TMI Blog2015 (9) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant has purchased the assets from M/s. Zia Iron Stores. In this transaction, neither M/s. Sumit Rerolling Mills Pvt. Ltd is the predecessor nor the appellant is successor. It is undisputed fact that firstly appellant has not taken over the business or trade which was being run by M/s. Sumit Rerolling Mills Pvt. Ltd. For this reason also proviso Section to 11 is not applicable. I am in agreement with the submission of the Ld. Counsel that in view of the Krishna Lifestyle Technologies Ltd (2008 (2) TMI 2 - HIGH COURT, BOMBAY) case the recovery from the successor can only be made when the business or trade is transferred either in whole or in part from the predecessor to the successor. - Immovable assets were first sold in auction by the bank to Zia Iron Stores and thereafter the appellant has purchased the property from Zia Iron Stores. It has been held in the numerous judgment that if any property is sold under auction buyer cannot be held liable for payment of the arrears of the previous owner of the property. Therefore the deed and agreement and terms and conditions thereof have no relevance in the present case. Moreover even if any such clause exist the same cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/2/2008 asked the appellant to pay the Central Excise dues which was outstanding against the M/s. Sumit Rerolling Mills Pvt. Ltd. in terms of Section 11 of the Central Excise Act, 1944. Aggrieved by the said demand appellant filed appeal before the Commissioner (Appeals), who vide the impugned order directed the appellant to pay the remaining of government dues and rejected the appeal. 3. Shri Sanjay Agarwal, Ld. Counsel for the appellant submits that they have only purchased the immovable assets that too not from M/s Sumit Rerolling Mills Pvt. Ltd but from Zia Iron Stores. He further submits that they have not succeeded the business of M/s. Sumit Rerolling Mills Pvt. Ltd. appellant have only purchased the factory premises and not the business. Therefore the appellant is not liable to pay the dues of M/s. Sumit Rerolling Mills Pvt.Ltd. He strongly placed reliance on Hon'ble Bombay High Court judgment in the case of Krishna Lifestyle technologies Ltd. vs. Union of India [2008 (229) ELT 17]. He submits that in the said judgment the Hon'ble High Court has held that the sale of assets of tax defaulters by itself would not be amount to transfer of business in whole or in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 it is stated that assignor having paid, up to this date all dues among other dues, Central Excise dues also and if there remain arrear to be paid assignor undertake to pay the same. Therefore even in view of this assignment deed the appellant has not under taken under deed of assignment to clear arrears of Central Excise therefore under any circumstances the appellant is not liable for payment of arrears which is against M/s. Sumit Rerolling Mills Pvt. Ltd. He further submits that it has been held by the Hon'ble Supreme Court in the case of UOI vs. Sicom Ltd. [2010 18 STR 673 (SC)] wherein Hon'ble Apex Court held that Government dues have no priority over the secured creditor. In view of this judgment the bank who has financed loan to M/s. Sumit Rerolling Mills Pvt. Ltd is admittedly secured creditors, therefore the bank has first charge on the assets of the factory to whom loan was given. Therefore in view of this settled legal position once the bank has taken over the unit and subsequently sold, it is bank who has first charge. In this position neither from the bank nor form subsequent buyer of the unit, recovery can be made against Central Excise arrears. He also subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions for recovery of arrears. In this support he placed reliance on the judgment of this Tribunal in the case of Shri Kesav Cements Infra Ltd. vs. Commissioner of C. Ex, Belgaum [2010 (256) ELT 585 (Tri.Bang)], wherein it was held that recovery cannot be made from auction purchaser of the assets even though the appellant was force to pay dues of defaulter by withholding registration. 4. On the other hand, Shri. Asuthosh Nath, Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that since the assets which was purchased by the appellant was originally owned by M/s. Sumit Rerolling Mills Pvt.Ltd. therefore arrears of Central Excise dues of M/s. Sumit Rerolling Mills Pvt. Ltd. are liable to be paid by the appellant as they have succeeded in the purchase of M/s. Sumit Rerolling Mills Pvt. Ltd. He also submits that as per the assignment deed the dues of Central Excise are supposed to be paid by the first purchaser therefore the appellant is liable to pay arrears. It is his submission that appellant has given an undertaking while obtaining Central Excise registration to pay the arrears which is pending agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and Customs, after obtaining written approval from the Commissioner of Central Excise, for the purposes of recovering such duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change. (2) (i) The Central Excise Officer may, by a notice in writing, require any other person from whom money is due to such person, or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held, or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (ii) every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against predecessor can be made from the successor only in case when there is transfer of business or trade either in whole or in part, the proviso to Section 11 does not stipulates applicability in case of sale of assets of the predecessor to successor. In the present case, it is undisputed fact that firstly appellant has not taken over the business or trade which was being run by M/s. Sumit Rerolling Mills Pvt. Ltd. For this reason also proviso Section to 11 is not applicable. I am in agreement with the submission of the Ld. Counsel that in view of the Krishna Lifestyle Technologies Ltd (supra) case the recovery from the successor can only be made when the business or trade is transferred either in whole or in part from the predecessor to the successor. Hon'ble Bombay High Court in the said judgment has held as under: 14. In order to answer the controversy, the Judgment in Shreyas Papers Pvt. Ltd.