Case Law Details

Case Name : Meena Krishna Agarwal Vs Commissioner of Central Excise & ST, Vadodara (CESTAT Ahmedabad)
Appeal Number : Excise Appeal No. 10061 of 2019
Date of Judgement/Order : 04/03/2021
Related Assessment Year :

Meena Krishna Agarwal Vs Commissioner of Central Excise & ST, Vadodara (CESTAT Ahmedabad)

The issue involved in the present appeal is whether the flats belonging to the appellant which she purchased under Registered Sale deeds dated 31.03.2008 out of monies received as gifts from her mother-in-law and father-in-law, can be proceeded against by the Excise department for recovery of Central Excise dues confirmed by order-in-original dated 21.12.2005 against two proprietory firms of her late husband Mr. Krishna Agarwal.

2. The brief facts of the case are that on 31.03.2008, by four registered Sale Deeds, the appellant purchased four flats bearing Nos. 201, 202, 301 and 302 in the building called “Shreeji Ashraya”, 7 Mamta Society, Behind Atmajyoti Ashram, Vadodara – 290023. The said flats were purchased from EXCISE Appeal No. 10061of 2019 Patwa Parikh Construction Company’ for the price of Rs. 26,32,500/- per flat i.e. total Rs. 1,05,30,000/-. Subsequent to the purchase of said four flats by the appellant in the year 2008, the Assistant Commissioner of Central Excise, Division IV, Vadodara-I issued letter dated 09.02.2011 to the Superintendent, City Survey No. 2, Vadodara in which it is stated that the Excise department is contemplating attachment of the said four flats, standing in the name of the appellant to realize the government dues which were confirmed by order-in-original dated 21.12.2005 against two proprietory firms – Gujchem International and Gujarat Impex of the appellant’s late husband Mr. Krishna Agarwal and which order-in-original is upheld by the Tribunal by order dated 02.07.2009. By the said letter, the said Superintendent, City Survey, Vadodara was requested to issue necessary instruction not to permit sale/ transfer of the said Four Flats by the Appellant. Based on the said request of the Assistant Commissioner of Central Excise, the Superintendent, City Survey issued Notice dated 22.02.2011 noting the encumbrance lodged by the Assistant Commissioner of Central Excise and prohibiting transfer of the said Flats.

3. The Appellant challenged the said Notice of encumbrance in the Hon’ble Gujarat High Court by Writ Petition bearing SC No.3969/2014, wherein the Hon’ble High Court passed Order dated 15.01.2018, wherein it was held as follows:-

(a) That by the Tribunal’s Order dated 02.07.2009 as modified by Order dated 10.11.2009, the duty demand stands confirmed against the appellant’s husband, Shri Krishna Agarwal and not against the Appellant;

(b) That it is not in dispute that the said Four Flats are purchased in the name of the Appellant under registered sale deeds dated 31.03.2008;

(c) That in response to the notice of recovery received from Excise, the Appellant had by reply dated 22.03.2011 pointed out that the said four fiats had been purchased by the Appellant out of her own source of income and had not been acquired through inheritance from her husband;

(d) That the Appellant had placed before the department Chartered Accountant Certificate dated 10.06.2011 giving full details of the source from which the Appellant had purchased the said four fiats;

(e) That Government dues can be recovered from the properties of the appellant’s husband which are inherited by the Appellant and the personal properties of the Appellant which have nothing to do with the inheritance cannot be utilized for such recovery;

(f) That the department authorities had not applied their mind to the aforesaid aspects and it is not clear whether the said Chartered Accountant certificate dated 10.06.2011 had been considered and that accordingly the matter was remanded to the Commissioner for examining and deciding whether the said four Flats had been acquired by the Appellant from her own source of income and if so, to withdraw the said letter of encumbrance issued to the City Survey Superintendent. ;

