Case Law Details
Shaniyal Dyeing Printing P Limited Vs C.C.E. (CESTAT Ahmedabad)
Held that it is settled that the government dues against the assessee cannot be recovered from the owner of the property which was leased out to the assessee against whom the dues are pending
Facts-
The appellant had filed an application for cancellation of Central Excise Registration and had given the factory plot to M/s Roma Industries, a partnership firm on lease for the period 25.07.1997 to 14.12.1998.
M/s Roma Industries ran their business at said premises during the period 11.08.1997 to 14.12.1998 and during the said period confirmed Government dues along with interest were pending against M/s Roma Industries. To recover the Government dues pending against the M/s Roma was issued to the Appellant on 10.07.2013 for recovery of Government dues to the tune of Rs. 71,48,901/- along with interest pending with M/s Roma . Since the Appellant did not pay the confirmed Government dues pending against M/s Roma, the property Plot No. 8206, GIDC, Sachin, Surat (Land and Building) owned by the Appellant were attached under Panchnama dated 19.07.2013. Appellant made payment of Rs. 1,40,48,110/- against the outstanding dues pending against M/s Roma. Thereafter, Appellant filed the refund claim for said amount on the ground that they have paid the above amount which were not legally liable to be paid by them only to save their property from the possible auction by the department. The payment were made by them are require to be refunded to them. A show cause notice was issued proposing to reject the refund claim and the adjudicating authority after due process, rejected the appellant’s claim for refund amount. Aggrieved by the said order, the appellant preferred an appeal before the Commissioner (Appeals) rejected the Appeal and, against which, the present appeal is filed.
Conclusion-
In view of the judgment, in the case of M/S. SAHIL TEXTILES V/S. COMMISSIONER OF C.EX.& S.TAX, SURAT-I- 2017 (1) TMI 704- CESTAT, AHMEDABAD, it is settled that the government dues against the assessee cannot be recovered from the owner of the property which was leased out to the assessee against whom the dues are pending accordingly, the revenue has wrongly collected the amount of dues pertaining to M/s. Roma Industries consequently, the said amount is required to be refunded to the appellant along with interest as per law.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The present appeal is directed against Order-in-Appeal No. CCESA – VAD/(APP-II)/MM/39/2016-17 dated 26.05.2016 passed by the Commissioner (Appeals) of Central Excise& Customs, Vadodara
1.1 The fact of the case is that the appellant had filed an application for cancellation of Central Excise Registration and had given the factory plot to M/s Roma Industries, a partnership firm on lease for the period 25.07.1997 to 14.12.1998. Appellant also furnished undertaking for cancellation of Registration that in case M/s Roma Industries did not pay the Central Excise dues due to any reason whatsoever, the director/ partners of Appellant would be responsible and pay the Government dues. Accordingly Registration of the Appellant was cancelled on 08.08.1997 and M/s Roma Industries were issued Central Excise Registration.
1.2 M/s Roma Industries ran their business at said premises during the period 11.08.1997 to 14.12.1998 and during the said period confirmed Government dues along with interest were pending against M/s Roma Industries. To recover the Government dues pending against the M/s Roma an Appendix –II was issued to the Appellant on 10.07.2013 for recovery of Government dues to the tune of Rs. 71,48,901/- along with interest pending with M/s Roma . Since the Appellant did not pay the confirmed Government dues pending against M/s Roma, the property Plot No. 8206, GIDC, Sachin, Surat (Land and Building) owned by the Appellant were attached under Panchnama dated 19.07.2013. Appellant made payment of Rs. 1,40,48,110/- against the outstanding dues pending against M/s Roma. Thereafter, Appellant filed the refund claim for said amount on the ground that they have paid the above amount which were not legally liable to be paid by them only to save their property from the possible auction by the department. The payment were made by them are require to be refunded to them. A show cause notice was issued proposing to reject the refund claim and the adjudicating authority after due process, rejected the appellant’s claim for refund amount. Aggrieved by the said order, the appellant preferred an appeal before the Commissioner (Appeals) of Central Excise and Central Tax, Vadodara who vide impugned Order-In-Appeal dated 26.05.2016 rejected the Appeal and, against which, the present appeal is filed.
02. Shri S. Suriyanarayan, Learned Counsel appearing on behalf of the appellant submits that refund claim is disallowed on the ground of alleged undertaking. However, neither the provisions of the Central Excise Act, nor the Rules, enable the department to extract commitment, which is nowhere provided in law. The provisions of Section 11, new Section 11A, Section 142 of the Customs Act and various Rules made thereunder, adequately, provided for protection to the department, when a unit is to be transferred or sold. It is clearly not open to the Department to exercise their vast power and render assesse liable beyond the clear provisions of the Act and the Rules. Such an exercise of power, apart from being illegal, cannot enable the department to create future right in their favour.
