Telangana High Court
M/S. Jagannatha Electricals Pvt. Ltd., vs The Commissioner Of Customs And Central ... on 22 January, 2024
Author: P.Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE N. TUKARAMJI
Writ Petition No.12461 of 2006
ORDER:
(per Hon'ble Sri Justice P.SAM KOSHY) This Writ Petition is filed by the petitioner herein under Article 226 of the Constitution of India praying this Court for issuance of an appropriate writ, order or direction particularly one in the name of Writ of Mandamus by declaring the proceedings in OC.No.1673 of 2005, dated 13.12.2005, issued by the 2nd respondent (for short, 'the impugned notice') as illegal, arbitrary, unconstitutional, without jurisdiction, void ab initio, and violative of petitioner's fundamental rights guaranteed under Articles 14 & 21 of the Constitution of India; and to set aside the same.
2. Heard Mr.D. Seshasayana Reddy, learned counsel for the petitioner and Mr.Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes, for the respondents.
3. Learned counsel for the petitioner contended that the 2nd respondent herein has issued impugned notice claiming for the pending of arrears as against M/s.Haritha Cable & Conductors Pvt. Ltd., which was subsequently purchased by the petitioner 2 company herein, for the purpose of manufacture and sale of transformers of all sizes, safes, voltage stabilizers, conductors, etc. The said M/s.Haritha Cable & Conductors Pvt. Ltd. committed default in repayment of the dues payable to respondent Nos.3 and 4 herein. The respondent No.4, on the default on the part of M/s.Haritha Cable & Conductors Pvt. Ltd., took over the land, building and assets that stood in the name of M/s.Haritha Cable & Conductors Pvt. Ltd. When the entire premises got put to open auction conducted by respondent Nos.3 and 4, the petitioner was the successful bidder and purchased the land, building along with plant and machinery belonging to M/s.Haritha Cable & Conductors Pvt. Ltd. Since then, it is operated by the petitioner's establishment.
4. Learned counsel for the petitioner further submitted that the impugned demand notice came to be issued by the 2nd respondent directing the petitioner herein to clear of all the dues payable by M/s.Haritha Cable & Conductors Pvt. Ltd.
5. Aggrieved, the present writ petition is filed by the petitioner.
6. Learned counsel for the petitioner submitted that the issue involved in the present writ petition is squarely covered by a 3 judgment rendered by a Division Bench of this Court in a batch of Writ Petitions, viz., Writ Petition Nos.3428 of 2007, 5247 of 2006, 6180 of 2007 & 18108 of 2007, dated 15.11.2022, wherein the Division Bench, by relying upon a series of decisions, has in very categorical terms held that a demand notice against the subsequent purchasers who had purchased the property by way of an open auction cannot be held to be sustainable qua the attachment of the previous owner of the establishment who was the original defaulter.
7. On the other hand, learned Standing Counsel for the respondent-Department, referring to the counter-affidavit, submitted that the impugned demand notice was in terms of proviso to Section 11 of the Central Excise Act, 1944.
8. However, when we look into the judgment rendered by the learned Division Bench of this Court in the aforesaid batch of matters, we find that this aspect has also been considered by the Hon'ble Apex Court in Rana Girders Limited vs. Union of India 1, Macson Marbles (P) Ltd. vs. Union of India 2 and Union of India vs. SICOM Limited 3. For ready reference, 1 (2013) 10 S.C.C. 746 2 (2008) 15 S.C.C. 481 3 (2009) 2 S.C.C. 121 4 paragraph Nos.10 and 11 of the aforesaid judgment is extracted as under :
"10. In the course of the hearing today, we find that issue raised in this batch of writ petitions has been answered by the Supreme Court in Rana Girders Limited v. Union of India. That was also a case where similar notice was challenged by the auction purchaser. The notice was issued to the auction purchaser because the borrower had failed to discharge the excise duty liability. Supreme Court considered two earlier decisions in Macson Marbles (P) Ltd. v. Union of India as well as Union of India v. SICOM Limited and thereafter held as follows:
"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. Otherwise, the subsequent purchaser cannot be fastened with the liability relating to the dues of the Government unless there is a specific provision in the statute, claiming "first charge for the purchaser".
As far as the Central Excise Act is concerned, there was no such specific provision as noticed in SICOM as well. The proviso to Section 11 is now added by way of amendment in the Act only w.e.f. 10-9-2004. Therefore, we are eschewing our discussion regarding this proviso as that is not applicable insofar as present case is concerned. Accordingly, we thus, hold that insofar as legal position is concerned, UPFC being a secured creditor had priority over the excise dues. We further hold that since the appellant had not purchased the entire 5 unit as a business, as per the statutory framework he was not liable for discharging the dues of the Excise Department."
11. Supreme Court thereafter held that as far as dues of central excise are concerned, those are neither related to plant and machinery nor to the land and building. Thus, it did not arise out of the said properties. Dues of central excise became payable on the manufacturing of excisable items by the erstwhile owner. Therefore, the excise duties were in respect of those items which were produced and not the plant and machinery which were used for the purpose of manufacturing. It has been held as follows:
"23. We may notice that in the first instance it was mentioned not only in the public notice but there is a specific clause inserted 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 the statutory liabilities arising out of the land shall be borne by the purchaser in the sale deed" and "all the statutory liabilities arising out of the said properties shall be borne by the vendee and the 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 talk 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 6 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 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 of at all by the High Court."
9. In view of the aforesaid categorical decision of the Division Bench of this Court and also series of decisions rendered by the Hon'ble Apex Court (supra), we are of the considered opinion that the demand notice issued by the 2nd respondent to the petitioner in the instant case also would not be sustainable and the same therefore deserves to be and is accordingly set aside. The Writ Petition is allowed. No costs.
10. However, it would be open for the respondent Nos.1 and 2 to take such steps as may be permissible in law for recovery of 7 the outstanding excise duty from M/s.Haritha Cable & Conductors Pvt. Ltd.
11. Consequently, miscellaneous petitions pending, if any, shall stand closed.
__________________ P.SAM KOSHY, J ____________________ N. TUKARAMJI, J Date : 22.01.2024 Ndr