2021-TIOL-961-HC-MUM-CX
Runwal Constructions Vs UoI
CX - Petitioner received a notice dated 29th / 30th January, 2008 from the Assistant Commissioner directing Petitioner to pay an amount of Rs. 1,41,40,767.59 and penalty of Rs. 33,93,609/- to the 2nd Respondent stating that Petitioner had purchased the property with all statutory liabilities - It is submitted that at the time of the purchase, Petitioner was unaware of the Excise duty payable by Respondent No. 3 - Company and is not liable to pay any Excise duty and/or alleged arrears of Respondent No. 3 claimed by Respondent No. 2 from Petitioner - It is with this background, after receiving the notice dated 29th/ 30th January, 2008, Petitioner by letter dated 31.01.2008, immediately informed Respondent No. 2 that the property was acquired at an auction held by the DRT, Kolkata and the same was acquired only with workers liability which had already been paid/ settled; that Petitioner had nothing to do with the payment of any Excise duty or arrears thereof which is the liability of Respondent No. 3 [ M/s. HMP Engineering Ltd., (name was subsequently changed to Blue Moon Engineers Ltd. ] – Petitioner further submitted that after the purchase, Petitioner has started developing the property; that Petitioner's project on said property consist of 5 buildings, containing 504 flats and with respect to 292 flats, it has entered into agreement/arrangements of sale with several flat purchasers who have availed of bank loans by mortgaging the flats to various banks / financial institutions; that liability to pay excise duty arises from manufacture of excisable products by the manufacturer; that Petitioner is not manufacturer of excisable products, hence, Petitioner cannot be termed and/or construed as an "Assessee" under the Central Excise Act, 1944; that though Petitioner purchased the property with the liability to pay the workers and "other existing liability", the words "other existing liability" cannot be construed as the liability to pay excise duty also; that the words "other existing liability" can be the liabilities pertaining to the extent of property only viz, i.e. Municipal tax, electricity and water charges, land revenue etc. - Petitioner is aggrieved that despite the property being vested, the Central Excise duty dues admittedly being due from the 3rd Respondent and not from the Petitioner, are sought to be recovered from the Petitioner by resorting to attachment of / putting restraint on dealing with said property (which does not belong to Respondent No. 3, having been purchased in an auction by the Petitioner) purporting to invoke a provision under the Central Excise Act; that the attachment/ restraint is illegal, unlawful, and liable to be removed forthwith; that since despite Petitioner's replies, clarifying the above position, Respondent No. 2 has issued the impugned notices having serious civil consequences and, therefore, the present petition.
Held:
++ Considering the aforesaid findings of this court in the case of Gharkul Industries Private Limited ( 2009-TIOL-177-HC-MUM-CX ), Bench is of the view that since in the present case as well, there is only purchase of land by Petitioner in the auction conducted by DRT, Kolkata and not transfer or disposal of business or trade in whole or in part but only a transfer or disposal of mere landed asset, the proviso to section 11 of the Excise Act would not be attracted. [para 31]
++ Secured creditor has priority over crown debts/excise dues. Going forward, this is a case where petitioner has purchased land in an auction conducted pursuant to proceedings under the RDDB Act by the Debt Recovery Tribunal Kolkata of the property belonging to the Respondent No. 3 company.
++ Petitioner is not a successor of the business of the erstwhile owner in business or trade viz: of Respondent No. 3, having acquired the property without any charge independent of business or trade of the previous owner, nor the Petitioner is in custody or possession of the said property as a successor of the previous owner against whom there was a demand of excise duty. This is also not a case where the entire unit, i.e. the entire business itself was purchased by the Petitioner. It is not that Petitioner has purchased or taken over the borrower's business or is its successor in business carrying on the borrower's or 3rd Respondent's manufacturing business but has only purchased the said land.
++ Excise duty liability can be fastened only on that person who had purchased the entire unit as a going concern and not on a person who had purchased land and building or machinery of the erstwhile concern. It is only in such cases that the buyer would be responsible to discharge the liability of Central Excise. Otherwise the purchaser cannot be fastened on the liability relating to the dues of the government unless there is a specific statutory provision to that effect. [para 32]
++ Petitioner is an auction purchaser of the said property and has not acquired the business of the Respondent No. 3- borrower. True also that the said purchase as per the order of Confirmation of Sale is subject to worker's liability and other existing liabilities of the owners of the said property. Admittedly, the worker's dues have been settled.
++ Excise dues are not dues which arise out of land or building. Such liabilities could be in the form of property tax, municipal tax, other types of cess relating to property etc. but cannot mean excise duty dues, which arise out of manufacture. In our view, therefore, the language in the confirmation of the Sale is with reference to the liabilities relating to the said property and not with reference to the business of the Respondent No. 3- borrower; we, therefore, hold that since Petitioner has not purchased the entire unit with business, it is not liable for the dues of the Excise Department. [para 33]
++ In view of the decision of the Supreme Court in the case of Rana Girders ( 2013-TIOL-39-SC-CX ), Petitioner would not be liable to excise duty dues of Respondent No. 3- borrower, having purchased only the land and not the entire business of the borrower in the public auction. [para 34]
++ Impugned notices dated 29th / 30th January, 2008, 17th October, 2008 and 14th May, 2009 relating to excise duty dues are quashed and set aside and its recovery by the department, if any, from Petitioner be refunded preferably within a period of four weeks from the date of receipt of this order. [para 37]
- Petitions allowed: BOMBAY HIGH COURT
2021-TIOL-960-HC-MAD-CUS
Sri Sathya Jewellery Vs Pr.CC
Cus - Writ petitions have been filed challenging the Order-in-Original passed by the adjudicatory authorities - admittedly, the writ petitioners responded to the SCNs by submitting their objections/defence and participated in the process of adjudication - The preliminary ground of attack raised is that the show cause notice itself was issued by an incompetent authority, not having jurisdiction under the provisions of the Customs Act, 1962, and therefore, the entire proceedings are liable to be set aside - SC decision in Canon India Private Limited = 2021-TIOL-123-SC-CUS-LB is relied upon - Counsel for Respondents submits that department has filed review petitions in Review Petition (Diary) Nos. 9580, 9584, 9587, 9591 of 2021 before the Supreme Court of India on 07.04.2021; that Writ petitioners cannot rely on the said judgment in view of the fact that the petitioners have not exhausted the statutory appellate remedy provided under Sections 128 and 129 of the Customs Act [ Fourceess Diamond Pvt. Ltd. = 2021-TIOL-532-HC-MAD-CUS relied upon]; that the petitioners are not entitled for any relief.
