2008 (7) TMI 775 - AT - Central Excise

Interpretation of Sale Proceeds Distribution under DRT Section 29A & Company Act Prioritization

The Tribunal upheld the interpretation that sale proceeds should be distributed in accordance with DRT Section 29A of the Company Act, prioritizing ... Order of Commissioner (Appeals) - Nature of - Appreciation of facts Issues:1. Interpretation of provisions of the DRT Act and Company Act regarding distribution of sale proceeds.2. Application of Supreme Court judgment on intra-state sales to the present case.3. Appropriation of sale proceeds and observations made by the Commissioner (Appeals).Analysis:1. The first issue in this case pertains to the interpretation of provisions of the Debt Recovery Tribunal (DRT) Act and the Company Act regarding the distribution of sale proceeds. The Commissioner (Appeals) observed that the title of the goods had been transferred to the DRT, and the sales proceeds were to be distributed in accordance with DRT Section 29A of the Company Act 1986. The Commissioner emphasized that the first payment should be made to secured creditors and workmen towards their dues. This decision was supported by a Supreme Court judgment in the case of Allahabad Bank v. Canara Bank, which highlighted the priority of creditors in such cases. The Tribunal upheld this interpretation, affirming the right of banks to realize their dues as the first charge, unaffected by recovery under the Customs Act.2. The second issue involves the application of a Supreme Court judgment on intra-state sales to the present case. The revenue relied on the decision in the case of National Aluminium Co. Ltd. v. State of A.P., where the Supreme Court clarified the limited scope of consideration before the Tribunal. The Court emphasized that the Tribunal was not required to delve into other questions beyond the specific issue at hand. In this case, the Tribunal had to determine whether a sale took place within a specific state, and it was not necessary to consider additional factors. The Supreme Court directed that certain observations made by the Commissioner (Appeals) were unwarranted and needed to be set aside, as they were beyond the scope of the Tribunal's consideration.3. The final issue concerns the appropriation of sale proceeds and the observations made by the Commissioner (Appeals). The Tribunal noted that the Commissioner's observations regarding the appropriation of sale proceeds of assets not subject to the proceedings were unnecessary. Citing the Supreme Court's judgment, the Tribunal emphasized that the Tribunal should focus on the specific issue at hand without delving into unrelated matters. Therefore, the Tribunal modified the impugned order to delete the unwarranted observations made by the Commissioner (Appeals) and disposed of the appeal accordingly.