Secured creditor enforcement prevails over excise dues; department must pursue its claim before the Official Liquidator and BIFR.

Central excise dues do not have priority over a secured creditor's rights where the creditor has acquired the security interest by assignment and has initiated measures under the SARFAESI Act. In that situation, the Department cannot restrain the creditor from proceeding with sale of the mortgaged assets. The proper course is for the Department to lodge its claim before the Official Liquidator for adjudication after notice to the concerned parties, and it may also move BIFR by appropriate application in the pending matter. Writ relief to block the secured creditor's enforcement was declined.

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Issues: Whether the Central Excise Department could restrain a secured creditor from proceeding with sale of the mortgaged assets, and whether the departmental dues had precedence over the secured creditor's rights; whether the Department's remedy lay in filing its claim before the Official Liquidator and approaching BIFR.

Analysis: The dues of the Central Excise Department do not enjoy priority over the rights of a secured creditor. The secured creditor had acquired rights through assignment and had taken measures under the SARFAESI Act, including action under Section 13(2). In such circumstances, the Department could not prevent the secured creditor from proceeding further. The proper course was for the Department to place its claim before the Official Liquidator, who would adjudicate the claim after notice to the concerned parties. As regards the matter pending before BIFR, the Department was left at liberty to move BIFR by appropriate application for adjudication on merits.

Conclusion: The writ relief to restrain the secured creditor was declined. The Department was directed to pursue its claim before the Official Liquidator, and it was also left open to approach BIFR in the pending matter.

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