2.1 He also submits that alleged undertakings were extracted out of sheer compulsion, coercion and pressure. There is no such provision in the Central Excise Act and/or Rules. Such documents cannot even be created by utilizing any departmental instruction. If an assessee wishes to surrender registration, or to obtain registration, it is only the department who can grant the same or accept surrender. Merely because the act grants such power, cannot mean that the department can force the assessee at that stage to take undertaking accepting the liabilities beyond the four corners of law. Such undertaking have clearly no enforceable value and cannot lead to any rights being crystallized in the department. At the stage of receiving registration or surrendering them, it is clearly at the mercy of the departmental officers. Such a situation cannot be exploited to extract such undertaking.
2.2 Without prejudice he also submits that the said undertaking has absolutely no connection with the dues of M/s Roma Industries. The said undertaking has been erroneously interpreted by the department, the undertaking is in the context of surrender of registration of Appellant and issuance of registration to M/s Roma Industries. The said undertaking states that, if there are old dues of the appellant, then the appellant will pay the same. It also state that, if the appellant does not pay the same, then M/s Roma Industries will pay the same. But, if M/s Roma Industries does not pay, then the appellant will definitely be liable to pay. The said undertaking has absolutely no connection with the dues of M/s Roma Industries. Hence the entire undertaking has been misconstrued by the department. It is not open to the department to take an undertaking from a person in such situations.
2.3 He also submits that second undertaking of 2002 is concerned, the same is not even executed by Appellant. There is no resolution of the appellant company permitting anyone to give such an undertaking. The said undertaking is given by the Vikesh Jayantilal Mandiviwala. Now, at the relevant time, he was not even director of the Appellant company.
2.4 He further submits that leave and licence does not create any interest in M/s Roma Industries, question of enforcing the demand of M/s Roma Industries against the assets of the appellant under Section 11 also cannot arise. M/s Roma Industries has no interest, whatsoever, on land, plant and building given to them under a leave and licence. Hence provisions of Section 11 can never apply. For the same reason, there can be no question of attaching the said properties, in as much as, the said properties do not belong to M/s Roma Industries at all. It is also pertinent to note that name of Roma Industries has never been entered in the record of the GIDC. There is no application made for transferring the unit to them, nor any application was made for leasing out the premises to them by way of lease or transfer. Thus even otherwise, M/s Roma Industries have absolutely no proprietary interest of any nature, whatsoever, in the land, plant and machinery of the Appellant. In such circumstance, the question of binding the appellant to any undertaking can never arise.
2.5 He also submits that even if the provisions of Section 11 are pressed in to service, it cannot be said that M/s Roma Industries was successor-in-business of the appellant. The Appellant had shut down the business. It is settled law that, to be a successor-in-business, the unit must be taken over as going concern. It is clearly not the case. This issue stands settled by a catena of decisions. It is therefore, even section 11 does not apply to the present case. For the aforesaid reason the provisions of Section 142 of the Customs Act also do not apply for the fundamental reason that Roma Industries had no interest in the property in question at all. Furthermore, at the stage when Annexure-II, was issued, land, plant, building and machinery were also not in control of M/s Roma Industries, nor were being used the same. He placed reliance on the following decisions:-
- RAJABALI ISMAIL RAJBARA VS. COMMISSIONER OF CENTRAL EXCISE ,SURAT- (2013) 298 ELT 612
- M/S SAHIL TEXTILES VS CCE, SURAT – 2017(1)TMI 704
- HERO MOTORS LTD. VS. CCE GAZIABAD – 2014 SCC ONLINE CESTAT 535
03. Shri J.A. Patel, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
04. We heard both sides and perused the record. The facts are not in dispute that Appellant was the owner of the Plot No. 8206, GIDC, Sachin, Surat and the same was given on lease and later on under Leave & Licence Agreement to M/s Roma Industries. At the time of surrender of the Central Excise Registration, Appellant had given undertaking as under:
“ 2. We undertake that dues pending with us on date of surrender will be paid by M/s Roma Industries, Plot No. 8206, GIDC, Sachin (Surat)
3. We undertake that M/s Roma Industries will pay any demand or recovery of Central Excise duty due on date of surrender as arrives in future without any factor or time bar.
