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Judgment
Heard learned counsels for the parties.
Learned counsel for the petitioner urged the Court in the beginning that as the entire issue is in a very narrow compass, the Court may takeup this matter for final disposal, to which Shri Nirzar Desai, learned advocate for the respondent fairly agreed and hence, at the request of learned counsel for the petitioner with concurrence of learned advocate for the respondent, the matter was takenup for final disposal.
Rule. Shri Desai, learned advocate waives service of notice of rule on behalf of the respondent no.2. By consent of the learned counsels for the parties, rule is fixed forthwith.
The petitioner by way of this petition under Article 226 of the Constitution of India has approached this Court with following prayers.
"A. Your Lordships be pleased to issue a writ of certiorari or in the nature of certiorari or writ of mandamus or in the nature of mandamus or any other appropriate writ or order quashing and setting aside the marking of lien on the property records (form no.7/12) of the Petitioner firm in respect of its industrial plot/shed no.238 (58) in village survey number 197/1 & 2, Moje Jolwa, Taluka Palsana, District Surat as well as the impugned certificate letter in AnnexureA hereto as contrary to law, lacking in jurisdiction, perverse, acts amounting to abuse and misuse of statutory provisions, ab initio illegal and therefore, nonest.
B. Your Lordships be pleased to hold that the petitioner firm being not a successor in business or trade of Shri Ganesh Mahadev Dyeing and Printing Mills and being only a purchaser of its industrial plot/shed in 2007 and the dues having been adjudicated against the seller in 2010, no Central Excise dues of the seller can be recovered from the petitioner firm nor its property can be subject to any lien by the Central Excise Department with grant of consequential relief to the petitioners.
C. Your Lordships may kindly grant exparte ad interim relief by way of a stay of impugned lien marked on the property records (form no.7/12) of the petitioner firm and the impugned exparte certificate dated 25th May 2018 with a direction to respondent no.2 and the officers working under him not to proceed with the enforcement of the recovery of the amount therein until final disposal of this Special Civil Application.
D. Such other and further relief(s) as may be deemed just and proper in the facts and circumstances of the present case may kindly be granted." Thus, what is essentially under challenge is an attempt and coercive action on the part of the respondents in seeking recovery of the excise dues of one M/s. Shri Ganesh Mahadev Dyeing Mills, a partnership firm whom from the petitioner purchased the property along with the construction and machinery thereon under the Sale Deed dated 7th September 2007 and obtained possession on 1st June 2006, on the specious ground that the petitioner would not liable to make good the excise departmental outstanding under the provisions of Section11 of the Central Excise Act, 1944 (hereinafter referred to as "the Act" for the sake of brevity) as petitioner was perceived to be successor of the erstwhile owner of the property, which as per the petitioner was wholly incorrect, illconceived and deserve to be quashed and set aside.
The facts in brief, as could be gathered from the memo of the petition, deserve to be setout as under in order to appreciate the controversy :
5.1 The petitioner firm purchased industrial shed in plot no.238(58) comprising an area of 1161.29 m2 in revenue survey no.197/1 and 2, Moje Jolwa, Taluka Palsana, District Surat from Shri Ganesh Mahadev Dyeing Mills vide Sale Deed dated 7th September 2007.
5.2 The name of the petitioner firm was entered in village revenue form no.6 and form no.7/12 on 22nd July 2008. The petitioner received a letter dated 9th September 2014 from the Superintendent of Central Excise, RangeIV, DivisionII, SuratI Commissionerate stating that duty amount of Rs.9,59,820/ plus interest, penalty of Rs.9,59,820/ from Ganesh Mahadev Dyeing and Printing Mills Private Limited and personal penalty of Rs.96,000/ upon Shri Vishnu G. Malpani, partner are outstanding and since the petitioner firm has purchased the said premises from Ganesh Mahadev Dyeing and Printing Mills Pvt. Ltd., the petitioner firm is liable for the said dues as per proviso to Section11 of the Central Excise Act, 1944. The letter further contained that the petitioner firm must pay the said dues and submit the proof of payment to the office of the range superintendent immediately, otherwise action as per provisions of this section will be taken for recovery of the said dues.
5.3 Another letter for recovery was received by the petitioner firm in November2017. In reply to that letter, the petitioner vide its letter dated 28th November 2017 informed the Superintendent of CGST and Central Excise, RangeII, DivisionV, Surat Commissionerate that at the time of purchasing the industrial plot/shed from Shri Ganesh Mahadev Dyeing and Printing Mills by the Petitioner firm, no recovery of dues was pending from the seller. In May 2018, the bankers of the petitioner firm - HDFC Bank, informed the petitioners that there is a lien on industrial shed of the petitioner firm hypothecated to the bank. Immediately, the partner of the petitioner firm approached the Superintendent of CGST and Central Excise, RangeII, DivisionV, Surat Commissionerate for the details.
5.4 A certificate letter F.No.XXIII/13/2017 dated 25th May 2018 was issued by the Superintendent of CGST and Central Excise, RangeII, DivisionV, Surat Commissionerate intimating total realisation of Rs.23,53,075/ against order in original dated 27th January 2010 passed by the Additional Commissioner of Central Excise, SuratI Commissionerate in the case of Shri Ganesh Mahadev Dyeing Mills. It further states that balance amount of interest to be paid is Rs.15,10,321/. As per the request of its Banker, who have advanced loans etc., to the petitioner firm, the certificate letter dated 25th May 2018 was submitted to the bankers. Thereupon, the petitioner firm had to open a fixed deposit account for Rs.15.25 lakhs and the said fixed deposit had been marked with the lien of the firm's bankers HDFC Bank, City Light, Surat.
