TMI Blog2018 (3) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... department that Harshwardhan Exports and the petitioner Chandra Dyeing are the clones and the entire exercise of creating Harshwardhan Exports as a separate company was a sham transaction to defraud the Government revenue, in facts of the present case, there is no possibility allowing the respondents to sell the property of the petitioner for the unpaid dues of the Harshwardhan Exports. Even in the show cause notice dated 04.02.2010, the department has not built any such case - Merely because Harshwardhan Exports agreed not to vacate the premises till full export obligations are discharged, would not create any additional right in the property which can be sold for the purpose of recovery of the dues of Harshwardhan Exports. The attachment and distress imposed by the department on the property in question are set aside - petition allowed - decided in favor of petitioner. - Special Civil Application No. 3264 of 2014 - - - Dated:- 8-1-2018 - MR. AKIL KURESHI AND MR. A. Y. KOGJE, JJ. For The Petitioner : Mr.Deven Parikh, Senior Advocate With Mr.Rohan A Shah, Advocate For The Respondent : Mr Gaurang H Bhatt, Advocate And Mr Sudhir M Mehta, Advocate ORAL JUDGMENT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han Exports on 20.02.2004 pointing out that Harshwardhan Exports had not paid sizable amount of rent and called upon Harshwardhan Exports to handover the possession of the factory immediately. It was also pointed out that the factory was closed since long and that the same be returned in working condition. In response to such letter, Harshwardhan Exports wrote to Chandra Dyeing on 31.03.2004 and conveyed that the central excise license is due to expire on 26.02.2004. The letter records handing over of the possession of the unit to Chandra Dyeing. It was further conveyed that the question of arrears of rent will be settled through discussions. 4. On 03.03.2004, Harshwardhan Exports wrote to the Superintendent of Central Excise and pointed out that the central excise license had expired on 25.02.2004. The lessor has asked Harshwardhan Exports to vacate the factory premises and accordingly the possession would be handed over soon. 5. On 18.01.2005, Assistant Commissioner of Central Excise, Surat, issued a notice of demand of ₹ 40,61,623/to Harshwardhan Exports. In the said notice, attention of the noticee was also drawn to the rule 9 of the Customs (Attachment of Property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment, the petitioner tried to remove the machinery from the site despite attachment. According to the petitioner, no such attachment was ever served or even affixed on the premises. In background of such disputes, the department put its lock on the premises, upon which, the present petition came to be filed. 9. Short question that calls for consideration is whether the department can seek recovery of the dues of Harshwardhan Exports through sale of the property of the petitioner. To summarize the relevant facts, the petitioner is enjoying lease of 99 years on the plot of land situated at GIDC, Sachin. The petitioner has set up a dyeing unit on such plot by installing plant and machinery. After operating said unit for few years, the petitioner closed down the said unit in the year 1999 and also surrendered the central excise license around the same time. Some of the directors of the petitioner company exited and set up a new company. This new company Harshwardhan Exports took the unit on lease for a period of six years to set up its dyeing unit exclusively for exports. The department has raised sizable central excise dues against Harshwardhan Exports. In the meantime, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining written approval from the [Principal Commissioner of Central Excise or 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.] 11. Section 142 of the Customs Act, 1962, pertains to recovery of the sums due to Government and reads as under: 142.Recovery of sums due to Government. ( 1) [Where any sum payable by any person] under this Act [including the amount required to be paid to the credit of the Central Government under section 28B] is not paid, (a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or (b) the [Assistant Commissioner of Customs or Deputy Commissioner of Customs] may recover or may require any other officer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise disposal or change. [(d) (i) The proper 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 the notice is issued under this 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, endorsement or the like being made before the payment is made, notwithstanding any rule, practice or requirement to the contrary; (iii) in case the person to whom a notice under this section has been issued, fails to make the payment in purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that entire creation of Harshwardhan Exports as the company was a sham transaction only with a view to defraud the government revenue or other creditors and in fact it was behind the scene that the petitioner alone was operating the entire business. The case of the department emerging from the record simply is that Harshwardhan Exports had sizable unpaid dues of the department and such dues can be recovered from its property even after its transfer. 15. If this be the case, we may recall the property referred to by the department was nothing other than the lease for a period of six years granted to the petitioner by Harshwardhan Exports to utilize the plant and machinery situated on the plot no.342, GIDC, Sachin. Such lease was terminated on or around 20.02.2004 since Harshwardhan Exports could not pay its rental dues. Possession of leased premises was handed over by the Harshwardhan Exports to the petitioner on 31.03.2004. The first order of attachment was passed on 28.01.2005 which followed the notice dated 18.01.2005 issued to Harshwardhan Exports for unpaid dues of the department. Thus, the transaction of transfer of the leasehold rights of Harshwardhan Exports to the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the conditions for granting permission to Harshwardhan Exports to set up a 100% EOU at the said place. This condition provided that the lease would last till 15.01.2005 and in any case, the factory would not be vacated till the export obligation of the Harshwardhan Exports are discharged and consent is obtained from the authorities in respect to the same. Firstly, it is not clear whether the petitioner was signatory to any such condition. Secondly, if at all, it would be the breach of the condition but would not change the complexion so far as the title and rights of Harshwardhan Exports in the leased property are concerned. Merely because Harshwardhan Exports agreed not to vacate the premises till full export obligations are discharged, would not create any additional right in the property which can be sold for the purpose of recovery of the dues of Harshwardhan Exports. 18. In view of such facts, it is not necessary to refer to various judgments cited by the counsel for the petitioners in the context of the applicability of section 142 of the Customs Act or section 11 of the Central Excise Act. 19. In the result, the attachment and distress imposed by the department on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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