‘Other existing liability’ cannot be construed as the liability to pay excise duty also: Bombay High Court

The words “other existing liability” can be the liabilities pertaining to the extent of the property only viz, i. e. Municipal tax, electricity and water charges, land revenue, etc. 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 whereas excise dues are not dues that arise out of land or building. Since such liabilities could be in the form of property tax, municipal tax, other types of cess relating to a property, etc. but cannot mean excise duty dues, which arise out of manufacture. This remarkable judgment was passed by the Bombay High Court in the matter of M/S RUNWAL CONSTRUCTIONS V UNION OF INDIA [WRIT PETITION NO. 1335 OF 2009] by Honourable Justice Sunil P. Deshmukh and Justice Abhay Ahuja.

By this petition filed under Article 226, the Petitioner is challenging notices dated 29th / 30th January 2008 & 17th October 2008 and 14th May 2009 by which the Respondent purports to prohibit and/or restrain Petitioner from transferring or charging the property situated at Mulund, Mumbai for alleged non-payment of Excise duty.

Petitioner is a Partnership firm and carries on the business of construction and development. The office of the Assistant Commissioner of Central Excise having a claim of Excise duty dues against Respondent M/s. Bluemoon Engineers Limited and is now claiming the same from the Petitioner.

It appears that certain property admeasuring 24,280.94 square meters situated at Mulund, Mumbai belonging to a company known as M/s. HMP Engineering Ltd. had been mortgaged to Indian Bank as security. At an auction conducted by the Debt Recovery Tribunal Kolkata, Petitioner’s offer was accepted. Certificate of Sale of immovable property dated 05.11.2004, it was certified by the aforesaid order of the DRT, Petitioner was declared purchaser of the property for a consideration of Rs. 12 crores paid by the Petitioner. The certificate of the Sale was stamped and subsequently registered with the office of the Sub-Registrar. It is submitted that at the time of the purchase, Petitioner was unaware of the Excise duty payable and is not liable to pay any excise duty. 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 and thus Petitioner had nothing to do with the payment of any Excise duty or arrears thereof which is the liability.

It was stated by HC that, “Considering the aforesaid findings of this court in the case of Gharkul Industries Private Limited, we are 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.

Additionally, “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.”

In the present case, the petitioner has not acquired the property without any charge independent of business or trade of the previous owner, nor is he in custody or possession of the said property as a successor of the previous owner against whom there was a demand of excise duty.

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.

Thus, the impugned notices relating to excise duty dues were quashed and set aside and its recovery by the department was ordered to be refunded within four weeks.

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