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2002 Supreme(Ori) 85
2002 (I) OLR — 558
THE CHIEF JUSTICE AND A. S. NAIDU, J.
M/s. Suburban Ply and Panel Pvt. Ltd.... Petitioner
Versus
Assistant Commissioner, Central Excise and Customs, Bhubaneswar Division and others... Opp. Parties
Original Jurisdiction Case No. 12712 of 1999
Decided on 28th February, 2002.
For Petitioner:M/s. M. R. Mohanty-2 G. K. Nayak
For Opp. parties:Senior Standing Counsel (Cen¬tral)
M/s. S. Rath (opp. party No. 4)
Headnote:CENTRAL EXCISE ACT, 1944 — Sec. 11 read with Central Excise Rules — Rule 230 (2) — The Assistant Commissioner, Central Excise and Customs attached the amount due towards duty from petitioner — The petitioner had mortgaged its undertaking to Orissa State Financial Corporation — The Corporation had taken over the unit with all its assets in terms of Sec. 29(1) of the State Financial Corporations Act, 1951 — Rule 230(2) of Central Excise Rules clearly states that if the defaulter had sold the undertakings, the transferee would be liable for outstanding excise duty on the date of transfer — The transfer in the instant case was not by original manufacturer or the owner himself but was at the instance of O.S.F.C. — The assignee-petitioner cannot resist the claim amount for recovery of the debts by the department — The debt payable under Central Excise Act which is outstanding is a debt due to Union of India and as such, is a crown debt having precedence over mortgage debt which can be recovered by the Financial Corporation by proceeding under that Act — Rule 230(2) of Central Excise Rules read with Sec. 11 of the Excise Act entitles the department to recover the amount from manufacturing unit or manufacturer or whoever is in possession, the right of department to proceed against the unit in the hands of the petitioner has to be recognised — Petitioner cannot challenge the demand of Excise Department. (Paras 1 to 8)
JUDGMENT
P. K. BALASUBRAMANYAN, J. — By order dated 9.9.1999, the Assistant Commissioner, Central Excise and Customs, Bhubaneswar Division attached an amount of Rs. 2,45,635/-under Section 11 of the Central Excise Act read with Rule 230 (2) of the Central Excise Rules on the basis that the said amount was due towards duty from M/s. Orissa Ply and Panels Ltd. in terms of the order of adjudi¬cation dated 22.11.1997. The Orissa Ply and Panels Ltd. had mort¬gaged the Undertaking to the Orissa State Financial Corporation (hereinafter referred as ‘Financial Corporation’). The Financial Corporation in exercise of its power under Section 29 of the State Financial Corporations Act, 1951, took over the Industrial Unit with all its assets in terms of Section 29 (1) of that Act and subsequently sold the Undertaking as envisaged by that sec¬tion. The writ petitioner, a Private Limited Company purchased the fixed assets of the defaulting Company, in the sale by the Financial Corporation. On the attachment being effected, the petitioner approached this Court with this writ petition praying for the issue of writ of certiorari to quash the order of attach¬ment dated 9.9.1999 under Annexure-1 and for other incidental reliefs. According to the petitioner-Company, it was incorporated on 18.12.1998 and the dues for which the attachment was effected, was incurred even prior to its incorporation, that the transfer in favour of the petitioner in terms of Section 29 of the State Financial Corporations Act, 1951 enabled it to take the stand that it was not liable for any of the prior dues of the default¬er-company, that in view of Section 468 of the State Financial Corporations Act, the provisions of Section 11 of the Central Excise Act or Rule 230 (2) of the Central Excise Rules, cannot prevail and going by the relevant provisions of the State Finan¬cial Corporations Act, the petitioner-company had no liability for the excise duty alleged to be outstanding from the defaulter. The petitioner therefore submits that even if the claim for Central Excise Duty outstanding against the defaulter could be enforced, it could be enforced only against the defaulter and not against the transferee from the Financial Corporation, when the Financial Corporation has sold the Undertaking in exercise of its power under Section 29 of the Act. It is also contended that the defaulting-company was still in existence and the petitioner only purchased some of the machineries and assets belonging to it and it was for the Central Excise Authorities to proceed against the defaulting-company.
2. Learned counsel for the Central Excise Authorities contended that Section 11 of the Excise Act read with Rule 230 (2) of the Excise Rules, enabled the Excise Authorities to recov¬er the amounts by proceeding against the movables and machineries in the hands of the writ petitioner as transferee from the origi¬nal defaulter and that there was nothing in the State Financial Corporations Act which stood in the way of the Excise Authorities enforcing the liability as it has sought to do in the case on hand. Learned Standing Counsel for the Financial Corporation submitted that when the Financial Corporation takes over an Undertaking under Section 29 (1) of the State Financial Corpora¬tions Act and thereafter deals with it, the liability of the defaulter does not attach itself either to the Financial Corpora¬tion or to the subsequent transferee and hence the attempt to recover the duty was not legal or justified. It was also contend¬ed that the Financial Corporation was a prior mortgagee and the subsequent claim by the Central Excise Department cannot prevail over the prior mortgage when in enforcement of its mortgage it had brought the property to sale for the discharge of the debt due to the mortgagee.
3. In a case where charge is created by Statute (for the Sales Tax dues of the defaulter) even though subsequent in point of time to the mortgage in favour of the Financial Corporation, the Su
