Court upholds Central Excise Dept's priority in debt recovery over Bank claim, denies installment payment request.

The court dismissed both writ petitions, upholding the Central Excise Department's priority in debt recovery over the Petitioner Bank. The court found that the bank's claim did not supersede the government's claim due to incomplete rights under the hypothecation deed. The attachment of the Third Respondent's properties by the Department was deemed legal, and the Third Respondent's request to pay Central Excise dues in installments was denied for non-compliance with court orders. Interim orders were vacated, and no costs were awarded.

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Issues Involved:
1. Priority of debt repayment between the Petitioner Bank and the Central Excise Department.
2. Legality of the attachment of the Third Respondent's properties by the Central Excise Department.
3. Entitlement of the Petitioner Bank to relief against the attachment.
4. Entitlement of the Third Respondent to pay Central Excise dues in installments.

Detailed Analysis:

1. Priority of Debt Repayment:
The primary issue was whether the claim of the Petitioner Bank, a secured creditor, had precedence over the arrears of Central Excise payable to the Government. The court referred to the Supreme Court's judgment in Dena Bank v. Bhikhabhai Prabhudas Parekh and Co., which established that the State's preferential right to recover debts over other creditors is confined to ordinary or unsecured creditors. The court noted that the Petitioner Bank's rights under the hypothecation deed were not complete and perfect to take precedence over the State's debt. The court emphasized that the principle of priority of Government debts is founded on the rule of necessity and public policy, ensuring the State's ability to function as a sovereign entity.

2. Legality of Attachment:
The Central Excise Department initiated recovery proceedings under Section 142(1)(c)(ii) of the Customs Act, 1962, read with Section 12 of the Central Excise Act, 1944, due to the Third Respondent's default in paying Central Excise Duty. The Department attached the Third Respondent's movable properties, including machineries, cement, and clinker. The Petitioner Bank challenged this attachment, claiming that the properties were hypothecated to them. However, the court found that the hypothecation was intimated to the Department only after the attachment, and the Department's actions were in accordance with the law.

3. Entitlement of the Petitioner Bank to Relief:
The Petitioner Bank argued that its claim as a secured creditor should prevail over the Central Excise Department's claim. However, the court found that the Petitioner Bank had not provided specific details regarding the description and specifications of the hypothecated properties. The court concluded that the Petitioner Bank's right had not crystallized in completion and perfection to have precedence over the Crown's debt. The court also noted that the Petitioner Bank had not taken immediate action against the Third Respondent to recover the dues.

4. Entitlement of the Third Respondent to Pay in Installments:
The Third Respondent sought to quash the attachment proceedings and requested to pay the Central Excise duty with interest in 24 installments. The court highlighted Rule 8(3) of the Central Excise Rules, 2002, which mandates that if an assessee fails to pay the duty by the due date, they are liable to pay the outstanding amount along with interest. The court found that the Third Respondent had collected the duty from its customers but failed to pay it to the government. The court ruled that the Third Respondent, having not complied with the conditional order of paying 25% of the amount demanded, was not entitled to any relief.

Judgment:
Both writ petitions were dismissed. The court upheld the Central Excise Department's priority in recovering the dues and found that the Petitioner Bank's claim did not have precedence over the government's claim. The Third Respondent's request to pay in installments was also denied due to non-compliance with the court's conditional order. The interim orders were vacated, and no costs were awarded.

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