M/S. RANA GIRDERS LTD. versus UNION OF INDIA & ORS.

Citation: [2013] 14 S.C.R. 58 · Decided: 16-08-2013 · Supreme Court of India · Bench: ANIL R. DAVE · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
[2013] 14 S.C.R. 58 
M/S. RANA GIRDERS LTD. 
V. 
UNION OF INDIA & ORS. 
(Civil Appeal No. 6802 of 2013) 
AUGUST 16, 2013 
[ANIL R. DAVE AND A.K.SIKRI, JJ.] 
State Financial Corporation Act, 1951 - s.29 - Purchase 
of property - In public auction - Free from all encumbrances 
C -- However, sale deed and agreement stipulating liability of 
the purchaser to meet statutory demands arising out of the 
property - Liability of the purchaser to discharge the dues 
which the erstwhile owner of the property owed to the excise 
department - Held: The excise dues are not statutory 
D liabilities - Since the purchaser had purchased the property 
free from all encumbrances and had not purchased entire unit 
as a business, it is not liable to meet the dues to Excise 
Department. 
The property in question, was taken over by Uttar 
E 
Pradesh Financial Corporation (UPFC) u/s. 29 of the 
State Financial Corporation Act. UPFC held public 
auction. The appellant-Company, being the highest 
bidder, became the owner of the land and building and 
also plant and machinery vide Sale Deed and Agreement. 
F 
The borrower did not question the validity of the auction 
and the same attained finality. 
The borrower owed liability qua excise duty. Excise 
Department made demand of the excise duty from the 
G appellant to discharge the liability of the borrower, being 
the purchaser and successor-in-interest of the land and 
building plus plant and machinery of the borrower. The 
appellant resisted the demand on the ground that the 
properties were purchased by him in open auction, free 
H 
58 
RANA GIRDERS LTD. v. UNION OF INDIA 
59 
from all encumbrances, hence not liable to discharge the A 
liability. 
Therefore, the question for consideration in the 
·present appeal was whether the excise department could 
recover the dues from the appellant. 
Allowing the appeal with cost, the Court 
B 
HELD: 1. UPFC being a secured creditor had priority 
over the excise dues. Since the appellant had not 
purchased the entire unit as a business, as per the c 
statutory framework, he was not liable for discharging the 
dues of the Excise Department. [Para 21] [72-E] 
2. In the present case, it was mentioned not only in 
the public notice but there was a specific clause inserted 
in the Sale Deed/Agreement as well, to the effect that the D 
properties in question were being sold free from all 
encumbrances. At the same time, there was also a 
stipulation that "all these statutory liabilities arising out 
of the land shall be borne by purchaser in the sale deed" 
and "all these statutory liabilities arising out of the said · E 
properties shall be borne by the vendee and vendor shall 
not be held responsible in the Agreement of Sale." As per 
the High Court, these statutory liabilities would include 
excise dues. The High Court has missed the true intent 
and purport of this clause. The expressions in the Sale 
F 
Deed as well as in the Agreemen~ for purchase of plant 
and machinery talks of statutory liabilities "arising out of 
the land" or statutory liabilities "arising out of the said 
properties" (i.e. the machinery). Thus, it is only that 
statutory liability which arises out of the land and building G 
or out of plant and machinery which is to be discharged 
by the purchaser. Excise dues are not the statutory 
liabilities which arise out of the land and building or the 
plant and machinery. Statutory liabilities arising out of the 
land and building could be in the form of the property tax H 
60 
SUPREME COURT REPORTS 
[2013) 14 S.C.R. 
A 
or other types of cess relating to property etc. Likewise, 
statutory liability arising out of the plant and machinery 
could be the sales tax etc. payable on the said machinery. 
As far as dues of the Central Excise are concerned, they: 
were not related to the said plant and machinery or the 
B 
land and building and thus did not arise out of those 
properties. Dues of the Excise Department became 
payable on the manufacturing of excisable items by the 
erstwhile owner, therefore, these statutory dues are in 
respect of those items produced and not the plant and 
c machinery which was used for the purposes of 
manufacture. This fine distinction is not taken note at all 
by the High Court. The judgment of the High Court is 
unsustainable in law. The notice of the Excise 
Department calling upon the appellant to pay the dues of 
0 
the erstwhile owner of the unit in question also stands 
quashed. [Paras 23 and 24] [

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