Summary
The Excise Department relied on confiscation orders made in 2007 to resist enforcement of a bank’s security over the borrower’s assets. The Court held that the confiscation power under Rule 173Q(2) had been omitted in 2000 and the later orders lacked jurisdiction. The statutory savings did not preserve that power in light of the contrary legislative intention. It also held that the secured bank’s dues had priority over the excise dues, and allowed the appeal, quashing both confiscation orders.
Issues
- Whether confiscation of land, buildings and machinery could be ordered under an omitted rule.
- Whether statutory savings preserved those confiscation proceedings.
- Whether the secured bank’s dues had priority over excise dues.
Provisions considered
- Rule 173Q(2), Central Excise Rules, 1944The omitted provision could not support the confiscation orders made in 2007. (¶¶ 30, 32-36, 45-48)
- Sections 38A and 11E, Central Excise Act, 1944A contrary legislative intention defeated the claimed saving; Section 11E expressly remained subject to SARFAESI. (¶¶ 30, 36, 43-44)
- Section 6, General Clauses Act, 1897Following Kolhapur Canesugar, the Court rejected reliance on this provision to save proceedings under the omitted rule. (¶¶ 34, 36)
- Sections 2(zc)-(zf), 13 and 35, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002The secured bank’s priority and the Act’s overriding operation prevailed over the excise dues in dispute. (¶¶ 30, 37-44, 47)
Held
- The Commissioner lacked authority to confiscate the specified assets in March 2007 under Rule 173Q(2), which had been omitted by the notification dated 12 May 2000. (¶¶ 32-36, 47)
- Section 38A did not save the confiscation power because a different intention appeared from the subsequent rules, which did not restore that power over land, buildings and machinery. Section 6 of the General Clauses Act did not provide the claimed saving for omission of a rule. (¶ 34-36)
- Before Section 11E was introduced, the Excise Act supplied no statutory first charge defeating the secured bank. Section 11E itself preserved the operation of SARFAESI, whose overriding provisions continued to govern the priority in question. (¶¶ 37-44, 47)
- The confiscation orders were invalid because they lacked statutory backing, rather than merely because a security interest existed. Earlier initiation of confiscation proceedings could not cure that jurisdictional defect. (¶ 45-46)
- The appeal was allowed and both confiscation orders, dated 26 and 29 March 2007, were quashed. (¶ 48)
Result
Appeal allowed. Confiscation orders of 26 and 29 March 2007 quashed; the secured bank’s dues held to have priority over the Central Excise Department’s dues.