4. By the above directions/ instructions, the Hon’ble High Court remanded the matter to the Commissioner with specific direction to decide whether the said Four Flats had been acquired by the Appellant from her own source of income and if so, to withdraw the said letter of encumbrance issued to the City Survey Superintendent. In the remand proceedings before the Commissioner, the Appellant by letters dated 22.01.2018 and 16.04.2018 made detailed submissions and placed before the Commissioner, Chartered Accountant’s Certificate dated 08.06.2013 which certified that the Appellant had purchased the said Four Flats out of her own source of income viz, the monies received as gift by her from her mother-in-law, Mrs. Panna Devi and father-in-law, Shri Satyanarayan Agarwal and in support thereof the Income Tax returns, Capital accounts, Bank statements, Income tax assessment order of the Appellant’s mother-in-law and father-in-law and the Appellant’s income tax returns and assessment order were submitted. The said Certificate of the Chartered Accountants also states that a report in this behalf has also been sent by the Income Tax assessing officer to the Excise department.

5. The Commissioner of Central Excise, Vadodara thereafter passed Order-in-Original dated 01.10.2018 wherein the learned Commissioner has passed the following order:-

“20. The letter dated 09.02.2011 of the Assistant Commissioner, Central Excise Division IV whereby he had lodged the emcumberance of government dues with Superintendent City Survey No. 2, Police Bhavan, Vadodara and requested him not to permit sale/transfer of Flat No. 201, 202, 301, 302 of Shreeji Ashray Flats, 7, Mamta Society, Ellora Park, Vadodara, which were in the name of Mrs. Meena K. Agarwal, is issued properly and the same is not required to be withdrawn.

Being aggrieved by the said order dated 01.10.2018, the appellant filed the present appeal.

6. Shri JC Patel, learned Counsel along with Shri Rahul Gajera and Ms. Shamita Patel, Advocates appearing on behalf of the appellant submits that the order of the Commissioner has travelled beyond the directions of the Hon’ble High Court and based on extraneous, factually incorrect and unsubstantiated grounds and also is without jurisdiction. He submits that the Hon’ble High Court while remanding the matter to the Commissioner directed to decide the question whether the price paid to the builder for the transaction of purchase of the said four flats under the four registered Sale Deeds had come out of the appellant’s own source of income or out of inheritance from her husband, Shri Krishna Agarwal and that was the only question which the Commissioner was required to decide in terms of the directions of the Hon’ble High Court. By examining the prior proposed purchases (which did not culminate into any registered sale deeds) of the said four flats by Zenith Chemicals Pvt. Limited and the appellant’s daughter, Shivangi Agarwal and payments for such proposed purchases made by them to the builder which were returned by the builder, the Commissioner has gone beyond the directions of the Hon’ble High Court and exceeded her jurisdiction. Admittedly, the proposed purchases by Zenith Chemicals Pvt. Limited and the payments for such proposed purchases made by them to the builder which were returned by the builder, the Commissioner has gone beyond the directions of the Hon’ble High Court and exceeded her jurisdiction. He submits that admittedly, the proposed purchases by Zenith Chemicals Pvt. Limited and Shivangi Agarwal did not fructify into a transaction of sale and purchase and no Registered Sale Deed was executed between the Builder and Zenith Chemicals Pvt. Limited and Shivangi Agarwal and accordingly, the monies paid by Zenith chemicals Pvt. Limited and Shivangi Agarwal were returned by the Builder.

6.1. He submits that it is settled law that a transaction of sale and purchase of an immovable property of the value of more than Rs. 100/- has to be by means of Registered Sale Deed and in the absence of a Registered Sale Deed, no title is acquired in the immovable property. Therefore, in absence of any Registered Sale deed between the Builder and Zenith Chemicals Pvt. Limited and Shivangi Agarwal in respect of the said four flats, they did not acquire any title in respect of the same. The only registered sale deed in respect of the said four flats is that between the builder and the appellant for which the price was paid by the appellant from the amounts of gift received by the appellant from her mother-in law and father-in-law. Clearly therefore the price for the purchase of the said four flats by the appellant under the four registered sale deeds was paid by the appellant from her own source of income and not out of monies inherited by her from her husband late Shri Krishna Agarwal.

