2019 (2) TMI 1559 - HC - Central Excise

Recovery of excise dues - attempt and coercive action on the part of the respondents in seeking recovery of the excise dues of one M/s. Shri Ganesh Mahadev Dyeing Mills a partnership firm erstwhile owner of the property - case of petitioner is that the petitioner was perceived to be successor of the erstwhile owner of the property which as per the petitioner was wholly incorrect illconceived and deserve to be quashed and set aside. Held that - Unfortunately in affidavitinreply it is no where pleaded that there was any fraudulent transfer of business for avoiding the payment of dues by the erstwhile owner of the property. The unfortunate invoking of the general and common clause in the Sale Deed qua liabilities of Government dues on the property deserve to be appreciated in a proper perspective. The excise dues were not liable to be recovered from the property in question in the hands of the petitioner as still the property s change hands there was no attachment or restrictions or charge placed by the department and the property was in fact free from such kind of charge from excise department and therefore it was not open to the department to invoke provision of Section11 to rope in the subsequent purchaser of the property by misconceiving it to be a purchase of business so as to attribute the petitioner successor only for the purpose of invoking Section11 which unfortunately has not been established by the petitioner in the present petition. The Court is of the view that the petitioner can not be held liable to pay any dues of the erstwhile owner of the property in absence of any specific covenant qua the same - petition allowed.

Summary

Issues Involved:
Challenge to marking of lien on property records, liability of petitioner for excise dues of previous owner, interpretation of Section 11 of the Central Excise Act.

Analysis:

1. Challenge to Marking of Lien on Property Records:
The petitioner approached the court seeking a writ to quash the marking of a lien on their property records by the Central Excise Department. The petitioner argued that as they were not the successor in business of the previous owner but merely purchasers of the property, they should not be liable for any outstanding dues. The court examined the facts of the case, including the purchase of the property by the petitioner from the previous owner and the subsequent communication from the Central Excise Department regarding outstanding dues. The court found that the department's action was based on an incorrect premise and proceeded to quash the lien marked on the property records.

2. Liability of Petitioner for Excise Dues of Previous Owner:
The Central Excise Department contended that the petitioner, as the subsequent owner of the property, was liable to pay the excise dues of the previous owner based on the provisions of Section 11 of the Central Excise Act. However, the court noted that there was no provision specifically holding the successor owner responsible for such dues unless there was a fraudulent transfer of business to evade payments. The court observed that in this case, there was no evidence of fraudulent transfer, and the mere transfer of property did not make the petitioner liable for the previous owner's dues. The court held that the petitioner could not be held responsible for the excise dues of the previous owner.

3. Interpretation of Section 11 of the Central Excise Act:
The court analyzed the provisions of Section 11 of the Central Excise Act, which deal with the recovery of dues from a successor in business. The court emphasized that for the petitioner to be held liable under this section, there needed to be clear evidence of a transfer of business, not just property. The court found that in the absence of any fraudulent transfer or specific provision making the subsequent owner responsible for dues, the invocation of Section 11 by the department was unjustified. The court clarified that the petitioner was not obligated to pay the excise dues of the previous owner based on the interpretation of Section 11.

In conclusion, the court partly allowed the petition, ruling in favor of the petitioner and holding that they were not liable to pay the excise dues of the previous owner. The court directed the petitioner to seek appropriate mutation from revenue authorities and clarified that the department could recover dues from the previous owner in accordance with the law.