4. we also undertake to present central excise statutory records for audit or any other purpose whenever required.
5. we also under-take that in case M/s Roma Industries, sachin does not pay the central excise dues due to any reason whatsoever, the directors /partners of M/s Shaniyal Dying and Printing Mill, Sachin will be responsible and pay the government dues.
From the plain reading of above undertaking it is clear that the said undertaking was given by the Appellant in respect of dues of M/s Shaniyal Dying and Printing mills only. The last para 5 of undertaking was wrongly interpreted by the department in the present matter. The actual meaning of said para is that if the dues related to Appellant i.e. arise after the surrender of registration certificate was not paid by M/s Roma Industries, than the same will be paid by the Directors /Partners of M/s Shaniyal Dying and Printing Mills. The said undertaking nowhere state that dues related to M/s Roma Industries will be paid by the Appellant or for the dues of M/s Roma Industries appellant will be responsible. Clearly, in the present matter entire undertaking has been misinterpreted by the department.
4.1 We also hold that the undertaking given at the time of cancellation of Central Excise registration does not ipso facto bind the appellant with the liability which is otherwise not present. The Hon’ble Supreme Court in the case of Tata Chemicals v. CCE [2015 (320) E.L.T. 45 (S.C.)] held that something illegal cannot convert itself into something legal by act of a third person. Reliance is also placed on Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Others [1983 (13) E.L.T. 1566 (S.C.)]
4.2 We also find that the provision for recovery of sums due to Government is contained in Section11 of the Central Excise Act,1944 which is extracted herein below :-
“Section11. Recovery of sums due to Government. — In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the Rules made thereunder, [including the amount required to be paid to the credit of the Central Government under Section11-D], the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) to levy such duty or require the payment of such sums may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered, he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from the said person the amount specified therein as if it were an arrear of land revenue :
[Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of any kind, as specified in this Section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining written approval from the Commissioner of Central Excise, for the purposes of recovering such duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change.]
In the present matter section 11 of the Act can have no application in the facts of the case. In the present disputed matter appellant have not succeeded or acquired the business or trade of the arrears holder (M/s Roma Industries) and even have not purchased any property of the arrears holder (M/s Roma Industries). M/s. Roma Industries cannot treated as predecessor and the appellant cannot be treated as successor in the business of M/s Roma Industries. Between both of them there is relationship of lessor and lessee. The appellant have simply given Factory Plot on lease and later on under Leave & Licence Agreement to M/s Roma Industries for their business use. This cannot make the appellant liable for any Central Excise dues standing in the name of the M/s. Roma Industries. Further as per the said agreement, M/s Roma Industries was absolutely liable for all the government dues for the period during which they were having possession of the said plot.
4.3 We also find that in the matter of Chandra Dying & Printing Mills Pvt. Ltd. Vs. Union of India 2018 (361) E.L.T. 253 (Guj.) the Hon’ble High court also observed as under:
9. Short question that calls for consideration is whether the department can seek recovery of the dues of Harshwardhan Exports through sale of the property of the petitioner. To summarize the relevant facts, the petitioner is enjoying lease of 99 years on the plot of land situated at GIDC, Sachin. The petitioner has set up a dyeing unit on such plot by installing plant and machinery. After operating said unit for few years, the petitioner closed down the said unit in the year 1999 and also surrendered the Central Excise license around the same time. Some of the directors of the petitioner company exited and set up a new company. This new company Harshwardhan Exports took the unit on lease for a period of six years to set up its dyeing unit exclusively for exports. The department has raised sizable central excise dues against Harshwardhan Exports. In the meantime, the lease between the petitioner and the Harshwardhan Exports came to be terminated on 202-2004. Under a letter dated 31-3-2004, Harshwardhan Exports also handed over the possession of the unit to Chandra Dyeing.
10. In this background, we may peruse the statutory provisions. Section 11 of the Central Excise Act, 1944, pertains to recovery of sums due to Government. Sub-section (1) of Section 11 till 10th of September, 2004, provided as under:
11. Recovery of sums due to Government. – (1) In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder, including the amount required to be paid to the credit of the Central Government under Section 11D the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) to levy such duty or require the payment of such sums may deduct or require any other Central Excise Officer or a proper officer referred to in Section 142 of the Customs Act , 1962 (52 of 1962) to deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control or may be in the hands or under disposal or control of such other officer, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in which such person resides or conducts his business and the said Collector, on receipt of such certificate, shall proceed to recover from such person the amount specified therein as if it were an arrear of land revenue.
