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2017 (7) TMI 555 - CESTAT MUMBAI

2017 (7) TMI 555 - CESTAT MUMBAI - TMI - Recovery of duty from the purchaser of property - purchase of property under auction - denial of refund on the ground that under provision of Section 11 (i) and as per Section 11 (e) of CEA, 1944 the Govt. dues of M/s. Bagwe Udyog Ltd is liable to paid by the person, owner ie.e. respondent - Held that: - In case of purchase of property alone under auction from Bank/ financial instituations, Section 11 is not applicable. Section 11 is applicable only in ca .....

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refundable - appeal dismissed - decided against Revenue. - E/87742/16 - A/87813/17/SMB - Dated:- 9-6-2017 - Mr. Ramesh Nair, Member(Judicial) Shri. Ajay Kumar, Addl. Commissioner(A.R.) for the Appellants Shri. Darshan Ranavat, C.A. for the Respondent ORDER This appeal is filed by the Revenue against order passed by the Commissioner(Appeals). The fact of the case is that appellant is engaged in the manufacture of 'Electric Generating Sets & parts thereof and 'electric control panel&# .....

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erate, before issuance of registration certificate to the respondent. Dy Commissioner Central Excise, Khopoli vide letter dated 18-3-2013 informed LTU, Mumbai that there were govt. dues pending recovery amounting to ₹ 30,45,434/-( 9,80,742/- alongwith interest of ₹ 20,64,692/-) vide GAR-7 challan no.00026 dated 24-5-2013 against pending dues of M/s. Bagwe Udyog Ltd and intimated to the department on 18-6-2013. Subsequently respondent vide their letter dated 6-9-2014 filed the refund .....

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r(Appeals) who allowed the appeal therefore revenue is before me. 2. Shri. Ajay Kumar, Ld. Addl. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the ground of appeal. He further submits that there is statutory provision under Section 11 that if there is government dues of the earlier owner of the property which is purchased by the subsequent person then he is liable to pay the said dues to the government. He also referred to Section 11 (e) according to which the Central excise d .....

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not purchased the business of previous owner. They have procured land under auction from DRT in such case recovery of dues of earlier owner could not have made from the respondent. He submits that Section 11 (e) is not applicable to the present case for the reason that it came into effect in the Finance Act, 2011 i.e. 8-4-2011 whereas the dues in the present case is pertaining to the period prior to enactment of Section 11A. He further submits that even if any stretch of imagination Section 11 b .....

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garwal Vs. Commr. Cus & C Ex. Hyderabad[2015(324)ELT 62(A.P.)] (c) IDBI Ltd Vs. Dy. Commr.[2012(283)ELT 188(A.P.)] 4. I have carefully considered the submissions made by both sides and perused the record. 5. This Tribunal on the identical issue has passed the detailed order in case M/s. Rajaram Steel Industries Pvt Ltd Vs. Commissioner of Central Excise, customs, Nagpur[Final Order No.A/2535/15/SMB dated 29/5/2015 which is reproduced below: 6. Ld. Commissioner in the impugned order has confi .....

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nd Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963)] to levy such duty or require the payment of such sums [may deduct or require any other Central Excise Officer or a proper officer referred to in section 142 of the Customs Act, 1962 (52 of 1962) to deduct the 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 be in the hands or under disposal or contro .....

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rein as if it were an arrear of land revenue : [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, machinerie .....

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l 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 .....

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, practice or requirement to the contrary; (iii) in a case where the person to whom a notice under this sub-section has been issued, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be a person from whom duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or the Rules made thereunder have become due, in respect of the amount specified in the notice and all the consequences under this Act shal .....

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hat firstly the duty is recoverable from M/s. Sumit Rerolling Mills Pvt. Ltd but the assets was purchased by the appellant, not from M/S. Sumit Rerolling Mills Pvt. Ltd but from Zia Iron Stores. As per the provisions, if the asset is sold by M/s. Sumit Rerolling Mills Pvt. Ltd to the appellant then only proviso to provisions of Section 11 will attract. The asset was neither sold by M/s. Sumit Rerolling Mills Pvt. Ltd nor it was purchased by appellant from M/s. Sumit Rerolling Mills Pvt. Ltd, for .....

