TMI Blog2022 (5) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... AT 3 OTHER (S) [ 2020 (1) TMI 1197 - GUJARAT HIGH COURT] and KALUPUR COMMERCIAL CO-OPERATIVE BANK LTD. VERSUS STATE OF GUJARAT [ 2019 (9) TMI 1018 - GUJARAT HIGH COURT] where it was held that We have no hesitation in coming to the conclusion that the first priority over the secured assets shall be of the Bank and not of the State Government by virtue of Section 48 of the VAT Act, 2003. It is hereby declared that the State cannot claim any first charge over the subject land by virtue of Section 48 of the GVAT Act, 2003. The impugned order passed by the Sales Tax Authority, Annexure H as well as the entry No. 15774 mutated in the revenue records with respect to the subject land is hereby quashed and set aside - Application disposed off. - R/SPECIAL CIVIL APPLICATION NO. 6283 of 2022 - - - Dated:- 8-4-2022 - HONOURABLE MR. JUSTICE J.B.PARDIWALA And HONOURABLE MS. JUSTICE NISHA M. THAKORE MR ARPIT SINGHVI FOR MR SP MAJMUDAR(3456) for the Petitioner(s) No. MR UTKARSH SHARMA AGP for the Respondent(s) No. 1 JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. By this writ application under Article 226 of the Constitution of India, the writ applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale deed also came to be executed by the bank in favour of the writ applicant. The final sale certificate was also issued in favour of the writ applicant. 3. It is not in dispute that the charge over the subject land was created by way of a secured mortgage in favour of the bank wayback some time in 2012-13. Thus, the subject land was a secured assets in hands of the bank in accordance with the provisions of the SARFAESI Act. 4. The Company simultaneously incurred liability towards the VAT. In such circumstances, the Company was assessed for two F.Ys. 2016-17 and 2017-18. Two assessment orders came to be passed on 04.11.2021 and 13.11.2021 respectively. The subject land came to be attached by the respondent No.3, Sales Tax Officer vide order dated 19.01.2022. 5. The writ applicant is here before this Court as the Mamlatdar has declined to mutate the entry of the sale transaction in the Revenue Records. The Mamlatdar declined on the premise that the State has the first charge over the subject land as it has to recover a particular amount towards tax from the Company. 6. We have heard Mr. Arpit Singhvi, the learned counsel appearing for the writ applicant and Mr. Utkarsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a recent pronouncement of the Supreme Court in the case of Punjab National Bank Vs. Union of India and Others reported in 2022 SCC OnLine SC 227. We quote the relevant observations as under:- 40. Secondly, coming to the issue of priority of secured creditor s debt over that of the Excise Department, the High Court in the impugned judgment has held that In view of the matter, the question of first charge or second charge over the properties would not arise. In this context, we are of the opinion that the High Court has misinterpreted the issue to state that the question of first charge or second charge over the properties, would not arise. 41. A Full Bench of the Madras High Court in the case of UTI Bank Ltd. Vs. Dy. Commissioner Central Excise [2006 SCC Online Madras 1182], while dealing with a similar issue, has held that: 25. In the case on hand, the petitioner Bank which took possession of the property under Section 13 of the SARFAESI Act, being a special enactment, undoubtedly is a secured creditor. We have already referred to the provisions of the Central Excise Act and the Customs Act. They envisage procedures to be followed and how the amounts due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight of recovery of debts over other creditors is confined to ordinary or unsecured creditors. The common law of England or the principles of equity and good conscience (as applicable to India) do not accord the Crown a preferential right of recovery of its debts over a mortgagee or pledgee of goods or a Secured Creditor. (emphasis supplied) 45. Further, in Central Bank of India Vs. Siriguppa Sugars Chemicals Ltd. Ors. [(2007) 8 SCC 353], while adjudicating a similar matter, this Court has held as under: 18. Thus, going by the principles governing the matter, propounded by this Court there cannot be any doubt that the rights of the appellant-bank over the pawned sugar had precedence over the claims of the Cane Commissioner and that of the workmen. The High Court was, therefore, in error in passing an interim order to pay parts of the proceeds to the Cane Commissioner and to the Labour Commissioner for disbursal to the cane growers and to the employees. There is no dispute that the sugar was pledged with the appellant bank for securing a loan of the first respondent and the loan had not been repaid. The goods were forcibly taken possession of at the instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he duty under the Central Excise Act will have priority over the secured debts in terms of the State Financial Corporation Act, 1951 and this Court held as under: 9. Generally, the rights of the crown to recover the debt would prevail over the right of a subject. Crown debt means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p.1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is saved in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one. (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paves way for its quashing and not merely the fact that a security interest is created in respect of the very same property that the confiscation orders dealt with. 51. Further, the contention that in the present case, the confiscation proceedings were initiated almost 8-9 years prior to the charge being created in respect of the very same properties in favour of the bank is also inconsequential. The fact that the charge has been created after some time period has lapsed post the initiation of the confiscation proceedings, will not provide legitimacy to a confiscation order that is not rooted in any valid and existing statutory provision. 51. To conclude, the Commissioner of Customs and Central Excise could not have invoked the powers under Rule 173Q(2) of the Central Excise Rules, 1944 on 26.03.2007 and 29.03.2007 for confiscation of land, buildings etc., when on such date, the said Rule 173Q(2) was not in the Statute books, having been omitted by a notification dated 12.05.2000. Secondly, the dues of the secured creditor, i.e.the Appellant-bank, will have priority over the dues of the Central Excise Department, as even after insertion of Section 11E in the Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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