M/S. RANA GIRDERS LTD.versusUNION OF INDIA & ORS.

                       [2013] 14 S.C.R. 58


A                  M/S. RANA GIRDERS LTD.
                                V.
                    UNION OF INDIA & ORS.
                 (Civil Appeal No. 6802 of 2013)
                       AUGUST 16, 2013
B
              [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.
                                                              B
    Allowing the appeal with cost, the Court

    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
    the erstwhile owner of the unit in question also stands
0
    quashed. [Paras 23 and 24] [72-G-H; 73-A-H]

         Mis. Macson Marbles Pvt. Ltd. vs. Union of India 2003
    (158) ELT 424 SC; Union of India vs. SICOM Ltd. 2009 (2)
    SCC 121: 2008 (17) SCR 120; State of Kamataka and Anr.
E   vs. Shreyash Papers (P) Ltd. and Ors. JT 2006 (1) SC 1 eo:
    2006 (1) SCR 235; Dena Bank vs. Bhikhabhai Prabhudas
    Parekh and Co. and Ors. (2000) 5 sec 694: 2000 (3) SCR
    509 - referred to.
                        Case Law Reference:
F
         2003 (158) ELT 424 SC referred to           Para 10
         2008 (17) SCR 120      referred to          Para 13
         2006 (1) SCR 235       referred to          Para 16
G
         2000 (3) SCR 509       referred to          Para 19
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    6802 of 2013.

H
       RANA GIRDERS LTD. v. UNION OF INDIA                    61


    From the Judgment and Order dated 25 .. 11.2011.of the           A
High Court of Judicature at Allahabad in Writ Tax No.383 of
2005.

    Rajesh Kumar, Krishna Kumar R.S., K.S. Mahadevan, R.
K. Srivastava for the Appellant.                                     B

     K. Radhakrishnan, Shrish Kumar Misra, K. Swami, B.
Krishna Prasad for the Respondents.

     The Judgment of the court was delivered by

     A.K.SIKRI, J. 1. Leave granted.
                                                                     c
       2. One M/s. P.J. Steels Pvt. Ltd. (borrower) had taken
  loans/financial accommodation from the Uttar Pradesh
  Financial Corporation (UPFC). Because of the consistent
  default on the part of the said borrower in re-paying the loans,   D
  the UPFC took possession of the land and building of the
  borrower which were mortgaged/kept as security with the
  UPFC. This action was taken under Section 29 of the State
  Financial Corporation Act. After taking physical possession of
  the unit, the UPFC held public auction on pursuant to              E
  advertisement which was issued on 8th January 2002. In the
  said public auction conducted by UPFC, the appellant herein
  (appellant which was known as M/s. Sarju Steels Pvt.Ltd. at that
  time and has now converted into a Public Limited Company
  known as Mis. Rana Girders Pvt. Ltd. Dated 20th March 2002         F
  was the highest and thus, successful bidder in resp,ect of land
  and building as well as plant and machinery. Sale Deed dated
  8.3.2002 was executed in favour of the appellant qua .the land
  and building. Likewise, Agreement dated 14.3.2002 was
  executed in favour of the appellant conveying the ownership of     G
. the plant and machinery.

     3. With the aforesaid Sale Deed and Agreement, the
 appellant has become the owner, both of the land and building
 and also plant and machinery. The borrower has not questioned
                                                                     H
      62       SUPREME COURT REPORTS                   (2013) 14 S.C.R.


 A    the validity of the said auction which has attained finality. It
      appears that the borrower had also to discharge the liability
      qua excise duty which had amounted to Rs.1,00, 72,442/-. To
      recover that amount, the Commissioner of Customs and
      Central Excise, Meerut-1 (respondent No.2 herein) is now
 B    pressing the appellant to discharge this liability as purchaser
      and successor-in-interest of the land and building plus plant and
      machinery of the borrower. The appellant is resisting the
      demand with the posture that since the aforesaid properties
      have been purchased by the appellant in an open auction from
 c    the UPFC, free from all encumbrances, it is not the liability of
      the purchaser to make payment of the dues of excise
      department.

