2008 (9) TMI 475

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....Central Excise Act, 1944 (for short "the Act") read with Section 142 of the Customs Act. 2. E.C.L. was a defaulter of various financial institutions which ultimately authorized one of them i.e. Punjab National Bank to sell the secured assets of ECL under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI Act") to realize total duties running into approximately Rs. 165 crores. In response to advertisements, one M/s. A.V. Cotex Ltd. (for short "AVC") agreed to buy the said assets for a total sale consideration of Rs. 29 crores. However, on the default of the said AVC, an agreement was entered into between it and the petitioner, as per which the petitioner made the r....

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....ax of the concern whose assets have been transferred? 1.2 Secondly, under what circumstances does a charge created on a property become unenforceable against a transfree of such a property?" The Hon'ble Court held as follows - "In these circumstances, we are of the view that the first respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent charge on the property. This would, therefore, attract the principle laid down by this Court in Ahmedabad Municipal Corporation, which is also embodied in the proviso to Section 100 of the TP Act. Thus, the property in the hands of the first respondent was free of the charge and it is not open to the appellants to enforce the liabil....

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....thereafter. In Dena Bank case (cited supra) it is held that the Crown's preferential right to recover all debts over other creditors is confined to ordinary and unsecured creditors. In the light of the above discussion, we conclude:- "(i) Generally, the dues to Government i.e. tax, duties etc. (Crown's debts) get priority over ordinary debts. (ii) Only when there is a specific provision in the statute claiming "first charge " over the property, the Crown's debt is entitled to have priority over the claim of others. (iii) Since there is no specific provision claiming "first charge" in the Central Excise Department cannot have precedence over the claim of secured creditor viz., the petitioner Bank. (iv) In the absence of such s....