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TMI Blog1998 (8) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... pairs to the plant and machinery after taking possession of the same. On 21-2-1994, the 1st respondent Assistant Collector of Customs and Central Excise issued notice to the petitioner under Rule 230(2) of Central Excise Rules, 1944 requiring the petitioner to pay a sum of Rs. 4,40,159.23 ps. in terms of adjudication order No. 4/90, dated 9-3-1990 which was payable by M/s. Dakshin Fabrics Ltd. Again on 13-6-1994 the Superintendent of Central Excise detained the plant and machinery of M/s. Dakshin Fabrics Ltd., on the ground that it has to pay a sum of Rs. 8,27,792.19 ps. in terms of adjudication order Nos. 4/90, dated 9-3-1990 and 79/90, dated 11-11-1990. Aggrieved by the orders of adjudication and also the order of demand dated 21-2-1994 and 13-6-1994 the present writ petition is filed. 4.The Central Excise authorities have also written a letter to A.P. Industrial Development Corporation not to handover the unit to the petitioner on the ground that M/s. Dakshin Fabrics Ltd. has to pay a sum of Rs. 3,76,50,083.85 ps. in terms of adjudication order No. 50/96. 5.The 2nd respondent M/s. A.P. Industrial Development Corporation has filed a counter affidavit stating that under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30(2) of the Central Excise Rules. 8.The main argument of the learned Counsel for the petitioner is that Rule 230 of the Central Excise Rules has no application to statutory transfers. Section 46B of the State Financial Corporation Act prevails over the provisions of the Central Excises and Salt Act. In support of this contention he relied on Maharashtra Tubes Ltd. v. State of Industrial Investment Corporation of Maharashtra Others - (1993) 2 SCC page 144. The learned Counsel contended that since the plant, machinery and land of M/s. Dakshin Fabrics Ltd., was mortgaged to the Industrial Development Bank, the Industrial Development Bank is a secured creditor. Therefore, the excise dues will not prevail over the dues of the Industrial Development Corporation. 9.The counsel for the Respondents Mr. B. Adinarayana Rao contended that under Rule 230(2) the excise authorities are entitled to proceed against not only excisable goods but also the plant and machinery in the hands of the transferee and therefore the demand notice and the detention order are valid and legal. 10.The counsel appearing for the 2nd respondent contended in view of the mortgage, the Industrial Development B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial concern as well as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. Therefore, under Section 29 the Financial Corporation has the right to realise the dues from the defaulting company by sale of the property mortgaged to it. 14.From the facts narrated in the earlier paragraphs the undisputed fact is that the property itself is the subject matter of sale and which is purchased by the petitioner in auction was mortgaged to the Industrial Development Corporation. Therefore, the Industrial Development Corporation, if there is default by the industrial concern is entitled to recover the dues by bringing the property to sale under Section 29 of the Act and realise the dues from the sale proceeds. On the facts of the present case in exercise of the said power, the Industrial Development Corporation brought the properties to sale and the petitioner purchased the same in the auction. The petitioner purchased the property for Rs. 76.00 lakhs out of which he deposited Rs. 15.20 lakhs while the 1st respondent proposes to recover the excise dues from the land, plant and machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bags of sugar. No payment was made to the plaintiff bank. Therefore, the plaintiff bank filed a suit for recovery of the cost of 1818 bags of sugar or for the return of the bags of sugar on the ground that the seizure and removal of sugar is illegal. The suit was resisted by the defendant on the ground that the seizure and removal of the sugar is on account of the sugar cess that is due by the 2nd respondent and therefore in exercise of the power under the Public Payments Recovery Act, they are entitled to remove the sugar bags from the godown. On the facts and in the circumstances of the case, the question that was considered by the Supreme Court was whether the sugar seized by the Government in possession of the bank as a pledgee at the time of the seizure and have the rights of the Bank as such pledgee been determined by the seizure in question. It was held rejecting the contention of the Cane Commissioner who seized the sugar bags that the Cane Commissioner have a right of priority over the other creditors of the defendant No. 2 in particular secured creditors, "It was held that the pawnee has special property and a lien which is not of ordinary nature on the goods and so lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were some proceedings in the court and pursuant to the directions issued by the court, the hypothecated stock in godown No. 1 was sold and the proceeds realised were deposited. The Andhra Bank claimed preferential right-first charge and lien to recover the suit amount due to it under open cash credit loan from the 4th defendant and the defendant Nos. 1 and 2 being simple money creditors are entitled to any surplus that may be left over. The suit was decreed holding that the plaintiff bank is entitled for priority in respect of the sale price in sugar. On appeal, this court following the judgment of the Supreme Court in Bank of Bihar's case (supra) held as follows : "In the case before us, though it is not a pledge, yet the transaction being a hypothecation, the hypothecatee, viz, the bank, has a lien on the goods which are held by way of security and the bank has a preferential claim as a secured creditor even against the Government's demand of taxes." 18.In other words, in the case of secured debt, the rights of secured creditor prevails over the excise dues of the excise department. The secured creditor will have preferential claim even against the demand of central excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtgage is less than ownership which continues with the mortgagor. The characteristic of a mortgage is that it transfers an interest in immovable property. Therefore, the mortgagee has an interest which is less than ownership and therefore a mortgagee has a preferential right over other unsecured creditors. 25.In view of a transfer of an interest in immovable property the mortgagee has a special interest in the property and so long as his claim is not satisfied no other creditor of the mortgagor has a right to take away the property or its price. 26.We appear the view expressed in Satyam v. Krishna Murthy Others (supra) and the Judgment in Indian Bank v. State of Andhra Pradesh (supra). 27.It follows from the above, that the Government cannot claim preferential right for recovery of its excise duty as no charge lies on the property for recovery of the duty. In other words, excise duty is not a secured debt, as for recovery of which no charge lies on the property. 28.We therefore are of the view that the Industrial Development Corporation being a secured creditor has preferntial claim even against demand of central excise duty of the Government. 29.The next question that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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