Held:
++ In order to avoid the Pre-Deposit, which is contemplated under the Statute, the practice of filing writ petitions is prevailing in the High Court and the High Court cannot encourage such practice and the appellate remedy contemplated under the Act is to be exhausted in all circumstances and only under extraordinary circumstances, in order to mitigate injustice, the High Court can intervene and not otherwise. Such power of dispensing with the appeal remedy is to be exercised sparingly and not in a routine manner. [para 7]
++ Court is of the considered opinion that all such grounds raised on merits are to be adjudicated with reference to the documents and evidences to be produced and the scope of the writ petition under Article 226 of the Constitution of India cannot be expanded so as to exercise the powers of the appellate authority in the matter of examination or scrutiny of original documents and evidences produced by the respective parties. The very purpose of the statutory appeal is to scrutinize the orders passed by the original authorities, and therefore, the legislative intention in this regard is to be scrupulously followed in the mater of adjudication of merits with reference to the documents and evidences. [para 11]
++ Appeal provisions are provided with the legislative intention to provide remedy to the aggrieved persons. The High Court, in normal circumstances, would not interfere nor dispense with the appellate remedy. [para 12]
++ The High Court cannot adjudicate the facts and merits with reference to documents and evidences. The High Court, under Article 226 of the Constitution of India, is not expected to usurp the powers of the appellate authorities by adjudicating the merits of the matter on certain documents and evidences.
++ High Court is expected to trust the institutional authorities as well as the hierarchy of institutions contemplated under the Statutes. Institutional respects are of paramount importance for providing complete justice to the parties and the various stages of adjudication are important for the purpose of correcting omissions, commissions, errors in appreciation of evidence, etc.
++ Powers of the High Court under Article 226 of the Constitution of India cannot be extended nor widened so as to allow to lay hands on the facts and circumstances by conducting the trial, nor certain facts and circumstances with reference to documents and evidences can be assumed or presumed or inference can be drawn, which is not preferable. [para 13]
++ As far as the judgment of the Supreme Court of India in the case of M/s.Canon India Private Limited (supra) is concerned, the matter went to the Apex Court by way of regular appeal and the Supreme Court of India, while adjudicating the final orders passed by the Appellate Tribunal, formed an opinion that the issuance of show cause notice itself was by an improper authority.
++ By citing the said finding, the appellate remedy otherwise provided under the Statute cannot be dispensed with, and in the event of accepting the said contention, in all such cases, every litigant will approach the High Court by way of writ petition bypassing the appellate remedy, which is not desirable and cannot be accepted.
++ Institutional respect is of paramount importance. Even the point of jurisdiction, limitation, error apparent on the face of the record, are on merits and all are to be adjudicated before the appellate authority and the appellate authority, more specifically, the Appellate Tribunal or the Commissioner (Appeals), as the case may be, is empowered to adjudicate all such legal grounds raised by the respective parties and make a finding on merits.
++ Thus, usurping the powers of the appellate authorities by the High Court by invoking its powers under Article 226 of the Constitution of India is certainly unwarranted. The parties must be provided an opportunity to approach the appropriate authorities for redressal of their grievances in the manner known to law. In the event of entertaining all such writ petitions, the High Court will not only be over-burdened, but usurping the powers of the appellate authority is certainly not desirable. [para 15]
++ Jurisdictional error should not result in exoneration of liability. Jurisdictional error, if any committed, is technical, and thus, rectifiable. In such circumstances, the Courts are expected to quash the order passed by an incompetent authority and remand the matter back for fresh adjudication. Contrarily, if an assessee is exonerated from liability, undoubtedly, the purpose and object of the Act is defeated. [para 16]
++ The growing practice in the High Court is to file writ petitions under Article 226 of the Constitution of India without exhausting the statutory remedies provided under the Act.
++ Courts are expected to be cautious, while granting exoneration of liability merely on the ground of jurisdictional errors, if any committed by the authorities competent.
++ Liability and jurisdictional errors are distinct factors, and therefore, Courts are expected to provide an opportunity to the Department to decide the liability on merits and in accordance with law with reference to the provisions of the Act and Rules and guidelines issued by the Department. [para 17]
++ Courts shall not provide an unnecessary opportunity to the assessee to escape from the liability merely on the ground on jurisdictional error, which is rectifiable. [para 18]
++ Court has no hesitation in arriving at a conclusion that the petitioners are bound to exhaust the appellate remedy, either under Section 128 or Section 129 of the Customs Act, respectively.
++ Petitioners are at liberty to approach the appellate authority and file an appeal within a period of 60 days and in the event of filing of appeal(s) by the writ petitioners all such appeals are directed to be entertained without reference to the period of limitation.
- Writ petitions dismissed :MADRAS HIGH COURT |