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M/s. Sumit Rerolling Mills Pvt. Ltd is the predecessor nor the appellant is successor. With regard to the proviso to Section 11 recovery under Section 11 and proviso thereto cannot be made from appellant. I also observe that in the proviso to Section 11 it is clearly provided that the recovery of arrears pending 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 appl .....

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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 case, there were two issues before the Supreme Court. (1) 117-cat 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 wer .....

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of the business of a dealer liable to pay tax or penalty or any other amount under this Act, is transferred, the transferor and the transferee shall jointly and severally be liable to pay any tax or penalty or any other amount payable in respect of such business as remaining unpaid at the time of transfer, and for the purpose of recovery from the transferee such transferee shall be deemed to be the dealer liable to pay the tax or penalty or other amount under this Act". The language used b .....

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owards producing income or profit. Ownership of assets is merely an incident rather than a characteristic of business. Hence, the mere transfer of one or more species of assets does not necessarily bring about the transfer of the "ownership of the business" for "ownership of a business" is much wider than mere ownership of discrete or individual assets. In fact, "ownership of business" is wider than the sum of the ownership of a business constituent asset. Above all .....

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m 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 .....

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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 not merely the assets. This follows, considering the subsequent language which uses the expression "in consequence of which he succeeded in such business or trade by any other person". In other words, it is only when the person wholly or partially succeeds to the business or trade pur .....

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ession" and consequently sought to place reliance on decided cases and text books which throw light on the matter. The Court then observed as under :- "In order to constitute a succession there must be, broadly speaking, a taking over of the whole of the business concerned;……………… But if a business is taken over as a whole, the fact that minor assets of the business are omitted from the transfer will not prevent there being a succession. The fac .....

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it any less a succession in law. It is not necessary to multiply decisions. Succession involves change of ownership; that is, the transferor goes out and the transferee comes in. It connotes that the whole business is transferred. It also implies that substantially the identity and the continuity of the business are preserved. If there is a transfer of a business, any arrangement between the transferor and the transferee in respect of some of the assets and liabilities not with a view to enable .....

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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 .....

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r words, the successor business must be the continuation of the original business. If the original business has come to an end or has been discontinued, then the subsequent business even though it may be identical with the first business, cannot be looked upon as its successor, because a successor should not only do the same business but also must continue the business to which it has succeeded. The Gujarat High Court in Kalaria Oil Mills v. The State of Gujarat and. others (1968 Sales Tax Cases .....

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erred to the judgment in Shreyas Papers Pvt. Ltd. (supra). The High Court there had found that mere transfer of land, building, plant and machinery by the State Financial Corporation would not make the purchaser a transferee In Oriental Fire & General Insurance Co. Ltd. v. Commissioner of Income Tax (2000) 244 ITR 631 (Delhi) was pleased to hold that carrying on the business and its place has been taken by an entirely new entity to run in continuity and as a going concern of the same busines .....

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these tests will have to be met, before it can be said that a person has succeeded to a business. This would require the facts to be investigated as to whether there has been transfer of the whole of the business or part of the business and succession to the original business by the 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 .....

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aw 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 facts and although the .....

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roceeded under the proviso to Section 11 of the Central Excise Act. 18. The Petitioner's have averred that they are engaged in the business of manufacturing/ trading in cotton yarn, knitted fabric and garmenting. Petitioner have also set out that they were intending to start the work of establishing of new textile mechanism in the property purchased. They were also advised to carry out repair to the building. Though respondents have filed a reply, nowhere is it alleged that the business has .....

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ttled that only when business or trade is transferred in part or whole and merely by sale of immovable assets, recovery of arrears cannot be made from the buyer of the assets. In the present case, it is undisputed that the 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 .....

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lation that "all these statutory liabilities arising out of the land shall borne by purchaser in the sale deed" and "all these statutory liabilities arising out of the said properties shall be bone 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 wel .....

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y 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 m .....

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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 also be entitled to cost of this appeal. Ambuja Electro Castings Ltd. Vs. Union of India[2014(306) ELT 583 (P&H)] 10. The controversy in the present petition is fully covered by the ratio of the aforesaid judgment. The petitioner purchased land and building and not the business of the owner. The clause in the agreement requires the .....

