Arrears of excise duty ofSick company - person liable to discharge the arrears

PJ/Case Laws/2011-12/1220

Case: SRI JAYAJOTHI CO. LTD. V/s COMMISSIONER OF C. EX., TIRUNELVELI

Citation: 2011 (268) E.L.T. 164 (Mad.)

Issue: -Amalgamation of Sick company with another company – sale of certain property - whether purchaser of property liable to discharge unpaid arrears of excise duty of sick company?

Brief Facts:- M/s. Balaramaverma Textile Mills Limited, Shencottach, Tirunelveli District, was a company incorporated under the Companies Act. The said company became sick, and therefore, a reference was made to the BIFR under the Sick Industrial Companies (Special Provosions) Act, 1985. On the orders of BIFR, the said company was amalgamated with National Textile Corporation Limited, which floated a tender to sell some of the properties originally belonging to M/s. Balaramaverma Textile Mills Limited. Petitioner participated in the tender and emerged as successful bidder. Accordingly a sale deed was executed in favor of petitioner. Hence in pursuance of the same, petitioner became the absolute owner of the said properties. Thereafter arrears of M/s. Balaramaverma Textile Mills Limited came to light regarding excise duty & penalty under Central Excise Act, 1944. So a Notice was issued to the petitioner (for recovery of the said amount with interest at the rate of 13% p.a.

Petitioner’s Contention: - Petitioner contended that the amount due from the M/s. Balaramaverma Textile Mills Limited cannot be recovered from the petitioner, as they had not purchased the property by transfer of the business or trade of M/s. Balaramaverma Textile Mills Limited.

Respondent’s Contention: - Revenue contended that under the proviso to Section 11 of the Central Excise Act, 1944 which was introduced by the Act 23 of 2004 with effect from 10-9-2004, the petitioner is liable to pay the said amount and that is the reason a demand notice was issued to him.

Reasoning of Judgment: - The High Court held that in view of the provisions of Section 11, it is clear that only in case where the transfer or disposal of the business or trade in whole or in part affects any change in ownership, in consequence of which he succeeds in such business or trade, then such person will be liable to pay dues. So in this case either M/s. Balaramaverma Textile Mills Limited or National Textile Corporation Limited will only be liable to pay dues.

Hence, the petitioner, who has purchased some properties and not the trade or business, is not liable to pay dues as provided in the proviso to Section 11 of the the Central Excise Act, 1944.

Decision:- Petition allowed.

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PJ/Case Laws/2011-12/1220

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