2023 (7) TMI 193 - HC - Central Excise

Priority of recovery of tax / duty of excise dues - Attachment of property - Seeking removal of lien/charge/encumbrance/mutation entry of Central Excise Department from the records of Respondent No. 4 and 5 in respect of the immovable property - refusal to register the Sale Certificate because of the lien/charge/encumbrance/mutation entry of Respondent No. 1 and 2 recorded in the records of Respondent No. 4 and 5 in respect of the Secured Asset - HELD THAT - The issue raised in the present Petition is squarely covered by the decision of the Full Bench of this Court in the case of Jalgaon Janta Sahakari Bank Ltd. and Anr. Vs Joint Commissioner of Sales Tax Nodal 9, Mumbai and Anr. 2022 (9) TMI 163 - BOMBAY HIGH COURT . In this decision, the Full Bench has clearly held that if the security interest of the secured creditor is registered with CERSAI, then the secured creditor would get priority over the dues of the Government. Since the Full Bench decision of this Court in the case of Jalgaon Janta Sahakari Bank Ltd. and Anr. has rested the controversy of priority of the secured creditor viz-a-viz the dues of the Central Government or State Government or local authority under Section 26-E of the SARFAESI Act, 2002, the lien/charges/encumbrance/mutation entry, if any, registered with Respondent No.5 by Respondent Nos. 1 2 cannot be allowed to stand and Respondent No. 4 would have to be directed to record/register the Sale Certificate/Sale Deed under the provisions of the Registration Act, 1908 as free from any encumbrances of the Respondent No. 1 and 2. Petition allowed.

Summary

Issues Involved:
1. Typographical correction in the prayer clause.
2. Priority of dues under SARFAESI Act.
3. Registration of the Sale Certificate and removal of encumbrances.

Summary:

Typographical Correction:
1. Typographical Correction: The court granted leave to the Petitioner to correct the typographical mistake in prayer clause (b) of the Petition, changing "Respondent No.6" to "Respondent No. 4". The correction was to be carried out forthwith in front of the Associate, with re-verification dispensed with.

Priority of Dues under SARFAESI Act:
2. Priority of Dues: The Petitioner sought to remove the lien/charge/encumbrance/mutation entry of Respondent Nos. 1 and 2 from the records of Respondent Nos. 4 and 5 concerning the immovable property (Secured Asset) and to direct Respondent No. 4 to accept and register the sale document issued by Respondent No. 3 in favor of the Petitioner.

3. Auction and Encumbrances: The Petitioner participated in an e-auction and was declared the highest bidder, subsequently paying the full bid amount based on Respondent No. 3's confirmation that there were no encumbrances or pending statutory dues against the Secured Asset. However, upon attempting to register the Sale Certificate, the Petitioner discovered existing encumbrances from Respondent Nos. 1 and 2.

4. Legal Arguments: The Petitioner argued that Respondent No. 3's security interest, registered with CERSAI, should have priority over the claims of Respondent Nos. 1 and 2, as per Section 26-E of the SARFAESI Act and supported by the Full Bench decision in Jalgaon Janta Sahakari Bank Ltd. vs Joint Commissioner of Sales Tax. Additionally, Respondent Nos. 1 and 2 had not registered their claim/attachment order with CERSAI, thus lacking priority over Respondent No. 3's dues.

5. Support from Respondent No. 3: Respondent No. 3 supported the Petitioner's arguments, emphasizing that the Secured Asset belonged to Mr. Prem Prakash Sarogi and not M/s Goldstar Polymer Pvt. Ltd., thus Respondent Nos. 1 and 2 could not claim dues from the properties of Mr. Sarogi.

6. Revenue's Concession: The counsel for Respondent Nos. 1 and 2 conceded that Respondent No. 3's registered charge with CERSAI had priority over their dues, but requested that any surplus proceeds from the sale be remitted to them.

Registration of the Sale Certificate and Removal of Encumbrances:
7. Court's Findings: The court found the issue covered by the Full Bench decision in Jalgaon Janta Sahakari Bank Ltd., holding that the secured creditor's registered interest with CERSAI has priority over government dues. Since Respondent Nos. 1 and 2 did not register their claim with CERSAI, they could not claim priority over Respondent No. 3's dues.

8. Judgment: The court allowed the Writ Petition, directing the removal of the lien/charges/encumbrance/mutation entry registered by Respondent Nos. 1 and 2 and ordered Respondent No. 4 to register the Sale Certificate/Sale Deed issued by Respondent No. 3 to the Petitioner, free from any encumbrances of Respondent Nos. 1 and 2.

9. Surplus Proceeds: Respondent No. 3 was directed to remit any surplus proceeds from the sale of the Secured Asset to Respondent Nos. 1 and 2 after appropriating its entire dues.

10. Costs and Orders: The Writ Petition was disposed of with no order as to costs, and all concerned were directed to act on an authenticated copy of the order.