          4. Therefore, the issue which has arisen for our
      consideration in this appeal iS as to whether excise department
 D    can recover the amount in question from the appellant. This
      issue has cropped up in the following factual background:

           5. As already pointed out above, after taking possession
      of the unit of the borrower under Section 29 of the State
. E   Financial Corporation Act, the UPFC issued an advertisement
      dated 8.1.2002 in the newspapers for public auction of the said
      properties. By the said advertisement, offers for sale of land
      and building consisting of land area 13390 sq. meter and
      covered area of 2429 sq. meter, plant and machinery and other
 F    fixed assets of the borrower were invited on ("as is where is
      basis"). This public notice also stipulated certain terms and
      conditions on which offer were invited. First condition thereof,
      which is relevant for our purpose, is reproduced below:

           "All the statutory liabilities arising out of land shall be borne
 G         by purchaser (except electricity dues). Other terms and
           conditions of sale may be sent at the office."

          6. The appellant turned out to be the successful bidder
      whose bid in the sum of Rs.43 Lakh for land and building being
 H    highest was accepted by the UPFC. Sale Deed dated 8th
      RANA GIRDERS LTD. v. UNION OF INDIA                     63
                [A.K. SIKRI, J.]

March 2002 was executed. ln this Sale Deed it was specifically       A
mentioned that the property is free from all encumbrances by
stating that "the vendor herein confirms that the property
purchased through the sale deed in favour of vendee is free
from all charges and encumbrances ......." The appellant had
paid a sum of Rs.21.50 Lakh at the time of registration of the       B
Sale Deed and balance amount of Rs.21.50 lakh was to be
paid by the appellant to the UPFC which was payable together
with interest at the rate of 16% P.A. in instalments as specified
in the Schedule to the said Sale Deed. There is no dispute that
this balance consideration has been paid by the appellant to         c
the UPFC. Another condition in the Sale Deed, which was also
mentioned in the public notice was that:

     "All the statutory liabilities arising out of said properties
     shall be borne by the vendee and vendor shall not be held       D
     responsible."

     7. The appellant also purchased plant and machinery in
the said auction for a total consideration of Rs.1 Crore 93 Lakh
for which Agreement dated 15th March 2002 was executed by.
the parties. This Agreement also .contained both the clauses, E
similar to the clauses in the Sa!e Deed, namely, the said plant
and machinery was free from all encumbrances and that all the
statutory liabilities arising out of the plant and machinery of the
industrial unit were to be borne by the purchaser i.e. the
appellant.                                                          F

     8. At that time, some demands of dues on account of
Central Excise payable to respondent No.2 were pending. It
appears that the borrower had filed two appeals against the
Order-in-Original dated 29.8.2002 in this behalf. These two G
appeals were dismissed by the CESTAT on 30th April 2003
on account of non-compliance of the pre-deposit amount
directed in its stay order dated 18th March 2003. Some
penalties were also imposed by the adjudicating authority,
under the Central Excise Act which were appealed again by
the borrower. That appeal was also dismissed on 30th April H
    64         SUPREME COURT REPORTS             [2013) 14 S.C.R.


A   2003 and 25th May 2004 thereby confirming the demand of
    Customs and Excise.

         9. After the conclusion of the aforesaid legal proceedings
    between the respondent No.2 and the borrower, following
    amount became due on account of duty and penalty payable
8
    by the borrower to the respondent No.2:

     Adj.Order No. &      Amount of confirmed demands
      Date                Duty       Penalty      R.F.    Penalty
c                         {In Rs.)   (In Rs)

      28/Comtnr/MRT/O     4298571    4298571               1000000
      2/dated 29.8.02

      16/Jt.              669862     669862
D
      Commr/2003/
      Dated 22.7.2003

      82/0ff/136/01 /02   115576     20000
E
      Dated 22.11.02

         10. Since the appellant had purchased the land and
    building as well as plant and machinery of the borrower in the
    auction conducted by the UPFC, the respondent No.2 issued
F   notice dated 25.8.2004 to the appellant stating that the amount
    in question had now become the liability of the appellant and
    demanded the aforesaid payment. It was mentioned in the
    notice that this amount was payable by the appellant in view of
    the law laid down by this Court in the case of Mis. Macson
G   Marbles Pvt. Ltd. Vs. Union of India 2003 (158) ELT 424 SC.

