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2010 (8) TMI 951 - HC - Central ExciseArrear of excise dues of previous owners - purchase of property by petitioner from U.P. Financial Corporation by way of public sale - case of petitioner is that they are bonafide purchasers in good faith of the property in dispute for valuable consideration and since the property has been purchased through public sale from UPFC free from all encumbrances, petitioner or its directors are not liable for payment of any excise dues which may be outstanding against the previous owner of the unit - case of Revenue is that the petitioner is a successor of the previous owners and in view of Rule 230 of the Central Excise Rules, 1944 the Excise Department is entitle to recover the dues from the assets of the previous owners which had come to the successor. Held that: - The only power given in Rule 230(2) of the Central Excise Rules, 1944 is to detain the goods which are in custody or possession of the person carrying on such trade or business. Apart from the above rule, there is no other provision under the Central Excise Act or the Rules which envisages to create any charge over the assets of a unit to enable the realization of the excise duty on top priority - No doubt sovereign dues/crown debts have a preferential rights of recovery over other ordinary and unsecured creditors but in the absence of any provision creating a 'charge or a first charge' in favour of central excise, the claim of the secured creditor would normally prevail over the crown debts also. The debt of UPFC had a priority being a secured creditor by virtue of a deed of mortgage over the dues of the Central Excise which had no 'charge' over the property in the absence of any provision creating any 'charge' over it. Thus, UPFC rightly invoked its preferential claim and transferred the property - The Central Excise having no 'charge' over the property has no right to recover such dues from subsequent purchasers, who happens to be bonafide purchasers. Petition allowed - decided in favor of petitioner.
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