(supra) needs to be considered. In that case, there were two issues before the Supreme Court. (1) What would be the meaning of the expression transfer of ownership of business under Section 15 of the KST Act and (2) Enforceability of the Charge. The assets were sold by State Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying each of them is the fundamental idea of the continuous exercise of an activity. It connotes some real, substantive and with a set purpose. There is something organic about the whole which does not exist in its separate parts. Business may include activity of taking a market place or godowns. The proviso to Section 11 of the Central Excise Act not only speaks of transfer of business or trade, but uses the expression in whole or in part . In other words, there need not be transfer of the whole of the ownership of business.It is sufficient if there is transfer or disposal of part of the business or any change in the ownership. The consequences must be that the person who purchases must succeed in such business or trade from the reason who was carrying on the business or trade. Would the ratio in Shreyas Papers Pvt. Ltd.(supra) conclude the issues as to the expression transfer or disposal of business in whole or in part ? Shreyas Papers Pvt. Ltd.(supra), has laid down the law in so far as Section 11 is concerned. However, the ratio would apply, namely that there must be transfer or disposal of the business in whole or in part. The transfer must be of the business or trade and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate collateral purpose cannot detract from the totality of succession . It would thus appear that whether there is whole or part transfer of business and succession thereto what has to be established is that identity and continuity of the business so transferred is preserved. The High Court of Rangoon in Commissioner of Income Tax v. N. N. Firm((1934) 2 ITR 85(Rangoon) was again considering the expression Business . It held there where a business is split up and thereafter another person carries on part of the business he does not succeed his predecessor in carrying on the business. Considering the language of our statute, in our opinion, that really would not apply. In Industrial Development Investments Co. Ltd. v. Commissioner of Excess Profits Tax (1957) 31 ITR 688(Bom)), this Court was considering as to what would constitute a succession to a business. The Court speaking through Chagla, C.J. observed that whether there is a succession to a business, two factors have got to be considered. One obviously is the identity of the two businesses. If the two businesses are not identical, no question of succession can arise and even if the two businesses are identical, anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferee. 17. Our attention was also invited to the Judgment in Municipal Corporation of Delhi v. Gurnam Kaur (1989) 1 SCC 101) as to what can be said to be a binding precedent. The Court noted that Quotability as to law applies to the case, its ratio the only thing binding on an authority is the principle upon which the case was decided. Statements which are not part of the ratio decidendi are distinguished as obiter dicta and are not authoritative. The Court also quoted with approval, P. J. Fitzgerald, 12th edition as to the concept of sub silentio which reads thus:- A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Sale Deed/ Agreement as well, to the effect that the properties in question are being sold free from all encumbrances. At the same time, there is also a stipulation that all these statutory liabilities arising out of the land shall be borne by purchaser in the sale deed and all these statutory liabilities arising out of the said properties shall be borne by the vendee and vendor shall not be held responsible in the Agreement of Sale. As per the High Court, these statutory liabilities would include excise dues. We find that the High Court has missed the true intent and purport of this clause. 