In the Budget 2011-12 introduced on 28.2.2011, a New Section 11E has been inserted in the Central Excise Act, 1944. This section is inserted to create a first charge on the property of a defaulter for recovery of Central Excise dues subject to the provisions of Companies Act, 1956; Recovery of Debts due to bank and Financial Institutions Act, 1993 and Securitisation and Reconstruction of Financial Assets and enforcement of Security interest Act, 2002. This signifies that the dues under the Central Excise Act shall have a first charge in respect of the dues of other acts as mentioned above.
A case was decided in the Supreme Court of MACSON MARBLES PVT LTD Versus UNION OF INDIA [2003 (158) E.L.T 424 (S.C.)] wherein the appellant purchased an Industrial Unit in an Auction from Rajasthan Financial Corporation. A show cause notice was issued to the assessee for payment of Excise Duty and Penalty on the grounds of removal of certain goods from that unit before the date of purchase by the appellant. A writ petition was filed in the High Court challenging the recovery proceedings initiated by the Department. The High Court dismissed the Writ Petition and ordered that the appellant, who is the current owner of the Unit, to pay the dues to the Department.
Further the case was taken to the Apex court wherein it was ordered that according to Rule 230(2) of erstwhile Central Excise Rules, 1944 the mode of recovery of excise dues from the assets owned by a predecessor and on his liabilities being assessed could be recovered even from the successor.
Similar decisions were quoted in decisions given by other Courts and Tribunals. Such decisions created difficulties for the successors of any Industrial unit or land as they had to pay the dues of the predecessor which would be burdensome for them.
In case of COMMISSIONER OF C. EX., AHMEDABAD-III versus SANDVIK ASIA LTD. the High Court of Gujarat gave a decision in favour of the Successor ordering the Predecessor of the land to pay his dues. Similar decisions were also given by various Decisive authorities in various cases which gave a sigh of relief.
Now, with the insertion of the Section 11E; if any amount of excise duty, interest or any other sum payable by assessee/any other person under the provisions of Central Excise Act, 1944; it will have first charge on the property of the assessee or that person. However, this charge would subject to the provisions contained in the Section 529A of the Companies Act, 1956, the recovery of Debts Due to Banks and the Financial Institutions Act, 1993 and the Securitization and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002. Thus, this section will save the rights of the poor successors who purchase the property under good faith and this is a Welcome Step for the benefit of the masses.
CA Pradeep Jain,
CA Preeti Parihar