No excise duty Liability on mere Purchase of Land instead of entire business

Runwal Constructions Vs Union of India (Bombay High Court)

Conclusion: Notice issued to assessee for prohibiting the transfer of property for alleged non-payment of Excise duty by Respondent No. 3 was quashed as excise dues were not dues which arise out of land or building. Such liabilities could be in the form of property tax, municipal tax, other types of cess relating to property etc. but could not mean excise duty dues, which arise out of manufacture and assessee would not be liable to excise duty dues of Respondent No.3- borrower, having purchased only the land and not the entire business of the borrower in the public auction.

Held: Assessee was a partnership firm carried on business of construction and development. 2nd Respondent was the office of the Assistant Commissioner of Central Excise having claim of Excise duty dues against Respondent No. 3 viz. M/s. Bluemoon Engineers Limited ( earlier known as “HMP Engineering Ltd.” ) and was now claiming the same from assessee. It appeared that certain property admeasuring 24,280.94 square meters situated at Mulund, Mumbai belonging to company Blue Moon Engineers Ltd. (i. e. Respondent No.3 ) had been mortgaged to Indian Bank  as security for certain facilities provided by the Bank to Respondent No. 3 -Company. In exercise of its rights as a mortgagee, the Bank intended to sell said property to recover its dues from Respondent No. 3. Assessee submitted that at the time of the purchase it was unaware of the Excise duty payable by Respondent No. 3 – Company and was not liable to pay any Excise duty and/or alleged arrears of Respondent No. 3 claimed by Respondent No. 2 from assessee. After receiving the notice dated 29th / 30th January, 2008, assessee immediately informed Respondent No. 2 that the property was acquired at an auction held by the DRT, Kolkata and the same was acquired only with workers liability which had already been paid/ settled; assessee had nothing to do with the payment of any Excise duty or arrears thereof which was the liability of Respondent No. 3. It was held that excise dues were not dues which arise out of land or building. Such liabilities could be in the form of property tax, municipal tax, other types of cess relating to property etc. but could not mean excise duty dues, which arise out of manufacture. Therefore, the language in the confirmation of the Sale was with reference to the liabilities relating to the said property and not with reference to the business of the Respondent No.3- borrower; since assessee had not purchased the entire unit with business, it was not liable for the dues of the Excise Department. Assessee would not be liable to excise duty dues of Respondent No.3- borrower, having purchased only the land and not the entire business of the borrower in the public auction. That the mortgage of the secured creditor will get prior charge over the revenue.

FULL TEXT OF THE JUDGMENT/ORDER of BOMBAY HIGH COURT

1 By this petition filed under Article 226 of the Constitution of India, 1950, the Petitioner is challenging notices dated 29th / 30th January, 2008, 17th October, 2008 and 14th May, 2009 by which the Respondent No. 2 purports to prohibit and/or restrain Petitioner from transferring or charging the property situated at Mulund, Mumbai for alleged non-payment of Excise duty by Respondent No. 3.

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