          11. The appellant herein initially requested the Excise
    Department to provide the copies of the adjudication orders
    relating to the three cases mentioned in the notice. Thereafter,
H   vide reply dated 7.12.2004, the appellant disputed the liability
       RANA GIRDERS LTD. v. UNION OF INDIA                      65
                 [A.K. SIKRI, J.]
stating that the amount was not recoverable from it in terms of       A
the provisions of Section 11 of the Central Excise Act as it had
purchased the aforesaid properties in auction from UPFC "free
from all encumbrances". The Central Excise Department,
however, insisted that it had become the liability of the appellant
and sent further communication demanding payment failing with         B
the threat that on failure in making payments the properties
would be attached.

     12. At this juncture, the appellant filed the Writ Petition in
the High Court of Judicature at Allahabad, questioning the            C
validity of the demands raised by the Revenue. Aftd1 hearing
the matter, vide the impugned judgment dated 1st December
2011, the High Court has been pleased to hold that in view of
the covenants in the Sale Deed and Agreement it is the liability
of the appellant to pay the excise duty. It is this order which is
the subject matter of present appeal.                                 D

      13. A perusal of the order of the High Court would
demonstrate that the Excise Department had contested the
petition filed by the petitioner herein on the ground that the
appellant being the successor-in-interest which had purchased         E
the land and building as well as plant and machinery, was liable
to make the payment having regard to the judgment of this
Court in M/s. Macson case. The appellant, on the other hand,
had argued that since the appellant had not purchased the entire
unit of the principal borrower the judgment of M/s. Macson case       F
was not applicable. On the contrary it is the law laid down in
Union of India vs. SICOM Ltd. 2009 (2) SCC 121, ratio
whereof was attracted. It was argued that the Mis. Macson
case was specifically distinguished by this Court in S/COM Ltd.
holding that the ratio of Mis. Macson case would be applicable        G
only in transfer of "ownership of business" i.e. when there is a
sale of business as an ongoing concern and not in case of
mere transfer of its specified assets. Significantly, the High
Court took note of this distinction by referring to various other
judgments as well on the lines of SICOM Ltd. of this Court as
                                                                      H
    661      SUPREME COURT REPORTS                 [2013] 14 S.C.R.


A well as some High Courts. However, leaving the discussion on
  this aspect inconclusive, the High Court chose to rest its
  de~cision on an altogether different foundation, namely
  stipulation in the Sale Deed dated 8.3.2002 to the effect that
  the statutory liabilities arising out of the property shall be borne
B by the vendee (i.e. the appellant). These clauses Sale Deed
  pf:irtaining to land and building and Agreement of Sale qua plant
  and machinery have already been noted above. According to
  the High Court, these covenants provided clear and
  unambiguous stipulation as per which the appellants agreed to
c discharge the statutory liabilities and since the excise dues
  were statutory in nature, it had become the liability of the
  appellant to pay the same. However, in so far as penalty is
  concerned, it is held that such a burden cannot be fastened on
  to the appellant as it is in the nature of quasi-criminal liability
D which was leviable only on the defaulter viz. the borrower. The
  writ petition is thus, partly allowed.

