DOLLAR INDUSTRIES (SPINNING DIVISION) Vs. ASSISTANT COMMISSIONER, CENTRAL EXCISE CUSTOMS AND SERVICE TAX, DINDIGUL AND ORS.

JUDGEMENT

(1.) WP (MD) NO.6238 OF 2011 : The writ petitioner is an auction purchaser of the properties belonging to a defaulter, namely M/s.Rajam Mills Spinning Company Limited in a public auction conducted on 19/6/2010 by the fourth respondent under the provision of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act]. A sale certificate was issued, confirmed and duly registered in favour of the petitioner. After taking over of possession and commencement of business, a demand was made by the respondents 1 to 3 that in view of cancellation of concession benefits on 20/4/2010, duty foregone at the time of purchase of machineries under the EOU Scheme to the tune of Rs.12,50,577.00 plus interest be recovered from the petitioner.

(2.) According to the petitioner, he had purchased the land, buildings and machineries at a huge cost of Rs.31,00,02,500.00 and invested an additional sum of Rs.10.00 Crores, employed more than 300 persons and functioning in full swing. At this juncture, any order of attachment will put the petitioner to very serious and irreparable loss and prejudice. The auction was conducted by a secured creditor, in which, the respondents 1 to 3 do not have any charge and Sec. 11 of the Central Excise Act, 1944, does not create any charge over arrears of tax. As per the judgment of the Hon'ble Supreme Court in UNION OF INDIA AND OTHERS VS. SICOM LIMITED AND ANOTHER [2009 (2) SCC 121] Crown's preferential right is confined only to unsecured debts and not to secured debts. In fact, respondents 1 to 3 have addressed a letter to the fourth respondent for recovery of arrears due to them on 29/3/2010, which was replied by fourth respondent on 11/6/2010 that if any surplus amount left after Bank's dues are met, they will make payment towards Central Excise arrears. In spite of receiving the letter from fourth respondent, they have kept quiet without taking any action to exercise their preferential right or claim that from the defaulter, but demand it from the petitioner, which totally unsustainable in view of the following judgments:

(3.) Countering the submissions, respondents 1 to 3 would contend that M/s.Rajam Mills Spinning Company Limited were granted an industrial license under 100% Export Oriented Unit (EOU) Scheme for manufacture and export of cotton vide LOP No.PER-