5.5 However, being aggrieved due to the lien marked in 2017 on the revenue form no.7/12 in respect of the industrial plot no.238 (58) in survey no.197/1 & 2 in Moje Jolwa, Taluka Palsana, District Surat purchased by the petitioner firm on 7th September 2007 from Shri Ganesh Mahadev Dyeing Mills and the impugned certificate dated 25th May 2018 stating that an amount of Rs.15,10,321/ towards outstanding interest payable by Shri Ganesh Mahadev Dyeing and Printing Mills is due from the petitioner firm. Hence, the present petition.
Learned counsel for the petitioner invited Court's attention to the provisions of Section11 of the Act and submitted that unfortunately the concerned authority appears to have misconceived the said provision only for seeking recovery from the petitioner, where there exists no basis whatsoever for effecting the same.
Learned counsel for the petitioner contended that the petitioner purchased the property after taking the possession of the property on 1st June 2006 by executing a registered sale deed dated 7th September 2007 and the requisite mutation was also carriedout under the revenue record right on 22nd July 2008. Since then, the mutation entry in respect of subject property indicates that the petitioner is the sole owner and proprietor of the property in question in place of the erstwhile owner and on that basis, the petitioner also could avail the financial assistance and loan from their bankers. Unfortunately, the petitioner received opinion and intimation from their bankers that the land in question on which loan is extended to the petitioner cannot be said to be land and property without encumbrances and hence, called upon the petitioner to pay the balance outstanding interest of Rs.15,10,321/, which was claimed to be outstanding from the erstwhile owner and sought to be recovered from the petitioner being successive owner of the property.
The entire exercise is thus, proceeded on absolutely incorrect premise and therefore, the same is required to be quashed and set aside.
Learned counsel for the petitioner also invited Court's attention to the affidavitinreply filed by the respondent to indicate that the respondents have unfortunately relied upon the usual covenant and terms and conditions of the Sale Deed to fasten the liability of paying the dues of its erstwhile owner, which to say the least can be said to be wholly unfortunate and illconceived. No Court much less High Court may countenance such approach or a stance taken by the respondents and put it on affidavit on their behalf.
Shri Nirjar Desai, learned advocate appearing for the revenue submitted that the petitioner could not have purchased the property without being aware of the fact that there were outstanding dues from the erstwhile owner. The erstwhile owner also made a mention in the Sale Deed that the property does not have any dues outstanding. This being incorrect statement, the department was justified in perceiving the petitioner's liability to make it good by invoking the provision of Section11 of the Act.
Shri Desai Learned advocate for the revenue further submitted that the averments made in the Sale Deed and reading the same along with the provision of Section11 may persuade this Court to appreciate the department's view and action, which was bonafidely taken for recovering the Government dues.
Shri Desai, learned advocate for the revenue when called upon to indicate as to how in absence of any specific provision qua the successor owner of the property being made liable to pay the excise dues of the erstwhile owner of the property, he could not reply to this query and rightly so as there exits no provision except in terms of Section11 proviso, which unfortunately could not be attracted or invoked in the present facts, as it is not even the case of the department that there was any suspicious or fraudulent transfer of property or business so as to evade or avoid the excise dues. Assuming for the sake of examining without holding that there was an attempt on the part of the original seller, but so far as the business is not being transferred or the business is not sold as envisaged under Section11 proviso, mere transfer of the property with machinery would remain only the transfer of the property and not transfer of business and this fine distinction between the two appears to have been impressed by the authority while imposing the restrictions upon the use of the property or addressing the letters of the bank to the petitioner.
We have perused the sale deed. We have also perused the affidavitinreply. Unfortunately, in affidavitinreply, it is no where pleaded that there was any fraudulent transfer of business for avoiding the payment of dues by the erstwhile owner of the property. The unfortunate invoking of the general and common clause in the Sale Deed qua liabilities of Government dues on the property deserve to be appreciated in a proper perspective. The excise dues were not liable to be recovered from the property in question in the hands of the petitioner as still the property's change hands there was no attachment or restrictions or charge placed by the department and the property was in fact free from such kind of charge from excise department and therefore, it was not open to the department to invoke provision of Section11 to rope in the subsequent purchaser of the property by misconceiving it to be a purchase of business so as to attribute the petitioner successor only for the purpose of invoking Section11, which unfortunately has not been established by the petitioner in the present petition. The close perusal of the affidavitinreply also clearly indicates that in absence of such an attempt, Section11 of the Act and its invocation cannot justify any demand from the petitioner or the dues of the erstwhile owner of the property.
As a result thereof, it would be open to the petitioner to seek appropriate mutation from the revenue authorities on the strength of this observation and the decision of this Court in this matter, as the revenue entry so far as the encumbrances is concerned would not be justified in view of observations made hereinabove. It goes without saying that this observation shall not in any manner preclude or impead the respondent from recovering their dues from the erstwhile owner strictly in accordance with law.
In view thereof, the petition succeeds and the Court is of the view that the petitioner can not be held liable to pay any dues of the erstwhile owner of the property in absence of any specific covenant qua the same. The petition is therefore partly allowed. Rule made absolute to the aforesaid extent. However, there shall be no order as to costs.