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Court, in the aforesaid judgment. (c) Himgiri Ispat Pvt. Ltd. Vs. Custom, Excise& Service Tax[2014(305) ELT 36] 4. While right to prefer appeal is statutory, the same can be exercised to the extent Statute has granted. While a time-limit has been fixed for preferring the appeal, upon expiry of that period, the right to prefer appeal stands extinguished. If the Appellate Authority has been authorized to condone delay of a limited period as prescribed, the same itself prescribes that he has no .....

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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 .....

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y the assessee cannot be recovered from the properties of the appellant, who is a bona fide purchaser in auction. Surat Metallics Ltd, Vs. Commissioner of C Excise, ELT 558(Fuj)] 17. Section 11 of the Central Excise Act makes provision for recovery of sums due to Government. The said section provides that in respect of any duty and any other sums of any kind payable to the Central Government under any of the provisions of the Act or the rules made thereunder, the Officer empowered by the Central .....

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iable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue. The proviso thereto lays down that where the person from whom the duty or any other sums of any kind as specified in the section is recoverable or due, transfers or otherwise disposes of his business or trad .....

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r the purposes of recovering such duties or other sums 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 b .....

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ned, it is an admitted position that no action has 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, the provisions of Section 11 are not attracted in the present case Manibhadra Fine Trade Services Vs, Chief Commissioner of Central ELT 514(Guj)]. 8, Under the circumstances, we have no hesitation in holding that the charge of the Central Excise De .....

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tract. It is not a case of transfer of business or trade, but transfer of property under compulsory sale of' the property through auction by the financial institution in exercise of powers under the SARFAESI Act. 9. In the result, the petition is allowed, Revenue Authorities are directed to delete the entry pertaining to the charge of the Central Excise Department from the records in question. It is, however, clarified that nothing stated in this order will prevent the Department from recove .....

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previous owner by holding as follows :- "What we have discussed above appears to be the law gatherable from the various provisions which we have detailed out above. It is impossible to impose on the purchasers a liability which was not incurred by them. " 5. Thereafter, in State of Karnatka and another v. Shreyas Papers Pvt. Ltd. & others reported as JT 2006 (1) SC 180, the Hon'ble Supreme Court stated the following questions :-. "1.1 Firstly, whether the purchaser of ass .....

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9;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 i .....

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n, clearly show that the Government is entitled to claim its dues/ taxes/ duties in preference to other ordinary debts. In all those cases, there is no provision as found in SAFRFAESI Act or a specific provision claiming to have "first charge" as provided in Rajasthan Sales Tax Act in State Bank of Bikaner & Jaipur v. National Iron and Steel Rolling Corporation (1995 (2) SCC 19; (1995 AIR SCW 214-Three Judge Bench), Madhya Pradesh General Sales Tax in State of M.P. v. State Bank of .....

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cle 372(1) of the Constitution of India and therefore continues to be in force thereafter. In Dena Bank case (cited supra) it is held that the Crown's preferential right to recover all debts over other creditors is confined to ordinary and unsecured creditors. In the light of the above discussion, we conclude (i) Generally, the dues to Government i.e. tax, duties etc. (Crown's debts) get priority over ordinary debts. (ii) Only when there is a specific provision in the statute claiming &q .....

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; In view of our above conclusion, the petitioner UTI Bank being secured creditor is entitled to have preference over the claim of the Deputy Commissioner of Central Excise, first respondent therein. 7. It may be specifically noted here that 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 .....

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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 as banks. financial institution, recovery of government dues .....

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horized officer (Manager, Recovery) has acknowledge the receipt of the sale price in full and hereby handed over the possession of M/s. Sumit Re-Rolling Mills Pvt. Ltd. Nagpur to M/s. Zia Iron Stores, on this_____ day of ___ 2005 on terms and conditions "as and where it is" basis and from this date M/s. Zia Iron Stores, Prop. Mohd. Shafiquddin is solely responsible for all future liabilities, acts, deeds etc. arising out of the premises of M/s. Sumit Re-Rolling Pvt. Ltd. (ii) Deed of a .....

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does not under take any liabilities or responsibility to procure any permission/ licence etc, in respect of, of the property offered for sale or for any dues like water/ service charges of the MIDC, transfer fees, electricity dues and charges for fresh power connection, Local Authority, or Nazul/NJL dues, in respect of the said property and the same shall be solely and exclusively born and paid by the Purchaser. (iii) Deed of Assignment dated 29 March 2006 between Jiya Iron stores and present ap .....

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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 prejudi .....

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