         14. Before us, it was strenuously argued by the learned
  counsel for the Revenue that since the excise duty is a statutory
  liability such a duty has to be paid by the person who purchased
E the property of borrower in default even when sold in auction
  under section 29 of the State Financial Corporation Act. He
  further argued that in any case the High Court was right in
  holding that by virtue of the stipulations in the Sale Deed as
  well as in the Agreement of Sale, so far as the appellant is
F concerned, it was liable to discharge the excise liability. In the
  circumstances, two questions arise for consideration namely
  (1) on the interpretation of stipulation contained in the Sale
  Deed of the land and building and Agreement of Sale of plant
  and machinery, whether the appellant had agreed to discharge
G the dues payable to the excise department by the borrower. (2)
  Whether such a liability arises in law (de-hors the stipulation in
  Sale Deed /Agreement of Sale) having regard to the legal
  provisions contained in the Excise Act and State Financial
  Corporation Act?
H
      RANA GIRDERS LTD. v. UNION OF INDIA                       67
                [A.K. SIKRI, J.]
     15. We shall discuss the second question in the first            A
instance. As noted above, in so far as second question is
concerned, though the High Court has discussed the position
in law in detail but has refrained from giving its final opinion on
this question.
                                                                     B
      16. Whether UPFC would have priority being a secured
creditor by virtue of Deed of Mortgage or the Central Excise in
respect of its dues having regard to the Rule 230(2) of the
Central Excise Rules, came up for consideration before this
Court in State of Karnataka & Anr. V.:>. Shreyash Papers (P) C
Ltd. & Ors. JT 2006 (1) SC 180. Dealing with the provisions of
Rule 230 of the Excise Rules, the Court held that this provision
authorises detention of all excisable goods, materials,
preparations, plant, machinery, vessels, utensils, implements
and articles, in the custody or possession of the person or·
persons carrying on such trade or business or from person D
succeeding the business or trade or part thereof for such time
till dues are paid or recovered. However, the rule does not in
any way create a charge over any of the goods enumerated
therein. After explaining the term "charge" as defined in Section .
100 of Transfer of Property Act, it was held that charge would E
be different from the word "detained". As Rule 230 only
empowers detention and there was no other provision under
the Central Excise Act or the Rules which envisages to creat~
any charge over the assets of a unit to enable the realization
of the Central Excise Duty on top priority. The Court held that F
UPFC had a priority being a secured creditor on the one hand
and Central Excise having no "charge" over the property. The
Court specifically took note of the fact that the petitioner in that
case was not the successor of the erstwhile owner in business
or trade and having acquired the property without any charge G
independent of business or trade of the previous owner, was
not a person in custody or possession of the property as a
successor of the previous owner against whom there was a
demand of excise duty.
                                                                      H
    68      SUPREME COURT REPORTS                 [2013] 14 S.C.R.


A      17. Learned counsel for the respondents, heavily relied on
  the judgment of this Court in M/s. Macson (supra), reference
  to which is also made in the notice dated 25.02.1984 that was
  served upon the appellant by the Excise Department. He
  submitted that in that case this Court had held that even the
B successor in interest is liable to discharge the liability of the
  Excise Department. We may, however, note that this case was
  considered and specifically distinguished in SICOM Ltd.
  (supra). In that case, considering the statutory right of the
  Financial Corporation under the State Financial Corporation
C Act, 1951 and the non-obstante clause occurring therein, it was
  categorically held that State Financial Corporation shall have
  a preferential claim in relation to its secured debts. This position
  is explained in paragraphs 16 and 23 of the said judgment in
  the following manner:

D         "16. If a company had a subsisting interest despite a
               lawful seizure, there cannot be any doubt
               whatsoever that a charge/mortgage over
               immovable property will have the same
               consequence.
E
                xxxxxxxxxxxxx
          23.   Furthermore, the right of a State Financial
                Corporation is a statutory one. The Act contains a
                non obstante clause in Section 46-B of the Act
F               which reads as under:

                "46-B. Effect of Act on other laws ...!-The provisions
                of this Act and of any rule or orders made
                thereunder shall have effect notwithstanding
G               anything inconsistent therewith contained in any
                other law for the time being in force or in the
                memorandum or articles of association of an
                industrial concern or in any other instrument having
                effect by virtue of any law other than this Act, but
H               save as aforesaid, the provisions of this Act shall
       RANA GIRDERS LTD. v. UNION OF INDIA                      69
                 [A.K. SIKRI, J.]
            be in addition to, and not in derogation of, any other    A
            law for the time being applicable to an industrial
            concern."