A proviso to said sub-section (1) of Section 11 was added with effect from 10-9-2004 which reads as under :
Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of any kind, as specified in this section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all excisable goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining written approval from the Principal Commissioner of Central Excise or Commissioner of Central Excise, for the purposes of recovering such duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change.
11. Section 142 of the Customs Act, 1962, pertains to recovery of the sums due to Government and reads as under :
142. Recovery of sums due to Government. –(1) Where any sum payable by any person under this Act including the amount required to be paid to the credit of the Central Government under Section 28B is not paid, –
(a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or
(b) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of Customs or such other officer of customs; or
(c) if the amount cannot be recovered from such person in the manner provided in clause (a) or clause (b)-
(i) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector on receipt of such certificate shall proceed to recover from the said person the amount specified thereunder as if it were an arrears of land revenue; or
(ii) the proper officer may, on an authorisation by a Principal Commissioner of Customs or Commissioner of Customs and in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person :
Provided that where the person (hereinafter referred to as predecessor), by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government under section 28B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by the proper officer, after obtaining written approval from the Principal Commissioner of Customs or Commissioner of Customs, for the purposes of recovering the amount so payable by such predecessor at the time of such transfer or otherwise disposal or change;
(d) (i) the proper officer may, by a notice in writing, require any other person from whom money is due to such person or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held, or at or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount;
(ii) every person to whom the notice is issued under this section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before the payment is made, notwithstanding any rule, practice or requirement to the contrary;
(iii) in case the person to whom a notice under this section has been issued, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Chapter shall follow.
(2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section.
12. The department would rely on the proviso to sub-section (1) of Section 11 of the Central Excise Act as well as on sub-clause (ii) of clause (c) of subsection (1) of Section 142 of the Customs Act.
13. We may record that proviso to sub-section (1) of Section 11 so also, proviso to sub-clause (ii) of clause (c) of sub-section (1) of Section 142 of the Customs Act were inserted with effect from 1-102004. The question of applicability of the said proviso to the transactions which may have been closed before the insertion by the Legislature would be one question. For the purpose of these proceedings, however, it is not necessary to finally comment on this aspect of the matter. We shall proceed on the basis that said proviso as also the proviso to sub-section (1) of Section 11 of the Central Excise Act, are applicable in the present case. Under sub-clause (ii) of clause (c) of sub-section (1) of Section 142 of the Customs Act, the proper officer can bring distress on the movable or immovable property belonging to or under the control of the defaulter. Proviso to sub-clause (ii) would apply in a case where such person without paying such dues, transfers or otherwise disposes of his business or trade in whole or in part or affects any change in ownership thereof. In such a situation, the property in possession of the transferee may also be attached and sold by the proper officer after following the prescribed procedure.
14. For various reasons, in the present case, invocation of the said provisions by the department is defective. We proceed on the basis that the central excise dues are that of Harshwardhan Exports. The department has not set up any case of Harshwardhan Exports and the petitioner Chandra Dyeing being one and same entity though on paper, separate companies. In other words, it is not the case of the department that entire creation of Harshwardhan Exports as the company was a sham transaction only with a view to defraud the Government revenue or other creditors and in fact it was behind the scene that the petitioner alone was operating the entire business. The case of the department emerging from the record simply is that Harshwardhan Exports had sizable unpaid dues of the department and such dues can be recovered from its property even after its transfer.
15. If this be the case, we may recall the property referred to by the department was nothing other than the lease for a period of six years granted to the petitioner by Harshwardhan Exports to utilize the plant and machinery situated on the Plot No. 342, GIDC, Sachin. Such lease was terminated on or around 20-2-2004 since Harshwardhan Exports could not pay its rental dues. Possession of leased premises was handed over by the Harshwardhan Exports to the petitioner on 31-32004. The first order of attachment was passed on 28-1-2005 which followed the notice dated 18-1-2005 issued to Harshwardhan Exports for unpaid dues of the department. Thus, the transaction of transfer of the leasehold rights of Harshwardhan Exports to the petitioner took place before the order of attachment was passed. It is not a case where the transfer took place after the property was attached. In plain terms, the said provisions apply in case of transfer of business and not merely transfer of property or assets as held by the Supreme Court in case of State of Karnataka and Anotherv. Shreyas Papers (P) Ltd. and others reported in (2006) 1 SCC 615.
