Secured creditor priority over excise dues under SARFAESI prevails where no statutory first charge existed

Priority between State excise dues and a secured creditor is discussed in the context of SARFAESI enforcement. The text notes that, before insertion of Section 11E of the Central Excise Act, 1944, there was no statutory first charge in favour of the Excise Department. It also states that the secured creditor's rights under Section 13 of the SARFAESI Act, together with the overriding effect of Section 35, were treated as prevailing over the Department's claim, and that the confiscation-related rule relied on by the Department was inapplicable on the relevant dates.

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Issues: Whether the State Excise Department has priority over the dues of a secured creditor.

Analysis: The appeals concerned a single question already settled by the Supreme Court. It was noticed that, prior to insertion of Section 11E of the Central Excise Act, 1944, there was no provision creating a first charge in favour of the Excise Department. The secured creditor's rights under the SARFAESI Act, 2002, including enforcement under Section 13 and the overriding effect under Section 35, were held to prevail over the Excise Department's claim. The earlier confiscation-related rule referred to by the department was also held inapplicable on the relevant dates.

Conclusion: The secured creditor's dues have priority over the Excise Department's dues, and the issue was decided against the State.

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