       18. In so far dues of the Government in the form of tax or
 excise etc. are concerned, the Court was of the opinion that         8
  rights of the Crown to recover the dues would prevail over the
  right of the subject. Crown debt means the debts due to the
  State or the King. Such creditors, however, must be held to
  mean unsecured creditors. The principle of Crown debt pertains
  to the common law principle. When Parliament or State               C
  Legislature makes an enactment, the same would prevail over
  the common law and thus the common law principles which
  existed on the date of coming into force of the Constitution of
  India, must yield to a statutory provision. A debt, which is
  secured or which by reason of the provisions of a statute
  becomes the first charge over the property must be held to          D
  prevail over the Crown debt which is an unsecured one. On this
  reasoning, the debt payable to secured creditor like the
· Financial Corporation was prioritised vis-a-vis the Central
  Excise Dues.

     19. For this principle, the Court referred to its earlier
judgment in Dena Bank v.. Bhikhabhai Prabhudas Parekh &
Co. & Ors. (2000) 5 SCC 694 explaining the doctrine of priority
to Crown Debts, thus:

     "What is the common law doctrine of priority or
                                                                      F
     precedence of Crown debts/ Halsbury, dealing with general
     rights of the Crown in relation to property, states that where
     the Crown's right and that of a subject meet at one and
     the same time, that of the Crown is in general preferred,
     the rule being "detur digniori (Laws of England, 4th             G
     Edn.,Vol.8, para 1076, at p.666).Herbert Broom states:

            "Quando jus domini regis et subditi concurrunt jus
     regis praegerri debat. - Where the title of the kind and the
     tile of a subject concur, the king's title must be preferred.    H
    70       SUPREME COURT REPORTS                    [2013] 14 S.C.R.


A        In this case detur digniori is the rule ...... where the titles of
         the kind and of a subject concur, the kind takes the whole .
         ... .where the king's title and that of a subject concur, or are
         in conflict, the king's title is to be preferred."(Legal maxims;
         10th Edn.,pp.35-36)
B
               This Common law doctrine of priority of State's
         debts has been recognised by the High Courts of India as
         applicable in British India before 1950 and hence the
         doctrine has been treated as "law in force" within the
         meaning of Article 372(1) of Constitution."
c
         It was, furthermore, observed :

                "However,, the Crown's preferential right to recovery
         of debts over other creditors is confined to ordinary or
D        unsecured creditors. The common law of England or the
         principles of equity and good conscience (as applicable
         to India) do not accord the Crown a preferential right for
         recovery cf its debts over a mortgagee or pledge of goods
         or a secured creditor. It is only in cases where the Crown's
         right and that of the subject meet at one and the same time
E
         that the Crown is in general preferred. Where the right of
         the subject is complete and perfect before that of the king
         commences, the rule does not apply, for there is no point
         of time at which the two rights are at conflict, nor can there
         be a question which of the two ought to prevail in a case
F        where one, that of the subject, has prevailed already.In
         Giles v.Grover it has been held that the Crown has no
         precedence over a pledge of goods. In Bnk of Bihar v.
         State of Bihar the principle has been recognised by this
         Court holding that the rights of the pawnee who has parted
G        with money in favour of the pawner on the security of the
         goods cannot be extinguished even by lawful seizure of
         goods by making money available to other creditors of the
         pawnor without the claim of the pawnee being first fully
         satisfied.Rashbehary Ghose states in Law of Mortgage
H        (TLL,7th Edn.,p.386) - "it seems a government debt in
      RANA GIRDERS LTD. v. UNION OF INDIA                          71
                [A.K. SIKRI, J.]
    India is not entitled to precedence over a prior secured              A
    debt."
    20. Coming to the liability of th19 successor in interest, the
Court clarified the legal position enunciated in Mis. Macson by
observing that such a liability can be fastened on that person
                                                                          B
who had purchased the entire unit as an ongoing concern and
not a person who had purchased land and building or the
machinery of the erstwhile concern. This distinction is brought
out and explained in paragraph 24 and 25 and it would be
useful for us to reproduce herein below:
                                                                          c
           "Reliance has also been placed by Ms.Rao on
     Macson Marbles Pvt.Ltd. (supra) wherein the dues under
     Central Excise Act was held to be recoverable from an
     auction purchaser, stating:
           We are not impressed with the argument that the                D
     State Act is a special enactment and the same would
     prevail over the Central Excise Act. Each of them is a
     special enactment and unless in the operation of the same
     any conflict arises this aspect need not be examined. In
     this case, no such conflict arises between the corporation           E
     and the Excise Department. Hence it is unnecessary to
     examine this aspect of the matter.
            The Department having initiated the proceedings
     under Section 11A of this Act adjudicated liability of
     respondent No.4 and held that respondent No.4 is also                F
     liable to pay penalty in a sum of Rs.3 lakhs while the Excise
     dues liable would be in the order of a lakh or so. It is difficult
     to conceive that the appellant had any opportunity to
     participate in the adjudication proceedings and contend
     against the levy of the penalty. Therefore, in the facts and         G
     circumstances of this case, we think it appropriate to direct
     that the said amount, if already paid, shall be refunded
     within a period of three months. In other respects, the order
     made by the High Court shall remain undisputed. The
     appeal is disposed of accordingly."                                  H
    72       SUPREME COURT REPORTS               [2013] 14 S.C.R.