6.2. As regards the claim on the fact that monies for purchase of four flats were paid by the appellant from her own source of income, he submits that payment was made by the appellant from her own bank account. In the said bank account payments have been received from the bank accounts of the appellant’s mother-in-law and father-in-law and thereafter, from the appellant’s bank account to the Builder, Patwa Parikh Construction for the purchase of said four flats. The said amounts from mother-in-law and father-in-law of the appellant were received as gifts and such gifts were duly reflected in the Income Tax return / assessment of the appellant, the appellant’s mother-in-law and the appellant’s father-in-law respectively. He submits that payments made by the appellant to the builder for the transaction of purchase of the four flats under the four registered deeds was out of the said monies received as gift by the appellant from her mother-in- law and father-in-law. Therefore, the fact that the source of monies for payment made to the builder for the transaction of purchase affected under the four registered sale deeds is the gift received by the appellant from her mother-in-law and father-in-law. This fact has not been disputed by the learned Commissioner in the order-in-original. He submits that as per the above facts, which is undisputed, it stand established that the four flats purchased under the said four registered sale deeds were acquired by the appellant from her own source of income and not out of inheritance from her husband Krishna Agarwal. Therefore, in terms of Hon’ble High Court’s order dated 15.01.2018, the Commissioner was bound to withdraw the letter of encumbrance issued to the City Survey Superintendent.

6.3. He further submits that registered sale deeds of the said four flats in the appellant’s favour as purchaser is a solemn document of title which is evidence in law of the appellant’s ownership and title. This coupled with the fact that the appellant had sufficient source of income to purchase the said flats is sufficient to establish that the said four flats belong to the appellant. He placed reliance on the decision of the Hon’ble Supreme Court in the case of Gapadibai vs. State of Madhya Pradesh – AIR 1980 SC 1040. He also placed reliance on the decision of Hon’ble Madras High Court in the case of A.G. Krishnamoorthy vs. V. Kannammal & Ors – 1992 (2) MLJ 343 in which the decision of the Hon’ble Supreme Court has been followed and it is held that a registered deed is a solemn document of title which cannot be disputed by a third party and it is not open to a Creditor who has a claim against a Debtor to say that his debtor is the real owner of a property which stands in the name of another person under a registered deed.

6.4. He submits that the Commissioner has seriously erred in presuming that monies paid by Zenith Chemicals Pvt. Limited and Shivangi Agarwal for the proposed purchase which did not materialize were monies paid by the appellant‟s late husband Shri Krishna Agarwal. The Commissioner has proceeded on the basis that Krishna Agarwal had in his statements dated 11.12.1997, 01.01.1998 and 15.06.1998 stated that amongst other companies, he had floated a Company by the name of Zenith Chemicals Pvt. Limited. On that basis the Commissioner has presumed without any evidence whatever, that monies which had gone from the account of Zenith Chemical Pvt. Limited were monies of Krishna Agarwal. He submits that out of three statements of Krishna Agarwal relied upon by the Commissioner, only in the statement dated 11.12.1997, Krishna Agarwal has stated that he had controlling interest in Zenith Chemicals Pvt. Limited. Merely because in 1997, Krishna Agarwal had controlling interest in Zenith Chemicals Pvt. Limited, it does not automatically mean that in 2008 whatever monies went from the account of Zenith Chemicals Pvt. Limited were monies of Krishna Agarwal. Krishna Agarwal was no longer a Director in Zenith Chemicals Pvt. Limited in 2008 since he had resigned from the said Company prior to 2005­06. He submits that there is not a scrap of evidence that the monies in the account of Zenith Chemicals Pvt. Limited came from Krishna Agarwal. Except for making a wild allegation on the basis of the said statement of 11.12.1997, no transaction of money coming from Krishna Agarwal into the account of Zenith Chemicals Pvt. Limited has been shown. The payments amounting to Rs. 33,36,000/- made by Zenith Chemicals Pvt. Limited to the builder for proposed purchase of the flats were in the year 2007,when Krishna Agarwal was no longer Director in the said Company. The Commissioner has therefore proceeded on totally unfounded and unsubstantiated presumption that the payments made by Zenith Chemicals Pvt. Limited to the builder in 2007 for proposed purchase of the flat which did not materialize into registered sale deed, were payments made by Krishna Agarwal.

