TMI Blog2013 (8) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and machinery of the borrower. The appellant is resisting the demand with the posture that since the aforesaid properties have been purchased by the appellant in an open auction from the UPFC, free from all encumbrances, it is not the liability of the purchaser to make payment of the dues of excise department. 4. Therefore, the issue which has arisen for our consideration in this appeal is as to whether excise department can recover the amount in question from the appellant. This issue has cropped up in the following factual background: 5. As already pointed out above, after taking possession of the unit of the borrower under Section 29 of the State Financial Corporation Act, the UPFC issued an advertisement dated 8.1.2002 in the newspapers for public auction of the said properties. By the said advertisement, offers for sale of land and building consisting of land area 13390 sq. meter and covered area of 2429 sq. meter, plant and machinery and other fixed assets of the borrower were invited on ( as is where is basis ). This public notice also stipulated certain terms and conditions on which offer were invited. First condition thereof, which is relevant for our purpose, is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand of Customs and Excise. 9. After the conclusion of the aforesaid legal proceedings between the respondent No.2 and the borrower, following amount became due on account of duty and penalty payable by the borrower to the respondent No.2:- Adj.Order No. Amount of confirmed demands Date Duty (In Rs.) Penalty (In Rs) R.F. Penalty 28/Commr/MRT/02/dated 29.8.02 4298571 4298571 ---- 1000000 16/Jt. Commr/2003/ Dated 22.7.2003 669862 669862 ---- ---- 82/Off/136/01/02 Dated 22.11.02 115576 20000 ---- 10. Since the appellant had purchased the land and building as well as plant and machinery of the borrower in the auction conducted by the UPFC, the respondent No.2 issued notice dated 25.8.2004 to the appellant stating that the amount in question had now become the liability of the appellant and demanded the aforesaid payment. It was mentioned in the notice that this amount was payable by the appellant in view of the law laid down by this Court in the case of M/s. Macson Marbles Pvt. Ltd. Vs. Union of India2003 (158) ELT 424 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion on this aspect inconclusive, the High Court chose to rest its decision on an altogether different foundation, namely stipulation in the Sale Deed dated 8.3.2002 to the effect that the statutory liabilities arising out of the property shall be borne by the vendee (i.e. the appellant). These clauses Sale Deed pertaining to land and building and Agreement of Sale qua plant and machinery have already been noted above. According to the High Court, these covenants provided clear and unambiguous stipulation as per which the appellants agreed to discharge the statutory liabilities and since the excise dues were statutory in nature, it had become the liability of the appellant to pay the same. However, in so far as penalty is concerned, it is held that such a burden cannot be fastened on to the appellant as it is in the nature of quasi-criminal liability which was leviable only on the defaulter viz. the borrower. The writ petition is thus, partly allowed. 14. Before us, it was strenuously argued by the learned counsel for the Revenue that since the excise duty is a statutory liability such a duty has to be paid by the person who purchased the property of borrower in default even when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red creditor on the one hand and Central Excise having no charge over the property. The Court specifically took note of the fact that the petitioner in that case was not the successor of the erstwhile owner in business or trade and having acquired the property without any charge independent of business or trade of the previous owner, was not a person in custody or possession of the property as a successor of the previous owner against whom there was a demand of excise duty. 17. Learned counsel for the respondents, heavily relied on the judgment of this Court in M/s. Macson (supra), reference to which is also made in the notice dated 25.02.1984 that was served upon the appellant by the Excise Department. He submitted that in that case this Court had held that even the successor in interest is liable to discharge the liability of the Excise Department. We may, however, note that this case was considered and specifically distinguished in SICOM Ltd. (supra). In that case, considering the statutory right of the Financial Corporation under the State Financial Corporation Act, 1951 and the non-obstante clause occurring therein, it was categorically held that State Financial Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to property, states that where the Crown s right and that of a subject meet at one and the same time, that of the Crown is in general preferred, the rule being detur digniori (Laws of England, 4th Edn.,Vol.8, para 1076, at p.666).Herbert Broom states: Quando jus domini regis et subditi concurrunt jus regis praegerri debat. Where the title of the kind and the tile of a subject concur, the king s title must be preferred. In this case detur digniori is the rule. .....where the titles of the kind and of a subject concur, the kind takes the whole. ....where the king s title and that of a subject concur, or are in conflict, the king s title is to be preferred. (Legal maxims; 10th Edn.,pp.35-36) This Common law doctrine of priority of State s debts has been recognised by the High Courts of India as applicable in British India before 1950 and hence the doctrine has been treated as law in force within the meaning of Article 372(1) of Constitution. It was, furthermore, observed : However,, the Crown s preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. The common law of England or the principles of equity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicated liability of respondent No.4 and held that respondent No.4 is also liable to pay penalty in a sum of Rs.3 lakhs while the Excise dues liable would be in the order of a lakh or so. It is difficult to conceive that the appellant had any opportunity to participate in the adjudication proceedings and contend against the levy of the penalty. Therefore, in the facts and circumstances of this case, we think it appropriate to direct that the said amount, if already paid, shall be refunded within a period of three months. In other respects, the order made by the High Court shall remain undisputed. The appeal is disposed of accordingly. The decision, therefore, was rendered in the facts of that case. The issue with which we are directly concerned did not arise for consideration therein. The Court also did not notice the binding precedent of Dena Bank as also other decisions referred to hereinbefore. 21. A harmonious reading of the judgments in Macson and SICOM would tend us to conclude that it is only in those cases where the buyer had purchased the entire unit i.e. the entire business itself, that he would be responsible to discharge the liability of Central Excise as well. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 etc. Likewise, statutory liability arising out of the plant and machinery could be the sales tax etc. payable on the said machinery. As far as dues of the Central Excise are concerned, they were not related to the said 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, therefore, these statutory dues are in respect of those items produced and not the plant and machinery which was used for the purposes of manufacture. This fine distinction is not taken note at all by the High Court. 24. We thus conclude that the judgment of the High Court is unsustainable in law. Accordingly, the appeal is allowed and the impugned judgment of the High Court is set aside. As a consequence the notice of the Excise Department calling upon the appellant to pay the dues of the erstwhile owner of the unit in question also stands quashed. The appellant shall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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