By TIOL News Service

MUMBAI, JUNE 26, 2017: THIS is a Revenue appeal.

The fact of the case is that the respondent purchased the factory premises of M/s Bagwe Udyog Ltd. on 'As is where is basis and what is basis' from the Debt Recovery Tribunal (DRT) by making payment of Rs.10.75 crores and for which DRT, Mumbai issued sale certificate.

Thereafter, they applied for Central Excise Registration from LTU, Mumbai on 19.02.2013.

The Dy. Commissioner Central Excise, Khopoli vide letter dated 18.03.2013 informed LTU, Mumbai that government dues amounting to Rs.30,45,434/- (Duty – Rs.9,80,742/- + interest Rs.20,64,692/-) were pending against M/s. Bagwe Udyog Ltd.

Vide GAR-7 challan dated 24.05.2013, the respondent paid the pending dues and intimated the department on 18.06.2013.

Later, on 06.09.2014, they filed a refund claim in respect of the 'alleged dues' paid of Rs.30,45,434/-.

A SCN came to be issued on 10.02.2015 proposing denial of refund on the ground that in terms of the provisions of Section 11of CEA, 1944, the Govt. dues of M/s. Bagwe Udyog Ltd. are liable to paid by the new owner i.e. respondent.

The refund claim was rejected by the adjudicating authority but the Commissioner (Appeals) set aside this order and, therefore, Revenue is aggrieved.

The AR reiterated the stand taken by the department.

The respondent submitted that proviso to Section 11(1) is not applicable in the present case as they had not purchased the business of previous owner. Inasmuch as since they have procured land under auction from DRT, recovery of dues of earlier owner could not have made from the respondent. Furthermore, Section 11E is not applicable to the present case as the issue of first charge does not arise. In support, the decisions in Lamifab Industries - 2015-TIOL-2542-HC-AHM-CX & Gopal Agarwal - 2015-TIOL-348-HC-AP-CX were cited.

The Bench observed that on an identical issue the CESTAT had passed a detailed order in the case of M/s. Rajaram Steel Industries Pvt Ltd [Final Order No. A/2535/15/SMB dated 29/5/2015] - 2015-TIOL-1917-CESTAT-MUM and wherein it is held that if any property is sold under auction, buyer cannot be held liable for payment of the arrears of the previous owner of the property.

Reproducing the said decision (incidentally, penned by the same Member(T)) almost in its entirety, the Bench concluded thus -

"From the above decision it can be observed that the same was passed after considering various land mark judgments of the High Court and Supreme Court wherein conclusively held that in case of purchase of property alone under auction from Bank/financial institutions Section 11 is not applicable. Section 11 is applicable only in case where the buyer purchases the business in whole or in part from the earlier owner against whom central excise dues are pending. In the present case admittedly the respondent having their own existing business, only purchased the land from the bank in auction, accordingly they have not purchased the business either in whole or in part from the earlier owner, therefore the old dues of earlier owner is not recoverable from the present respondent , therefore, whatever amount paid by them is clearly refundable…"

The impugned order was held to be correct and legal and, therefore, the Revenue appeal was dismissed.

(See 2017-TIOL-2163-CESTAT-MUM)