Central Excise Dues cannot be recovered from Property Owner of Leased Property used by Assessee: CESTAT [Read Order]

The Central Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad bench has held that the central excise dues cannot be recovered from the owner of the property which was leased out to the assessee against whom the dues are pending.

The appellant, M/s Shaniyal Dyeing Printing P Limited leased out the factory plot to the assessee, M/s Roma Industries. The appellant contended that they have not succeeded or acquired the business or trade of the arrears holder 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. According to them, this cannot make the appellant liable for any Central Excise dues standing in the name of the M/s. Roma Industries. It was further contended that 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.

A division bench comprising Mr. Ramesh Nair Member (Judicial), and Mr. Raju Member (Technical) observed 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,” the Tribunal said.

While holding in favour of the appellant, the Tribunal held that “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.”

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