<p>In a significant judgment, the Supreme Court on Thursday ruled that the debts of the secured creditors like banks will have priority over the central or state dues, including excise and tax.</p>.<p>A bench of Justices L Nageswara Rao and Vineet Saran agreed to a contention by the consortium of banks led by Punjab National Bank that Section 35 of the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002 provided that its provisions will have overriding effect on all other laws.</p>.<p>The court pointed out even the provisions in Section 11E (related to recovery of dues) of the Central Excise Act, 1944 are subject to the provisions contained in the 2002 Act.</p>.<p>"The dues of the secured creditor, i e, the banks, will have priority over the dues of the Central Excise department, as even after insertion of Section 11E, the provisions contained in the Sarfaesi Act will have an overriding effect on the provisions of the excise law," the bench said.</p>.<p>The court further said, prior to insertion of Section 11E in the 1944 Act, effective from April 8, 2011, there was no provision providing for first charge on the property of the assessee or any person under the Act of 1944.</p>.<p>"Therefore... where the land, building, plant machinery, etc have been mortgaged/hypothecated to a secured creditor, having regard to the provisions contained in section 2(zc) to (zf) of Sarfaesi Act, 2002, read with provisions contained in Section 13 of the 2002 Act, the secured creditor will have a first charge on the secured assets,” the court said.</p>.<p>The top court set aside a judgement of the Allahabad High Court.</p>.<p>In the case, the Commissioner, Customs and Central Excise, Ghaziabad confirmed an excise duty demand of around Rs 15 crore including interest and penalty against Rathi Ispat and also confiscated its land, building, plant and machinery for evasion of excise duty. </p>.<p>Since Rathi Ispat had defaulted in clearing its 2005 loan dues, the consortium of banks led by PNB issued notice to the company under section 13(2) of the Sarfaesi Act as to why its all mortgaged or hypothecated movable and immovable properties should not to attached and auctioned for recovery of their dues. </p>.<p>However, the excise department intervened by asking the assessee not to deal with the confiscated properties.</p>.<p><strong>Watch the latest DH Videos here:</strong></p>
<p>In a significant judgment, the Supreme Court on Thursday ruled that the debts of the secured creditors like banks will have priority over the central or state dues, including excise and tax.</p>.<p>A bench of Justices L Nageswara Rao and Vineet Saran agreed to a contention by the consortium of banks led by Punjab National Bank that Section 35 of the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act, 2002 provided that its provisions will have overriding effect on all other laws.</p>.<p>The court pointed out even the provisions in Section 11E (related to recovery of dues) of the Central Excise Act, 1944 are subject to the provisions contained in the 2002 Act.</p>.<p>"The dues of the secured creditor, i e, the banks, will have priority over the dues of the Central Excise department, as even after insertion of Section 11E, the provisions contained in the Sarfaesi Act will have an overriding effect on the provisions of the excise law," the bench said.</p>.<p>The court further said, prior to insertion of Section 11E in the 1944 Act, effective from April 8, 2011, there was no provision providing for first charge on the property of the assessee or any person under the Act of 1944.</p>.<p>"Therefore... where the land, building, plant machinery, etc have been mortgaged/hypothecated to a secured creditor, having regard to the provisions contained in section 2(zc) to (zf) of Sarfaesi Act, 2002, read with provisions contained in Section 13 of the 2002 Act, the secured creditor will have a first charge on the secured assets,” the court said.</p>.<p>The top court set aside a judgement of the Allahabad High Court.</p>.<p>In the case, the Commissioner, Customs and Central Excise, Ghaziabad confirmed an excise duty demand of around Rs 15 crore including interest and penalty against Rathi Ispat and also confiscated its land, building, plant and machinery for evasion of excise duty. </p>.<p>Since Rathi Ispat had defaulted in clearing its 2005 loan dues, the consortium of banks led by PNB issued notice to the company under section 13(2) of the Sarfaesi Act as to why its all mortgaged or hypothecated movable and immovable properties should not to attached and auctioned for recovery of their dues. </p>.<p>However, the excise department intervened by asking the assessee not to deal with the confiscated properties.</p>.<p><strong>Watch the latest DH Videos here:</strong></p>
