Kerala Financial Corporation vs Collector of Central Excise

Varghese Kalliath, J.—This petition is by Kerala Financial Corporation. It seeks to quash Ext. PI demand notice, Ext. PI notice is issued u/s 7 of the Revenue Recovery Act.

The Deputy Tahsildar has issued the notice Ext. PI stating that the Manager, Kerala Financial Corporation has defaulted payment of an amount of Rs. 77,544.77. According to the petitioner, Ext. PI notice is illegal in so far as the petitioner or the Manager of the Kerala Financial Corporation is not a defaulter and no arrears is due from the petitioner.

The petitioner''s case is that the Kerala Financial Corporation has advanced large amounts to an industrial unit by name Hi-Impress Fibre Glass Industries. Hi-Impress Fibre Glass Industries did not repay the loan as agreed to. So the petitioner has taken proceedings u/s 29 of the State Financial Corporation Act, 1951. u/s 29 of the above Act, it is possible for the Financial Corporation to take action against the defaulting industrial unit. Under Sub-section (5) of Section 29 of the Act, the Financial Corporation shall be deemed to be the owner of such concern for the purpose of suits by or against the concern and shall sue and be sued in the name of the concern. Because of these provisions contained in Section 29(5), the first respondent thinks that the Financial Corporation is deemed to be the owner of the unit concerned and that the unit being a defaulter for payment of excise duty, the first respondent can invoke the power u/s 11 of the Central Excises and Salt Act, 1944 against the petitioner. True under. Section 11, the first respondent can take proceedings under the Revenue Recovery Act against the defaulter who has not paid the excise duty due to the Revenue. It has to be remembered that the Unit is the defaulter and not the petitioner.

Counsel for the first respondent submitted that by virtue of Section 29(5) of the Financial Corporation Act, petitioner-corporation has to be deemed as the owner and as such Revenue Recovery proceedings can be initiated against the petitioner. Of course, against the assets of the unit in the hands of the Financial Corporation, it is possible to say that Revenue Recovery proceedings can be initiated in respect of the properties of the unit. I am not saying anything conclusively on the point since I feel that it is unnecessary in the light of the language of Ext. PI notice. In Ext. PI notice it is said that the defaulter is the Corporation, i.e. the petitioner and that it is obviously incorrect. By saying that the petitioner is the defaulter not only the assets of the unit, but all the assets of the petitioner corporation will be liable as per the notice. In this view, Ext. PI notice is illegal and it requires to be quashed in this proceedings. I declare that Ext. PI notice is illegal and quash the same. Original Petition is allowed.

I make it clear that this decision will not preclude the first respondent from taking appropriate proceedings in law for the realisation of the amount due to it.