6.5. He submits that since it is clear that Krishna Agarwal was no longer a Director in Zenith Chemicals Pvt. Limited since 2005-06, any financial transactions between Zenith Chemicals Pvt. Limited and the appellant in the year 2007, 2008 and 2009 when the appellant was the Director in Zenith Chemicals Pvt. Limited, were between the Company and the appellant as its Director with which Krishna Agarwal had no relation. He pointed out that the Commissioner has proceeded on the factually incorrect premise that saving account No. 801-1-008918-9, out of which total amount of Rs. 47,59,000/- was paid by Shivangi Agarwal to the builder for proposed purchase by her, was personal saving account of Krishna Agarwal. The said finding is factually incorrect as the said account was not personal saving account of Krishna Agarwal but was saving account of Shivangi Agarwal under Guardian, Meena Agarwal (the appellant). Learned Counsel also invited our attention to the Bank Account statements to this effect. He further submits that monies in the account of Shivangi Agarwal from which she made payments to the builder for the proposed purchase were received by her by way of gifts from her grandmother. He also referred to the gift letters enclosed with the appeal papers. He submits that in the above circumstances, the Commissioner has proceeded on the totally erroneous basis.

6.6. Learned Counsel further submits that learned Commissioner has totally exceeded her jurisdiction in holding that the purchase by the appellant under the four registered sale deeds are created transactions. The sale deeds are duly registered with the Registration Authority in law and are documents of title to the property in law. The matter was remanded to the Commissioner by the Hon’ble High Court for the limited and specific purpose of examining whether the monies paid by the appellant to the builder for the purchase under the said Registered four sale deeds was out of her own source of income which the appellant has clearly established by the Income Tax documents. The Hon’ble High Court had not remanded the matter to the Commissioner for investigating whether the transaction of purchase of the four flats under four registered sale deeds between the appellant and the Builder is a “Created” transaction or not. Indeed such an investigation cannot be undertaken by the Commissioner who lacks jurisdiction to question duly registered documents of title. There is no provision in the Central Excise Act, 1944 or the Rules which confers jurisdiction on the Commissioner to do so. He placed reliance on the judgment of the Hon’ble High Court in the case of Deputy Commissioner of Customs (Preventive) vs. Ayesha A.V. – 2014 (300) ELT 167 (Kerala).

With his above submissions, he prays for setting aside the impugned order with consequent directions that letter of encumbrance dated 09.02.2011 issued by Assistant Commissioner of Central Excise to the Superintendent, City Survey No.2, Police Bhavan, Vadodara be withdrawn.

7. On the other hand, Shri H.K. Jain, learned Assistant Commissioner (Authorised Representative) appearing on behalf of the Revenue reiterates the findings of the order-in-original.  He also reiterated the written submission dated 16.02.2021 submitted by him on behalf of Revenue.

8. Heard both sides and perused the record.

9. By the impugned order, learned Commissioner (Appeals) upheld the order of the Adjudicating Authority whereby encumbrance dated 09.02.2011 issued by the Assistant Commissioner of Central Excise to the Superintendent, City Survey No.2, Police Bhavan, Vadodara on the four properties owned by the appellant has been maintained. I find that the case should have been decided within four corners of the observations made by the Hon’ble Gujarat High Court in Writ Petition SC No. 3969/2014. The department has created encumbrance on four flats owned by the appellant for recovery of Central Excise dues of units belonged to her late husband Shri Krishna Agarwal on the contention that these four flats were purchased by the appellant not from her own source of income but from the income of her late husband Shri Krishna Agrawal. The Hon’ble High Court in the order dated 15.01.2018, after considering the entire facts and circumstances, come to the conclusion that the only aspect to be examined is that the said four flats had been purchased by the appellant out of her own source of income and had not been acquired through inheritance from her late husband.

