TMI Blog2008 (2) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... as are necessary for consideration of the present writ petition are, that the first respondent is an assessee within the jurisdiction of the petitioner. It transpires that the first respondent is due to the petitioner in a sum of Rs. 7,83,23,235/- by way of central excise duty and penalty along with interest in terms of an Adjudication Order no. 2/2006, dated 1-3-2006. Pursuant to proceedings initiated for clandestine removal of the manufactured goods, it transpires that there was a Detention Order issued by the Authorised Officer as on 9-11-2006 for recovery of the said arrears and a Notice of Demand followed by a proclaimed Order of Attachment was issued on 9-1-2007 in respect of the properties of the first respondent, namely, its factory building and other buildings situate at plot no. 2D, 2E and 2F of Block no. 89. The further order of attachment has been proclaimed on the very date in respect of land situate in plot no. 1/14, Block no. 96A belonging to respondent no. 1(a), who is the Executive Director of the first respondent-Company, as well as in respect of land in Block no. 675, measuring about 3 acres and 27 guntas belonging to one of the directors of the Company. 3. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in W. P. No 11371/2007 also challenging the said hand-bill on the very grounds that have been urged in the first petition. Hence, the two petitions are considered together on a pure question of law as to the priority of debts as between the petitioner and the respondents-Banks. 5. It is the contention of the Counsel for the petitioner that the amounts sought to be recovered by the petitioner being arrears of central excise duty and penalty, with interest thereon, the petitioner-department would have priority over other institutions and organisations, including the respondent-Banks in the matter of realising its dues from an assessee. 6. In this regard, the Counsel places reliance on the judgments of the Supreme Court in the case of Dena Bank supra and Macson Marbles Private Limited v. Union of India, 2003 (158) E.L.T. 424. It is contended that the Co-op bank seeking to claim under Section 71 of the Karnataka Co-operative Societies Act, 1951 and attachment before judgment under section 103 of the said Act, while SBM seeking to proceed under the provisions of the SARFAESI Act, are overriding the priority claim of the Central Excise Department. The said respondent-B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on 1-3-2000, a Detention Order on 9-11-2006 and a Proclamation Order of Attachment on 9-1-2008 and a Notice of Warrant of Attachment has been issued an 9-1-2007. These admitted facts would indicate that all actions initiated by the petitioner against the respondent-Company and its assets, are subsequent to the action initiated by SBM. 11. Similarly, insofar as the Co-operative Bank is concerned, in proceedings initiated under the Karnataka Co-operative Societies Act,1951, there was an Attachment Order by the Arbitration Court on 3-9-2005, a public notice was published in the Newspapers on 17-10-2004, a Public Auction Sale Notice was published on 8-1-2007 and a public auction was proposed to be held on 25-1-2007 and 31-1-2007. These admitted events would also indicate that even the Co-operative Bank has initiated proceedings subsequent to the charge and proceedings that are initiated by SBM. The respondent-Bank bring a secured creditor, who had no prior notice of any claim, either by the petitioner or by the Co-operative Bank, they are estopped in law from seeking to claim a right of priority over the assets of the first respondent-Company. 12. The Counsel would contend th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ekh and Company and Others, AIR 2000 SC 3654, (iii) Karnataka State Industrial Investment and Development Corporation Limited v. The Secretary, Government of India and Others, ILR 2005 KAR. 3572, (iv) UTI Bank Limited v. The Deputy Commissioner of Central Excise, Chennai, a Fall Bench decision of the High Court of Madras in Writ Petition No. 39536/2005 [2007] (208) E.L.T. 3 (Mad.) = 2007 (6) S.T.R. 82 (Mad.)], (v) Collector of Aurangabad v. Central Bank of India Limited, AIR 1967 SC 1831, (vi) The Bank of Bihar v. State of Bihar and Others, AIR 1971 SC 1210, (vii) Sitani Textiles and Fabrics Private Limited v. Collector of Customs and Central Excise, 1998-ALT-5-249, (viii) Union of India v. Metherukunju Moosakutty and Others, AIR 1980 KER 182, (ix) ICICI Bank Limited v. SIDCO Leather Limited, AIR 2006 SC 2088. 15. The Counsel for the second respondent would also urge similar contentions while emphasizing the fact that on account of the said respondent not being in a position to recover moneys, it has affected its business and its very functioning has come to a stand-still inviting action by the Rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Central Excise, for the purposes of recovering such duty or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change.] Section 12. Application of the Provisions of Act 8 of 1878 of Central Excise Duties : - The Central Government may, by notification in the Official Gazette, declare that any of the provisions of the [Customs Act, 1962 (52 of 1962)] relating to the levy of and exemption from customs duties, drawback of duty, warehousing, offences and penalties, confiscation, and procedure relating to offences and appeals shall, with such modifications arid alterations as it may consider necessary or desirable to adapt them to the circumstances, be applicable in regard to like matters in respect of the duties imposed by Section 3. The Customs Act, 1962 "Section 142. Recovery of Burns doe to Government :- (1) [where any sum payable by any person] under this Act (including the amount required to be paid to the credit of the Central Government under Section 2KB] is not paid- (a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al from the Commissioner of Customs, for the purposes of recovering the amount so payable by such predecessor at the time of such transfer or other wise disposal or change.] (2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub section." 17. The provisions of the SARFAESI Act as are relevant m the respondent-State Bank of Mysore claiming that it has initiated proceedings and has taken possession prior to the action initiated by the petitioner is concerned, are also extracted below: "Chapter 1 of the SARFAESI Act Definitions (zd) "secured creditor" means any bank or financial institution or any consortium or group of banks or financial institutions and includes (i) debenture trustee appointed by any bank or financial institution; or (ii) [securitisation company or reconstruction company, whether acting as such or managing a trust set up by such securitisation company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been taken over by the secured creditor; (5) Any payment made by any person referred to in clause (d) of sub-section (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower, (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sales tax arrears and that Section 150 accords primacy to all moneys recoverable including the sales tax arrears. 20. Thus, from a reading of the provision under which, the petitioner claims primacy over the debts due to it as against the respondent-Banks, it is clear that there is no specific provision either under the Central Excise Act or the Customs Act, to enable the Central Excise Department to claim a precedence over the claim of a secured creditor such as the respondent-Banks. On the other hand under the provisions of the SARFAESI Act, the State Bank of Mysore haying initiated proceedings thereunder, would clearly claim precedence insofar as enforcing its right is concerned. The precedence, vis-a-vis the State Bank of Mysore and the Hirekerur Urban Co-operative Bank is not the subject matter of this writ petition and is a matter to be resolved as between the said respondents as the same would involve questions of fact which are purely matters concerning the said respondents. The question insofar as the petitioner is concerned, would clearly have to be answered against the petitioner. The petitions stand dismissed. The interim order granted earlier stands vacated. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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