Whether recovery of government dues can be made from an assessee who has took over the business of the defaulter under section 11A Central Excise Act, 1944?

PJ/Case Law/2014-15/2362

Case:SACHIN DYEING & PRINTING MILLS PVT. LTD.VERSUS COMMR. OF C.EX., SURAT

Citation: 2013(296) E.L.T. 340 (Tri.-Ahmd.)

Brief Facts:There were two demands against M/s. Vaishnavi Dyeing & Printing Mills Pvt. Limited confirmed during the years 2000-01. No appeal was filed and the order became final. Subsequently the assets were taken over by M/s. Gujarat Industrial Investment Corporation Limited (GIIC for short), and who transferred it to M/s. Sachin Dyg. & Ptg. Mills on the basis of certain terms and conditions. The Revenue initiated action for recovery of Central Excise dues, due from M/s. Vaishnavi Dyeing & Printing Mills Pvt. Limited, from the transferee Company i.e. from the present appellant. The proceedings initiated for recovery have been upheld in the impugned order and hence the appeal.

Appellant Contention:Learned counsel on behalf of the appellant submits that appellant cannot be considered as successor at all and even if the appellant is considered as successor, the provisions for transferring the liability to the successor in Section 11A of Central Excise Act, 1944, which came to be in effect in Sept. 2004, whereas the assets were transferred to the appellants in Jan. 2004. Further, he also submits that GIIC had taken over the assets which were provided to them as security for the loan and the submits that it cannot be said that the appellant is successor or transferee from M/s. Vaishnavi Dyeing & Printing Mills Pvt. Limited at all.

Respondent Contention:
The respondent has submitted that still previous assessee has not paid the government due and subsequently its assets were taken over by M/s. Gujarat Industrial Investment Corporation Limited (GIIC for short), and who transferred it to M/s. Sachin Dyg. & Ptg. Mills on the basis of certain terms and conditions. Hence, provision for transferring the liability to the successor as per the section 11A of Central Excise Act, 1944 stated that recovery of due which is still defaulted by the preceding assessee would be liable to settle by successor. The Commissioner (Appeals) in his order has relied upon the State Financial Corporation Act, 1951.

Reasoning of Judgment:We have considered the submission from both side and perused the record, we find that the issue is complex. The Commissioner (Appeals) in his order has relied upon the State Financial Corporation Act, 1951. Further the appellant has relied upon the decision of the Hon’ble Supreme Court and decision of the Hon’ble High Court of Punjab & Haryana in the case of T.C. Spinners Pvt. Limited v. UOI - 2009 (243) E.L.T. 31 (P&H) to submit that the liability cannot be fastened on the appellant. Even though the Commissioner has distinguished the decision cited by the appellant in State Financial Corporation Act and contractual terms, there is need to examine the terms of the contract-, conditions of sale, decisions relied upon by the appellant in the light of statutory provisions in the Central Excise Act relating to recovery, which requires detailed hearing and since the issue involved is legal and prima-facie the issue seems to be covered by the decisions of the Hon'ble High Court of Punjab & Haryana in the case of T.C. Spinners Pvt. Limited, I consider it appropriate that the requirement of pre-deposit is to be waived and stay has to be granted against recovery during the pendency of appeal in this case.

Decision:Stay granted.

Comment:The tribunal held the issue to be complex and considering that the appellant had decisions of apex court in his favor, granted waiver of the pre-deposit but at the same time also held that matter has to be studied in depth on legal and statutory grounds to reach on to a conclusion.

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PJ/Case Law/2014-15/2362

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