10. I find that after remand by the Hon’ble High Court, the appellant, before the Adjudicating Authority had placed Chartered Accountant’s certificate dated 10.06.2011 giving full details of source of income from which the appellant has purchased the said four flats. It was submitted by the appellant that the entire money which was paid by her for purchase of four flats was received by her as gift from her Father-in-law Shri Satyanarayan Agarwal and Mother-in-law Mrs. Panna Devi. To substantiate this fact, the appellant submitted income tax returns, capital accounts, bank statements and Income tax assessment orders of both the persons. On scrutiny of these documents, it is absolutely clear that the appellant have received gift from her father-in-law and mother-in-law. Accordingly, it is legally earned income by the appellant from which the entire payment of cost of flats was made. This fact has also not been disputed by the lower authorities. Both the lower authorities have proceeded to hold that the payment made by the appellant is not from her own source of income but from her late husband Shri Krishna Agarwal’s source. In support of this contention, the department has heavily relied upon the fact that initially the purchase of these four flats were initiated by making payment to the builder by Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal, daughter of the appellant. It is also not disputed that though initially a part payment was made by Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal but that payment has been returned back to the same person and no sale or purchase was fructified. As admittedly, no sale or purchase deed was registered between Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal with the builder. In this fact, it is established that no sale purchase of four flats against the payment made by Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal was concluded. Therefore, even though some transaction was made towards purchase of four flats by Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal with the builder but since the deal was cancelled there exists no sale purchase of four flats. Subsequently, in the fresh deal, the appellant has made payment from her own source which was received as gift from her mother-in-law and father-in-law and the sale deed for purchase of four flats with the builder was registered. Therefore, the appellant is sole owner of four flats purchased by making payment from her own source of income. In the deal between the appellant and the builder, the earlier inconclusive deal of Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal with builder has no relevance. Therefore, the department’s sole basis that initially the payment was made by Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal were towards the purchase of said four flats by the appellant is far-fetching and has no bearing on the ownership of four flats by the appellant. It is also observed from the assessment order of the appellant’s mother-in-law and father-in-law and her own assessment order indicates the gift transaction between her mother-in-law and father-in-law and the appellant and has been legally entered thereafter no question can be raised on such transaction. Even if there is remote connection with Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal, since the deal was not fructified that any transaction made by them is not relevant as regards the present ownership of the appellant of these four flats for a simple reason that the payment by the appellant made to the builder is not from Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal but entire payment was made by her from her own source of income. As observed above, since the four flats were purchased by the appellant from her own source of income, question of inheritance from her late husband Shri Krishna Agarwal does not arise.

11. The Hon‟ble High Court precisely directed the department to examine only two points whether the appellant has made payments for purchase of four flats by her own source of income and whether the property was possessed by the appellant as a result of inheritance from her late husband Shri Krishna Agarwal. From the detailed submissions along with the documentary evidence submitted by the appellant, it is clearly established that appellant have purchased four flats and made payment from her own source of income and it is also fact that appellant has not inherited the property from her late husband Shri Krishna Agarwal. In this undisputed fact, the lower authorities have travelled blindly ignoring the observations made by the Hon‟ble Gujarat High Court and without any basis held that the appellant has not purchased four flats from her own source of income which completely in defiance of the order passed the Hon‟ble High Court.

As regards the issue that initially the payment was made by Zenith Chemicals Pvt. Limited and Ms. Shivangi Agarwal, since the purchase was not fructified and the amount so paid was returned back, it has absolutely no relevance in the deal of the purchase made by the appellant, therefore, the whole basis of the department‟s case gets demolished. I have therefore, no doubt in my mind that taking into consideration the Hon‟ble High Court‟s order, undisputed facts and documentary evidence presented by the appellant, the appellant is the sole owner of four flats purchased from her own source of income and not inherited from her late husband Shri Krishna Agarwal or even any member of the family. Therefore, the impugned order is not sustainable. The order dated 09.02.2011 issued by Assistant Commissioner of Central Excise to the Superintendent, City Survey-2, Police Bhavan, Vadodara by which encumbrance on the four flats was created is quashed and set-aside.

The impugned order is set-aside and the appeal is allowed.

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