A              The decision, therefore, was rendered in the facts of
         that case. The issue with which we are directly concerned
         did not arise for consideration therein. The Court also did
         not notice the binding precedent of Dena Bank as also
         other decisions referred to hereinbefore."
B       21. A harmonious reading of the judgments in Macson and
  SICOM would tend us to conclude that it is only in those cases
  where the buyer had purchased the entire unit i.e. the entire
  business itself, that he would be responsible to discharge the
  liability of Central Excise as well. Otherwise, the subsequent
C purchaser cannot be fastened with the liability relating to the
  dues of the Government unless there is a specific provision in
  the Statute, claiming "first charge for the purchaser". As far as
  Central Excise Act is concerned, there was no such specific
  provision as noticed in SICOM as well. Proviso to Section 11
D is now added by way of amendment in the Act only w.e.f.
  10.9.2004. Therefore, we are eschewing our discussion
  regarding this proviso as that is not applicable in so far as
  present case is concerned. Accordingly, we thus, hold that in
  so far as legal position is concerned, UPFC being a secured
E creditor had priority over the excise dues. We further hold that
  since the appellant had not purchased the entire unit as a
  business, as per the statutory framework he was not liable for
  discharging the dues of the Excise Department.
         22. With this, we now revert to the first issue, namely
F   interpretation of the clause in the Sale Deed for land and
    building and similar clause in Agreement of Sale for machinery
    on the basis of which appellant is held to be liable to pay the
    dues. These clauses have already been incorporated in the
    earlier portion of our judgment.
G        23. We may notice that in the first instance it was
    mentioned not only in the public notice but there is a specific
    clause inserted in the Sale Deed/Agreement as well, to the
    effect that the properties in question are being sold free from
    all encumbrances. At the same time, there is also a stipulation
H
       RANA GIRDERS LTD. v. UNION OF INDIA                          73
                 [AK. SIKRI, J.]
that "all these statutory liabilities arising out of the land shall be     A
borne by purchaser in the sale deed" and "all these statutory
liabilities arising out of the said 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. We find that the High Court         B
has missed the true intent and purport of this clause. The
expressions in the Sale Deed as well as in the Agreement for
purchase of plant and machinery talks of statutory liabilities
"arising out of the land" or statutory liabilities "arisin\:) out of the
said properties" (i.e. the machinery). Thus, it is only that               c
statutory liability which arises out of the land and building 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        D
 in the form of the property tax 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 land
                                                                           E
 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 machinery which was used for
the purposes of manufacture. This fine distinction is not taken            F
 note at all by the High Court.
      24. We thus conclude that the judgment of the High Court
is unsustainable in law. Accordingly, the appeal is allowed and
the impugned judgment of the High Court is set aside. As a                 G
consequence the notice of the Excise Department calling upon
the appellant to pay the dues of the erstwhile owner of the unit
in question also stands quashed. The appellant shall also be
entitled to cost of this appeal.
Kalpana K. Tripathy                                     Appeal allowed.    H