16. The issues can be looked from a slightly different angle. At the very best, the department could have sold the property of the Harshwardhan Exports for its entire unpaid dues of the Government. In the present case, the property under reference is a leasehold right over the plant and machinery at GIDC, Sachin. If at all, the department could have put such right to sale for the remainder of the lease period. After the lease period was over, in any case, there would be no residue of the ownership right of Harshwardhan Exports in such property. Even ignoring the premature termination of the lease, the lease would expire upon completion of period of six years from the inception i.e. 16-11999. By efflux of time, the lease period would in any case, expire on 16-1-2005. Even if no other factor had intervened, Harshwardhan Exports’s right in the property was limited to hold on to the possession and to utilize plant and the machinery till 15-1-2005. To realize the unpaid dues of the Harshwardhan Exports in any case, the department could not have sold what Harshwardhan Exports did not own.
17. In absence of any assertion of the department that Harshwardhan Exports and the petitioner Chandra Dyeing are the clones and the entire exercise of creating Harshwardhan Exports as a separate company was a sham transaction to defraud the Government revenue, in facts of the present case, there is no possibility allowing the respondents to sell the property of the petitioner for the unpaid dues of the Harshwardhan Exports. Even in the show cause notice dated 4-22010, the department has not built any such case. Case of the department merely was that Harshwardhan Exports had defaulted in paying a sum of Rs. 2.03 crores (rounded off), that Harshwardhan Exports had set up its manufacturing unit on the plot of land leased by the petitioner to Harshwardhan Exports and that the petitioner should therefore pay up such sum. Significantly, such notice referred to one of the conditions for granting permission to Harshwardhan Exports to set up a 100% EOU at the said place. This condition provided that the lease would last till 15-1-2005 and in any case, the factory would not be vacated till the export obligation of the Harshwardhan Exports are discharged and consent is obtained from the authorities in respect to the same. Firstly, it is not clear whether the petitioner was signatory to any such condition. Secondly, if at all, it would be the breach of the condition but would not change the complexion so far as the title and rights of Harshwardhan Exports in the leased property are concerned. Merely because Harshwardhan Exports agreed not to vacate the premises till full export obligations are discharged, would not create any additional right in the property which can be sold for the purpose of recovery of the dues of Harshwardhan Exports.
18. In view of such facts, it is not necessary to refer to various judgments cited by the Counsel for the petitioners in the context of the applicability of Section 142 of the Customs Act or Section 11 of the Central Excise Act.
19. In the result, the attachment and distress imposed by the department on the property in question are set aside. Petition is disposed of accordingly.
4.4 On the identical facts and issue, this tribunal also considered the matter in the case of M/S. SAHIL TEXTILES V/S. COMMISSIONER OF C.EX.& S.TAX, SURAT-I- 2017 (1) TMI 704- CESTAT, AHMEDABAD wherein, the following order was passed :-
“5. Per contra, the learned Authorized Representative for the Revenue has submitted that the facts in the present case are slightly different from the facts in Rajbali Ismail Rajbara Ismails case. In the said case, the lease deed was unregistered and also recovery notice was issued after expiry of lease period. It is his contention that in the present case, lease deed dt.30.09.1999 has been registered and also recovery notice was issued to the appellant on 01.07.2004 i.e. before expiry of the lease period.
6. I find that the recovery notice was issued to the Appellant on 27.01.2006 along with M/s Revawala Exports for recovery of the outstanding dues under Section 142(1)(c)(ii) of Customs Act, 1962. It is not in dispute that under registered lease deed executed on 30.09.1999, the Appellants had leased their factory, building and plant and machinery to M/s Revawala Exports for a period of six years commencing from 30th Sept. 1999, and till 29th Sept. 2005 and stipulated that in any case, the factory was not to be vacated till the export obligation was discharged. However, the said lessee M/s Revawala Exports has left their premises before completion of export obligations and expiry of lease period of six years. I find that on the very same issue, the Tribunal has discussed in detail, the legality of the recovery of the outstanding dues from the lessor when the lessee, an 100% EOU, vacated the premises before fulfillment of the export obligations in Rajabali Ismail Rajbara case(supra) and by majority held that recovery cannot be made from the Lessor by attachment of the property.”
In view of the above judgments, it is settled that the government dues against the assessee cannot be recovered from the owner of the property which was leased out to the assessee against whom the dues are pending accordingly, the revenue has wrongly collected the amount of dues pertaining to M/s. Roma Industries consequently, the said amount is required to be refunded to the appellant along with interest as per law.
05. Thus, following the precedent laid down in above judgments and as per our above discussion and finding we do not find merit in impugned order and accordingly, the same is set aside and the appeal is allowed with consequential relief, if any, as per law.
(Pronounced in the open court on 06.07.2022)
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