M/s.S.B.Steels v. The Collector of Central Excise, Coimbatore.2. The Asst. Collector of Central Excise

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 28.03.2007CORAMTHE HON'BLE MR.JUSTICE P.D.DINAKARANANDTHE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJAWrit Appeal No.2435 of 1999M/s.S.B.Steels,rep. by its Partner,Shanthi Tantia,No.6-A, Cheran Nagar,Coimbatore... Appellant Vs.1. The Collector of Central Excise, Coimbatore.2. The Asst. Collector of Central Excise, Pollachi, Coimbatore District.3. The Superintendent of Central Excise, Podanur Range, Coimbatore. ..RespondentsAppeal under Clause 15 of the Letters Patent, against the order ofthe learned Single Judge passed in W.P. No.8353 of 1991 dated 18.02.1999.This petition filed under Article 226 of the constitution of India toissuance a writ of certiorari, calling for the records of the proceedingsof the Superintendent of Central Exise, Podanur Range in O.C.No.1083/91dated 2.5.91 and OC.No.2094/91. dated 20.5.91 and quash the same.For Appellant : Mr.M.MuthappanFor Respondents: No appearance https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.)This appeal is filed against the order of the learned Single Judgepassed in W.P.No.8353 of 1991 dated 18.02.1999.2.The brief facts arising out of this Writ Appeal are as under:The appellant is a partnership firm, having its Office at Coimbatore.The petitioner firm was manufacturing M.S.Bars, M.S.Angles, M.S.Platesclassified under sub-headings 7209.90, 7210.10 and 7209.10 respectively ofthe Schedule to the Central Excise Tariff. The petitioner was notmanufacturing goods during the relevant period, that attracted excise dutyand hence there is no need for the appellant to obtain the Excise License.On 01.04.1987, the petitioner leased out its plant, machinery and buildingto M/s.Modern Steel Industries, Coimbatore for manufacture of the aboveitems. The said lease period was for a period of three years and the saidperiod came to an end on 01.04.1990. On the expiry of the said period oflease, the lessee M/s.Modern Steel Industries surrendered the possessionof the plant, machinery and building to the appellant on 10.01.1991.After taking over the possession of the plant, machinery and building fromthe lessee, the appellant made arrangements for running the factory itselfand for the same, the appellant firm wrote a letter dated 20.04.1991 tothe Superintendent, Central Excise, Podanur Range, Coimbatore, the abovementioned third respondent, stating its intention to resume manufacture inthe said factory. The appellant received a communication dated 02.05.1991from the Superintendent of Central Excise, Podanur Range, the thirdrespondent, that, by the second respondent's order dated 07.02.1991, theplant and machinery in the premises were detained under Rule 230(1) of theCentral Excise Rules. By virtue of the Detention Order, the lessee had noright to handover the plant and machinery to the appellant unless a sum ofRs.2,82,201.57 towards duty liability of the lessee M/s.Modern SteelIndustries and penalty of Rs.2000/- is paid and hence the appellant is notentitled for the license. A further communication dated 20.05.1991 wasreceived from the third respondent by which it was stated that if theappellant fails to pay the the arrears of lessee, action would beinitiated against the appellant. Aggrieved by the letters dated02.05.1991 and 20.05.1991 of the third respondent, the petitionerpreferred a writ petition in W.P.No.8353 of 1991 and the same wasdismissed by order of the learned Single Judge on 18.02.1999. 3.Learned counsel for the appellant submitted that the appellantis not subject to pay duty in respect of the liability of the lessee andsuch liability arose out of manufacturing, alleged to have been made bythe lessee M/s.Modern Steel Industries. Hence the same cannot be imposedon the appellant, the lessor. Further it is submitted that there was a https://hcservices.ecourts.gov.in/hcservices/ lease in favour of M/s.Modern Steel Industries and after the expiry oflease, the plant and machinery were handed over to the appellant as earlyas 10.01.1991 and thereafter, the said lessee had no interest in the plantand machinery and hence the detention of the plant and machinery is wrong,illegal, without basis and justification. It is also submitted that therewas no proper opportunity given to the appellant before passing thedetention order and the detention order was passed when the lessee was notin possession of the plant and machinery. It is also further contendedthat this is not a case where the previous firm M/s.Modern SteelIndustries was taken over by the appellant as a new Management and this isonly a case where the appellant wants to carries on manufacturing activityof its own and hence the liability of the lessee would not be imposed onthe appellant. 4.There is no representation on behalf of the respondents.5.Heard the counsel. The lessee, M/s.Modern Steel Industries,having its factory at Myleripalayam, Coimbatore, was manufacturing ironand articles of iron. By order dated 25.08.1989, the Additional Collectorof Central Excise, Coimbatore demanded duty of Rs.2,82,201.57 fromM/s.Modern Steel Industries in respect of wrong availment of the benefitunder Notification No.208/83. On 07.02.1991, the Assistant Collector ofCentral Excise, Pollachi, the above mentioned second respondent, ordereddetention of goods and Plant & Machinery under Rule 230 of Central ExciseRules, 1944. On 13.02.1991, the detention order was executed by theSuperintendent of Central Excise, the above mentioned third respondent,and a copy of the detention Mahazar was served on the partner ofM/s.Modern Steel Industries, who was present at the time of detention atthe factory. The lessee, M/s.Modern Steel Industries, also filedW.P.No.4830 of 1991 and this Court, dismissed the writ petition,confirming the detention order passed by the Assistant Collector on10.04.1991. After the dismissal of the said writ petition, within tendays, the appellant sent a letter to the Superintendent of Central Excise,the above mentioned third respondent on 20.04.1991 stating that thebuilding, plant and machinery under detention are the properties ofM/s.S.B.Steels, and M/s.Modern Steel Industries was only the lessee andthat the lease period had already expired on 01.04.1990. In view of theexpiry of lease period, the appellant had taken possession of theproperties on 10.01.1991, which was before the date of detention order.The counter affidavit was also filed by the respondents in the impugnedwrit petition denying all the allegations wherein it was made clear that,only to circumvent the detention order dated 07.02.1991 and the subsequentrefusal of this Court to interfere with the detention order, the appellantand the lessee, M/s.Modern Steel Industries, have devised a theory ofleasing of the factory. https://hcservices.ecourts.gov.in/hcservices/

