Kerala High Court
The Principal Commissioner Of Central ... vs The Chief Manager, Federal Bank on 11 April, 2024
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE EASWARAN S.
THURSDAY, THE 11TH DAY OF APRIL 2024 / 22ND CHAITHRA, 1946
WP(C) NO. 12191 OF 2018
PETITIONER/S:
THE PRINCIPAL COMMISSIONER OF CENTRAL TAX &
CENTRAL EXCISE, C.R BUILDING, I.S PRESS ROAD,
KOCHI - 682017.
BY ADV SMT.SHEELA DEVI.I., SC, CENTRAL BOARD OF
EXCISE AND CUSTOMS
RESPONDENT/S:
1 THE CHIEF MANAGER,
FEDERAL BANK, OPP.MAHARAJA COLLEGE GROUND,
M.G. ROAD, ERNAKULAM, KOCHI - 682018.
2 INDIA VISION SATELLITE COMMUNICATION LTD.
32/1787, 6TH FLOOR, TUTUS TOWER,
PALARIVATTOM, N.H.BYE PASS, KOCHI-682024.
BY ADVS.
MOHAN JACOB GEORGE
B.M.AJITH
A.K.GOPALAN
NIGI GEORGE
P.V.PARVATHY (P-41)
REENA THOMAS
SRI.MOHAN JACOB GEORGE,S.C., FOR R1
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 11.04.2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
W.P. (C) No.12191 of 2018 2
EASWARAN S. , J.
-------------------------
W.P. (C) No.12191 of 2018
-----------------------------------
Dated this the 11th day of April 2024
JUDGMENT
The present Writ Petition is filed by the Principal
Commissioner of Central Tax & Central Excise, for a direction to
the 2nd respondent to clear the Service Tax arrears to the
petitioner with immediate effect and also for a direction to the 1st
respondent to clear the Service Tax after appropriating the
amount.
2. The contention of the petitioner is that, in terms of the
Section 87(b)(i) of Chapter V of the Finance Act, 1994, the
Central Excise Officer may, by notice in writing, require any other
person from whom money is due or may become due to such
person, or who holds or may subsequently hold money for or on
account of such person, to pay to the credit of Central
Government either forthwith upon the money becoming due or
being held or at or within the time specified in the notice. Based
on the aforesaid provision, the learned counsel for the petitioner
contended that the 2nd respondent, who is having liability with
the 1st respondent bank and has mortgaged the property, in the
event, the 1st respondent enforces the security, it is bound to pay
the petitioner the amount due under the Service Tax.
3. I have heard, Smt. I. Sheela Devi, the learned Counsel
appearing for the petitioner and Shri. Mohan Jacob George, the
learned Counsel appearing for the 1st respondent.
4. The learned counsel appearing for the petitioner
reiterated the contentions raised in the writ petition and
submitted that this is the only manner in which the petitioner
could enforce the claim against the 1st respondent.
5. On the other hand, Shri. Mohan Jacob George, learned
Counsel for the 1st respondent, would rely on the judgment of
the Hon'ble Apex Court in Punjab National Bank Vs. Union
Bank of India (UOI) and Ors. (2022 Vol. 7 SCC 260) and it is
contended that that in the light of Section 26E of the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (for short, the
Securitisation Act), the Secured Creditor has got a priority and
they are entitled to enforce the Security interest over the
property.
6. I have considered the rival submissions raised across the
Bar.
7. On a perusal of Section 26E of the Secularization Act,
vis-a-vis Section 87 of the Finance Act, 1994, this Court finds
that the priority for the sale of the secured assets is definitely
with the 1st respondent Federal Bank. Still further the Hon'ble
Supreme Court in Punjab National Bank (supra) has specifically
held that the provisions of the Secularization Act will have priority
over the dues of the Central Excise Department. Applying the
principles laid down by the Hon'ble Supreme Court on to the facts
of this case, this Court finds that the liability of the 2nd
respondent to pay the Service Tax can never be construed as a
first charge of the property. However, the issue does not end in
terms of the Rule 9(7) of the Security Interest Enforcement
Rules, which states that "where the immovable property sold is
subject to any encumbrances, the authorized officer may, if he
thinks fit, allow the purchaser to deposit with him the money
required to discharge the encumbrances and any interest due
thereon together with such additional amount that may be
sufficient to meet the contingencies or further cost, expenses and
interest as may be determined by him."
8. At this point of time, this Court is not in a position to
ascertain as to whether a direction could be specifically issued to
the Federal Bank to transmit such amount consequent to the sale
of the secured assets which is yet to take place.
9. In the above circumstances, this writ petition is disposed
of with the following directions:
(a) It is declared that the charge over the secured
asset will be definitely with the 1st
respondent/Federal Bank in terms of Section 26E of
the Securitisation Act.
(b) In the event of the property being successfully
put for sale/auction, for the recovery of the dues of
the 2nd respondent, the 1st respondent shall
immediately intimate the issuance of the sale notice
to the petitioner /Principal Commissioner of Central
Tax and Central Excise Officer.
(c) In the event of the successful enforcement of
the security interest and the 1st respondent having
any residuary amount lying with him, he may
intimate the same to the petitioner, who shall then
make a request to the 1st respondent for transfer of
the said amount.
(d) In the event such a request is made, the 1st
respondent shall act in terms of Rule 9(7) of the
Security Interest Enforcement Rules and transfer
the said amount after adjusting the dues of the
secured creditor.
With the above directions, this writ petition is disposed of.
No order as to costs.
Sd/-
EASWARAN S.
JUDGE
NS
APPENDIX OF WP(C) 12191/2018
PETITIONER EXHIBITS
EXHIBIT P1. TRUE COPY OF THE ORDER-IN-ORIGINAL
NO.02/2013/ST DATED 23.01.2013 ISSUED BY
THE PETITONER TO THE 2ND RESPONDENT
EXHIBIT P2. TRUE COPY OF THE ORDER-IN-ORIGINAL
NO.22/2013/ST DATED 07.03.2013 ISSUED BY
THE PETITONER TO THE 2ND RESPONDENT
EXHIBIT P3. TRUE COPY OF THE NOTICE
C.NI.IV/16/11/2014-ST-MISC/82 DATED
12.01.2015 ISSUED TO THE 2ND RESPODNENT
BY THE ASSISTANT COMMISSION OF CENTRAL
EXCISE, KALOOR, KOCHI-682017
EXHIBIT P4. TRUE COPY OF LETTER C NO.IV/16/11/2014-
ST MISC PT II DATED 16.12.2016 ISSUED TO
THE PETITINER BY THE ASSISTANT
COMMISSION OF CENTRAL EXCISE, KALOOR,
KOCHI-682107
