Commissioner of C. Ex. vs Sandvik Asia Ltd.

D.A. Mehta, J.—The appellant-revenue has proposed the following two questions:

(A) Whether in the facts and circumstances of the case, the Tribunal is justified in allowing the appeal of the respondent by holding that it cannot be appropriate and legal to recover dues of money due to the respondent on the ground that it has a legal entity different from M/s. Chokshi Tubes Company, despite the provisions contained in Section 11 of the Central Excise Act, 1944 read with Rule 230(2) of the Central Excise Rules, 1944?

(B) Whether the Tribunal in the facts and circumstances of the case is justified in holding that dues pending against predecessor M/s. Chokshi Tubes Company Ltd. cannot be recovered from its successor i.e. M/s. Sandvik Chokshi Limited?

Heard the learned advocate for the appellant. It was contended that provisions of Section 11 of the Central Excise Act, 1944 (the Act) permit deduction of the amount payable to a person from whom certain sums of duty are required to be recovered. That in the present case the respondent-assessee was a company who was entitled to rebate of duty to the extent of Rs. 5,91,964/- and Rs. 6,81,357/- in relation to the two consignments of goods exported in December, 2000. Simultaneously, sums of Rs. 40,70,998/- and Rs. 16,52,899.60 were pending recovery since 1998, being payable by M/s. Chokshi Tubes Company Limited (the Tubes Company). That the Tubes Company and one Sandvik AB of Sweden floated a joint venture on 10-9-1996 and for the said purpose promoted a new company called Sandvik Chokshi Private Limited wherein the Tubes Company was holding 49% shares and Sandvik AB of Sweden was having 51% holding. Subsequently due to mergers and de-mergers a company named Sandvik Asia Limited came into existence w.e.f. 1-1-2002. According to the appellant, despite all these exercises, the fact remains that the assets and liabilities of the Tubes Company stood transferred to the respondent-assessee. Therefore, the revenue was entitled to effect recovery by adjusting the rebate due to the respondent-assessee against the outstanding demand in case of the Tubes Company. In support of the submissions reliance has been placed on Apex Court decision in case of Macson Marbles Pvt. Ltd. Vs. Union of India (UOI), to submit that the principle of Rule 230(2) of The Central Excise Rules, 1944 (the Rules) can also be made applicable to the facts of the case.

In the impugned order dated 28-3-2007 the Tribunal has found that the joint venture company is a new company different from the Tubes Company and merely because the Tubes Company was initially instrumental in formation of the respondent-assessee company it was not permissible to the revenue to recover the dues of the Tubes Company from the monies due and payable to the respondent-assessee as both are different legal entities.

Section 11 of the Act can have no application in the facts of the case. Merely because the Tubes Company was initially 49% shareholder in the joint venture company it cannot be stated that the sums due to the joint venture company are the sums due to the Tubes Company. Section 11 in fact permits such adjustment only when in hands of the same person the monies are recoverable on the one hand and monies are also payable on the other hand to the same person. Therefore, if any monies were payable to the Tubes Company it would be open to the revenue to effect recovery by adjusting such payable amount. The Apex Court decision in case of Macson Marbles Pvt. Ltd. (supra) was in context of Section 29 of the State Financial Corporation Act, 1951 and reference to Rule 230(2) of the Rules as they then stood (which are no longer on the Statute Book) cannot make the said decision applicable in the facts of the present case.

In the circumstances, in absence of any legal infirmity in the impugned order of the Tribunal, the appeal does not merit acceptance. No question of law, as proposed or otherwise, much less a substantial question of law, arises from the impugned order of the Tribunal.

The appeal is accordingly dismissed.