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2007 (12) TMI 454 - HC - Central Excise
Issues: Priority of dues between Department of Customs and Central Excise and secured creditors, validity of temporary injunction against defendant no.2.
Analysis: 1. Priority of Dues: The case involved a dispute over the priority of dues between the Department of Customs and Central Excise and a secured creditor, defendant no.2. The Department sought to recover a sum from defendant no.1, who had mortgaged plots to defendant no.2 for a loan. Defendant no.2 had attached the plots under the State Financial Corporation Act, intending to sell them to recover the loan amount. The Department claimed precedence over the dues that defendant no.2 would receive from selling the plots. The court referred to legal precedents, including Sicom Ltd. v. Union of India and Syndicate Bank v. The Official Liquidator, to establish that the State does not have priority over secured creditors but only over non-secured creditors. As defendant no.2 had acted within the provisions of the Act, the Department had no grounds to obtain a temporary injunction against defendant no.2. 2. Validity of Temporary Injunction: The court found that the Department of Customs and Central Excise had not sought any relief against defendant no.2 in their plaint. As defendant no.2 was entitled to deal with the plots in accordance with the law to recover their dues, the court set aside the impugned order dated 30-6-2007. Consequently, defendant no.2 was granted the right to manage the plots, including the factory premises and machinery, as per the provisions of the State Financial Corporation Act. The appeal was allowed in favor of defendant no.2 based on these findings. In conclusion, the judgment clarified the priority of dues between the Department of Customs and Central Excise and secured creditors, emphasizing the rights of the latter under the State Financial Corporation Act. It also highlighted the importance of seeking appropriate relief in legal proceedings and upheld the rights of defendant no.2 to deal with the mortgaged plots for the recovery of their dues.
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