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2010 (9) TMI 758 - HC - Central ExciseWhether in the present case, the respondent can avail the benefit of Section 38A for passing order under Rule 173Q(2) for confiscation of land and can take directly advantage of Rule 211, which now stood omitted - From the Rule 28, it is clear that the legislature intended to confiscate only goods which has distinct from immovable property like land, building, plant, machinery, etc - Held that the competent authority of Excise & Customs Department, including the Commissioner of Central Excise & Customs, Vadodara-II had no jurisdiction to confiscate the land under Rule 173Q(2), the said Rule having omitted and substituted by Rule 28, by the time the order dated 25-2-2006 was passed - The order being without jurisdiction is nullity in the eye of law and thereby the authorities cannot derive advantage of the order dated 25-2-2006. Whether the respondent Central Government has the first charge or priority over the secured charge of the secured creditor-bank - There is nothing on record to suggest that under the Central Excise Act or the Rules framed thereunder priority of charge over the secured debt has been created - No such law has been brought on record to suggest that the Central Government has any first charge or priority over the secured or unsecured debt - Held that the Excise & Customs Department of the Central Government cannot claim any priority over the secured debt of a secured creditor-Kotak Mahindra Bank as created under Section 14 of the Securitization Act.
Issues Involved:
1. Priority of charge between the Excise & Customs Department of the Central Government and the secured creditor (Kotak Mahindra Bank). 2. Jurisdiction of the Excise & Customs Department to confiscate property under the omitted Rule 173Q(2) of the Central Excise Rules, 1944. 3. Validity of the order passed by the District Magistrate, Bharuch, under Section 14 of the Securitization Act. Detailed Analysis: 1. Priority of Charge: The primary issue was whether the Excise & Customs Department of the Central Government had priority of charge over the secured creditor, Kotak Mahindra Bank. The court noted that the Central Government does not have priority of charge over secured creditors unless there is a specific statutory provision. The court referred to several precedents, including the Supreme Court's decision in *Union of India v. Sicom Ltd.* and the Full Bench decision of the Madras High Court in *UTI Bank Ltd. v. The Dy. Commissioner of Central Excise*, which established that government dues (Crown debts) do not have priority over secured debts unless explicitly provided by statute. The court concluded that the Excise & Customs Department could not claim priority over the secured debt of Kotak Mahindra Bank as there was no specific provision in the Central Excise Act or the Rules framed thereunder. 2. Jurisdiction to Confiscate Property: The court examined whether the Excise & Customs Department had jurisdiction to confiscate property under the omitted Rule 173Q(2) of the Central Excise Rules, 1944. The court noted that Rule 173Q(2) and Rule 211 were omitted by notifications dated 12-5-2000 and 1-7-2001, respectively. The proceedings under the Central Excise Act were initiated when these rules were in force, but the final order of confiscation was passed on 25-2-2006, after the rules had been omitted. The court held that the competent authority of the Excise & Customs Department had no jurisdiction to confiscate the land under the omitted Rule 173Q(2) and that the order passed under this rule was null and void. 3. Validity of District Magistrate's Order: The court upheld the order passed by the District Magistrate, Bharuch, under Section 14 of the Securitization Act, directing the Mamlatdar, Amod, to provide protection to the secured creditor, Kotak Mahindra Bank. The court found that the learned Single Judge erred in rejecting the claim of the bank and that the District Magistrate's order for handing over possession of the secured assets was correct. Conclusion: The court allowed the appeal and the writ petition filed by Kotak Mahindra Bank, directing the District Magistrate, Bharuch, and the Mamlatdar, Amod, to ensure compliance with the order to assist the bank in getting possession of the secured asset within one month. The order passed by the learned Single Judge dated 3-2-2010 was set aside.
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