6.It is evident from the records that both the lessor, theappellant, as well as the lessee, M/s.Modern Steel Industries, had notdisclosed all these facts before the Court at the time of contesting theAssistant Collector's detention order in the earlier writ petition inW.P.No.4830 of 1991. It is not in dispute that the appellant as well asthe lessee, had not produced any documents or evidence to show that therewas a lease transaction between them before any of the authorities. Ifthere was a lease transaction, they should have produced the same beforethe Superintendent of Central Excise. Alleging that there was a leasetransaction is nothing but an after-thought. It is seen that, when thedetention mahazar was passed and served on one of the partners ofM/s.Modern Steel Industries, the building, plant and machinery were inpossession of the lessee on the date of passing of the detention order.If actually there was a lease and expiry of the lease at the time ofpassing the detention order, the said lessee would have definitelydisclosed about the alleged leasing of the factory and also handing overof the plant and machinery after the lease period, to the RevenueAuthorities, the above mentioned respondents. They have not disclosedanything about the leasing out of the factory and also they have not saidanything about it at the time of contesting the detention order passed bythe Assistant Collector in the writ petition filed by the lessee in W.P.No.4830 of 1991. Even in the above writ petition, the appellant hereinhas failed to bring to the notice of the Court regarding the surrender ofbuilding, plant and machinery on 10.01.1991, in favour of the appellantherein. In the present writ appeal as well as in the earlier writpetition filed by the lessee, the fact remains that no one made anystatement regarding the said surrender on 10.01.1991. On these facts, thelearned Judge is right in holding that the said lease transaction does notappear to be a bonafide one and the transaction is bogus and an after-thought. The learned Single Judge also considered the scope of Rule 230of Central Excise Rules and further held that no legal document evidencingthe ownership of the factory as on the date of detention was produced,either at the time of passing the detention order under Rule 230 ofCentral Excise Rules on 13.02.1991 or at the time of contesting thedetention order by the lessee in W.P.No.4830 of 1991. Further the learnedcounsel for the appellant did not make any contention in respect oflimitation as per Section 11A of the Central Excise Act, 1944 and also itis seen from the grounds that no specific ground was taken by theappellant eventhough the same was argued before the learned Single Judge.The reasons given by the learned Single Judge are based on valid materialsand evidence and hence there is no error or legal infirmity in theimpugned order. https://hcservices.ecourts.gov.in/hcservices/

7.In view of the foregoing reasons, we are of the view that theorder passed by the learned Single Judge is in confirmity with law and thesame does not require interference. Accordingly, the writ appeal isdismissed. No costs. Consequently, C.M.P.No.20503 of 1999 is closed. kmSd/-Asst.Registrar/true copy/ Sub Asst.RegistrarTo1. The Collector of Central Excise, Coimbatore.2. The Asst. Collector of Central Excise, Pollachi, Coimbatore District.3. The Superintendent of Central Excise, Podanur Range, Coimbatore.+1 cc to Mr.MMuthappan, Advocate Sr.No.20237.VRK(CO)dcp/12.4.07 Writ Appeal No.2435 of 1999