BL :July 19, 2012:
The excise, customs and service tax authorities have to yield to the special dispensation contained in the Debt Recovery Tribunal law of 1993 and Securitization law of 2002 when it comes to competing claims of these taxes and the banks in respect of their dues.
This was held by the Hyderabad High Court in IDBI and others vs the Deputy Commissioner (Arrears Recovery Cell), Central Excise and Customs.
The Court pointed out that in a welfare State, the Government indeed has to enforce its writ and collect taxes due to it but this inherent power of the State has to yield to the specific provision of the two enactments passed with the intention of addressing the festering problem of bad debts of the banking system in the country.
In fact the customs and excise laws defer to these two recovery enactments made in favour of the banking system in the country so much so that the secured debts of the banks have a priority over the unsecured tax dues of the government, observed the Court.
It therefore quashed the auction proceedings conducted by the Excise Department against one of the defaulting borrowers’ properties who incidentally was also an excise defaulter. The auction was conducted despite the ongoing proceedings in the Debt Recovery Tribunal.
(The author is a New Delhi-based Chartered Accountant)
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