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SUPREME COURT OF INDIA
K.M. Joseph, Hrishikesh Roy, JJ.
Wave Industries Pvt. Ltd. – Appellant
Versus
State of U.P. & Ors. – Respondents
Civil Appeal No. 9272 of 2022 (Arising out of SLP (C) No. 3525 of 2018) with Civil Appeal No. of 2022 (Arising out of SLP (C) No. 4053 of 2018), Civil Appeal No. of 2022 (Arising out of SLP (C) No. 3537 of 2018), Civil Appeal No. of 2022 (Arising out of SLP (C) No. 12724 of 2018)
Decided On : 15-12-2022
Taxation – Slump Sale Agreement – Liability of unpaid duty, penalty, and interest – Liability towards duty in question for Amroha unit are in respect of business transactions for period anterior to signing date of Slump Sale Agreement – Assessment orders and recovery citations have been issued by taxing authorities in name of UPSSCL – Business liability for Amroha unit had definitely arisen out of operation of unit during period before same was sold to appellant, although liability is to be quantified and discharged at a future date – When liability is capable of being estimated with reasonable certainty, liability is not to be treated as a contingent one and should be considered as a liability which may be discharged at a future date – Such being position in law and liability in question not being a contingent one, same cannot be fastened on purchaser who were not operating unit prior to Slump Sale Agreement – Liability of purchaser for dues relating to activities and operations of unit for period anterior to Slump Sale Agreement, could not have been fastened on appellant – It is UP State Sugar Corporation Limited which had collected all dues from their customer on behalf of State Government and they are under obligation to deposit collected sum in government treasury – Liability in question, not being a contingent liability, cannot be fastened on shoulders of appellant – Impugned Judgment set aside.(Paras 15, 17, 18 and 20)
Result : Appeal allowed.
JUDGMENT :
Hrishikesh Roy, J.
Leave granted.
2. Heard Mr. T. Srinivasa Murthy, the learned counsel appearing for the appellants. Also heard Mr. Balbir Singh, the learned Additional Solicitor General of India appearing for respondent-State. The U.P State Sugar Corporation (respondent no.2) for short “the UPSSCL”, is represented by Mr. Pradeep Misra, the learned counsel.
3. For the sake of convenience, we will take the facts of SLP(C) No. 3525 of 2018, for the purpose of this judgment: -
The appellants were the writ petitioners before the High Court who were unsuccessful in their challenge to the order dated 7.6.2016 whereby the liability for payment of Rs.2,14,169/- duty, Rs. 2,41,169/-penalty, and Rs.1,40,459/- interest, amounting to Rs. 5,68,797/- is declared to be borne by M/s Wave Industries Pvt. Ltd. (Purchaser) and not by the Seller i.e. “UPSSCL”.
4. This appeal relates to the Amroha sugar mill which was one of the four loss making sugar mills owned and operated by the UPSSCL. For the unit at Amroha, a Slump Sale Agreement dated 17.7.2010 was entered into, followed by the sale deed dated 4.10.2010, between the UPSSCL and the appellant.
5. The above arrangements were preceded by the advertisement dated 29.6.2009 in the newspaper proposing slump sale of the loss making sugar mills of UPSSCL. A pre-bid meeting was next held on 10.7.2009 with the prospective buyers where, inter alia, concern was raised on outstanding liabilities against the units on sale. The appellant submitted bid for Rs.13.94 crores for the Amroha Unit and as per Clause 12 of the Slump Sale Agreement dated 17.7.2010, all liabilities referred to in the said clause, accruing before the date of signing agreement were to be borne by the Seller and those of subsequent period, were to be borne by the Purchaser. The sale agreement was registered accordingly on 9.8.2010 and possession of the Amroha unit was taken over by the appellant on 17.8.2010 and since then the appellant has been managing the unit. Subsequent to the Slump Sale Agreement, formal sale deed was executed on 4.10.2010 and in Clause 9 thereof it was made clear that the seller shall be liable to bear all assessments, rents, rates, taxes, outgoing and impositions of whatsoever nature relating to the Unit upto the signing date and thereafter these will be the liability of the purchaser. The dispute here relates to liability of unpaid duty, penalty, and interest. When recovery proceeding relating to the period prior to 17.7.2010 was initiated by the respective departments, the appellant filed a writ petition before the Lucknow Bench of the High Court of Allahabad and the said Writ Petition No.2587(M/B) of 2013 was disposed of by the High Court on 22.3.2013, with a direction to the State Government to afford hearing to the purchasers and decide their representation, with a speaking order.
6. The appellants representation was disposed of on 7.6.2016 by declaring that the purchaser is liable for the outstanding liabilities in respect of the sugar unit at Amroha upto 30.11.2011. The payable duty with penalty and interest was quantified at Rs.5,68,797/- and the issue to be decided in this appeal is whether those outstanding liabilities are to be discharged by the seller or the purchaser.
7. Before we proceed further it would be proper to take note of certain defined terms in the Slump Sale Agreement dated 17.7.2010:
“Certain Liabilities:
Certain Liabilities shall mean such liabilities, debts and other obligations in respect of the Unit including contingent liabilities of Unit except Excluded Liabilities.
Current Liabilities:
B. Statutory Dues
(vi) Income Tax
(vii) Sale Tax/VAT
(viii) Entry Tax
(ix) Others due including Purchase tax.
Excluded Liabilities:
“Excluded Liabilities shall mean Liabilities claimed till Signing Date which are being retained/settled by the Seller.
Explanation : For the purposes of this definition liabilities accrued but unclaimed shall not be settled or retained by the seller but the same shall stand
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