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). Thus, it is 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 are not the statutory liabilities which arise out of the land and building or the plant and machinery. Statutory liabilities arising out of the land and building could be in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribes that he has no authority to condone delay beyond the limit so prescribed. However, the right exercised by a citizen under Article 226 of the Constitution of India is not a statutory right, but is a constitutional right. If the Constitution has limited that right, of course, then the right has to be exercised within that limit. The fact remains that the Constitution, while conferring the right under Article 226 of the Constitution, did not fetter such right by any limitation whatsoever. In those circumstances, there cannot be a contention that the writ petition is not maintainable because it is belated. If the action complained of is non est from the day one, the same can be challenged even after 100 years. The question is, whether the action complained of in the writ petition is non est or not? The Central Excise Act provides the mechanism of recovery of excise duties. It permits recovery of such duties from the merchandise of the assessee in his control. It does not permit even recovery from those merchandise, which have gone to the buyers of the assessee. Upon failure to recover the same, the Act permits the dues to be recovered as land revenue. The word land revenue' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change. In the facts of the present case, admittedly, it is not the person from whom the amounts were recoverable or due, who has transferred the property in question to the petitioner. The property had been sold to the petitioners under the provisions of the Securitisation Act, by the respondent Bank who is a secured creditor. Moreover, what has been sold to the petitioners is the immovable property of the defaulter company and not the business or trade, in whole or in part. The petitioner, therefore, has not succeeded the defaulter in the business or trade. In the circumstances, the proviso to Section 11 of the Act would not be attracted in the present case. Insofar as the first and second contingencies referred to hereinabove are concerned, admittedly the same do not exist in the present case. Insofar as the third contingency is concerned, it is an admitted position that no action as been taken in terms thereof inasmuch as the officer empowered has not prepared any certificate specifying the amount due from the defaulter, etc., as required under the said clause. Thus, prima facie, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporations Act, 1951 (hereinafter the SFC Act) would be liable under the Karnataka Sales Tax, 1957 (hereinafter the KST Act ), for the arrears of sales tax of the concern whose assets have been transferred? 1.2 Secondly, under what circumstances does a charge created on a property become unenforceable against a transfree of such a property? The Hon'ble Court held as follows :- In these circumstances, we are of the view that the first respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent charge on the property. This would, therefore, attract the principle laid down by this Court in Ahmedabad Municipal Corporation, which is also embodied in the proviso to Section 100 of the TP Act. Thus, the property in the hands of the first respondent was free of the charge and it is not open to the appellants to enforce the liabilities of the defaulting company in this manner against the first respondent. 6. The third judgment on the point is the case of UTI Bank Ltd. v Deputy Commissioner of Central Excise reported as 2007 (208) E.L.T. 3 (Mad.) = AIR 2007 Madras 118 wherein the Full Bench of the Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no such first charge has been pleaded by the Excise Authorities in the present case also. Lastly, reference may be made to the decision of this Court in Union of India v Punjab Financial Corporation reported as 2007(1) ISJ (Banking) 258. In this case, the Court held as follows : The result of the above discussion is that the plea raised by the petitioners in regard to its priority of recovering excise dues or the other such like dues under the Excise Act cannot be upheld either on the applicability of doctrine of priority of Crown debts or that any such priority has been so created under any of the provisions of the Excise Act or Rules or the Customs Act. 8. In the circumstances, the inescapable conclusion is that the Excise Department cannot enforce the payment of their dues against the property purchased by the petitioner though they would have the liberty to seek redress against the original debtors. 9. In view of what has been stated herein above, the present writ petition is allowed and the impugned letters are quashed. In view of the above judgments, it was consistently held that wherever the property was sold under auction by secured creditors such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to be paid, the ASSIGNOR undertakes to pay the same to the ASSIGNEE. Therefore the aforesaid deed and agreement and terms and conditions thereof have no relevance in the present case. Moreover even if any such clause exist the same cannot be used for making recovery. For recovery of arrears of the M/s. Sumit Rerolling Mills Pvt. Ltd if at all can be made in terms of proviso to Section 11 which under the present set of the facts does not apply. On going through the under taking given by the appellant while obtaining registration regarding the payment of arrears, I find that the appellant has given such under taking without prejudice to the legal rights of the appellant therefore in my considered view though the under taking is given by the appellant, the same is not sufficient for enforcing the recovery of arrears as the appellant is not legally liable for payment of arrears of M/s. Sumit Rerolling Mills Pvt. Ltd. 6.1 In view of my above discussions, binding judgments of Hon'ble Supreme Court, High courts and this Tribunal, I am of the considered view that the appellant is not liable for payment of dues which is pending against M/s. Sumit Rerolling Mills Pvt. Ltd. th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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