2022 (6) TMI 1133 - HC - Central Excise

Recovery of dues - priority over of the dues - Whether in the absence of any provisions providing for First Charge in relation to Central Excise dues in the Central Excise Act 1944 the dues of the Excise department would have priority over the dues of the Secured Creditors or not? - HELD THAT - The petitioner-Bank is having first charge over the property belongs to the respondent No.3 and prays for deciding the matter in the light of the law laid down by Hon ble Apex Court in the case of PUNJAB NATIONAL BANK VERSUS UNION OF INDIA ORS. 2022 (2) TMI 1171 - SUPREME COURT where it was held that the provisions contained in the SARFAESI Act 2002 even after insertion of Section 11E in the Central Excise Act 1944 w.e.f. 08.04.2011 will have an overriding effect on the provisions of the Act of 1944. In view of the aforesaid judgment of Hon ble Apex Court nothing remains to be decided by this Court and by following the principle laid down by Hon ble Apex Court the letter/ communication dated 01.03.2013 (Ann.P.18) appears to be illegal and without jurisdiction and is hereby quashed holding thereby that the petitioner-Canara Bank is having first charge over the property belongs to the respondent No.3. It is further directed that respondent No.1 and 2 shall not create any hurdle in auction and sale of the property in question. Petition allowed.

Summary

Issues Involved:
1. Quashment of communication interrupting auction proceedings under SARFAESI Act.
2. Priority of Central Excise dues over Secured Creditors.

Analysis:
1. The petitioner, a bank, filed a writ petition seeking to quash a communication interrupting auction proceedings under the SARFAESI Act related to property belonging to a respondent. The petitioner claimed first charge over the property and argued that the interruption by the respondents was unwarranted. The petitioner contended that the matter had been finalized by the Debts Recovery Tribunal and cited a relevant judgment by the Apex Court in a similar case involving Punjab National Bank. The court noted the petitioner's arguments and the issue at hand.

2. The court referred to the judgment by the Apex Court in the Punjab National Bank case, which addressed the priority of Central Excise dues over Secured Creditors. The court highlighted the absence of provisions for First Charge in relation to Central Excise dues in the Central Excise Act, 1944, prior to a specific amendment. The judgment clarified that, considering the provisions of the SARFAESI Act, the secured creditor would have a First Charge on the Secured Assets, emphasizing the legal implications for such cases.

3. Upon reviewing the Apex Court's judgment and the arguments presented, the respondents acknowledged the petitioner's first charge over the property in question. Consequently, the court, in line with the legal principles established by the Apex Court, ruled in favor of the petitioner. The court quashed the communication that had interrupted the auction proceedings, declaring it illegal and without jurisdiction. It further directed the respondents not to obstruct the auction and sale of the property. The court allowed the petition without imposing any costs, concluding the matter based on the legal precedence and the parties' submissions.