dhond, learned counsel for the petitioners who has taken strong exception to such a course being adopted by the Excise Department. In this connection, it is necessary to refer to Mascon's case (supra) because the respondents have heavily relied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that such a course is permissible is accepted, it will lend to absurd results. Illustration can be given of a sale conducted by the Excise Department. If in a given case, the Excise Department dues are Rs.1,000/and the property is sold by it for Rs.100/, can it attach the same property in the hands of the buyer for remainder of its dues, thus jeopardizing the buyer's title? The answer to this question has to be in the negative. 22. We must however, make it clear that if the 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferred to the petitioner and consequent thereto the petitioner has succeeded in the said business. This court recorded that the Excise Department in that case had not proceeded on the proviso to Section 11. This court concluded that the issue of the petitioner being liable for the arrears of Central Excise dues will not, therefore, arise. 25. In Tata Metalik's case (supra), this court reiterated the same view. 26. Since in this case also, there is nothing to indicate that the petitioners 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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