Central Govt's statutory charge prevails in property attachment. Section 11(E) of Central Excise Act applied.

The court held that the Central Government's dues have a statutory first charge over the properties of the defaulter. The attachment notices issued by the Assistant Commissioner of Central Excise were deemed valid, dismissing the petitioner's challenge. The court affirmed the priority of Central Government dues over the petitioner's rights to sell secured assets and upheld the application of Section 11(E) of the Central Excise Act to all properties of the defaulter, regardless of prior mortgages or possession by financial institutions under the State Financial Corporations Act. The petition was dismissed, and the rule was discharged.

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Issues Involved:
1. Validity of attachment notices issued by the Assistant Commissioner of Central Excise.
2. Priority of Central Government dues over the rights of the petitioner to sell secured assets.
3. Application of Section 11(E) of the Central Excise Act, 1944, in the context of sales by the petitioner under Section 29 of the State Financial Corporations Act, 1951.
4. Alleged threats to the petitioner's officers regarding the sale of attached properties.

Detailed Analysis:

1. Validity of Attachment Notices:
The petitioner, Gujarat Industrial Investment Corporation Limited (GIIC), challenged the attachment notices dated 19.04.2007 and 15.03.2004 issued by the Assistant Commissioner of Central Excise, Junagadh, under the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rule 1995. GIIC contended that these notices were issued without jurisdiction because, at the time of attachment, the Central Government dues did not have the first charge over the properties in question. The petitioner argued that the properties were mortgaged to them and they had taken possession under Section 29 of the State Financial Corporations Act, 1951 (SFC Act).

2. Priority of Central Government Dues:
The petitioner sought a declaration that the respondents had no priority over their rights to sell the secured assets based on the principle of Crown debt having priority. GIIC argued that the Central Government dues were not the first charge at the time of attachment and thus, the attachment orders were illegal and without authority. The petitioner relied on the decision of the Orissa High Court in Suburban Ply & Panels (P.) Ltd. v. Regional Provident Fund Commissioner to support their claim.

3. Application of Section 11(E) of the Central Excise Act, 1944:
The petitioner also sought a declaration that Section 11(E) of the Central Excise Act, 1944, which gives the Central Government dues a statutory first charge, would not apply to sales made by the petitioner under Section 29 of the SFC Act. The petitioner argued that Section 11(E) should not have retrospective effect and should not affect their vested rights as a mortgagee. The respondent countered that Section 11(E) creates a statutory first charge over the properties for Central Government dues, which prevails over any other charges, including those created before the enactment of Section 11(E). The Supreme Court's decision in State of M.P. v. State Bank of Indore was cited to support this contention.

4. Alleged Threats to Petitioner's Officers:
The petitioner claimed that the letters dated 19.04.2007 and 13.12.2006 from the Assistant Commissioner of Central Excise threatened their officers with personal responsibility if they proceeded with the sale of the attached properties. The respondent argued that these letters were not threats but merely informed the petitioner of the legal consequences of selling the attached properties.

Judgment:
The court held that in light of Section 11(E) of the Central Excise Act, the Central Government's dues have a statutory first charge over the properties of the defaulter, Rohil Zinc Limited. Consequently, the attachment notices issued by the Assistant Commissioner of Central Excise were valid, and the petitioner's challenge became academic. The court also rejected the petitioner's claim that Section 11(E) would not apply to sales made under Section 29 of the SFC Act, stating that accepting this argument would render Section 11(E) redundant. The court found no substance in the petitioner's contention that the letters from the Assistant Commissioner were threats, concluding that they were merely informative.

Conclusion:
The petition was dismissed, and the rule was discharged. The court affirmed the priority of Central Government dues over the petitioner's rights to sell the secured assets and upheld the validity of the attachment notices. The court also clarified that Section 11(E) of the Central Excise Act applies to all properties of the defaulter, regardless of any mortgage or possession by financial institutions under the SFC Act.

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