Legal principle

Where a prior sale is completed, the Department is prohibited from claiming right over the property, since the first charge created by Section 142A of the Customs Act, 1962 is expressly subject to the SARFAESI Act, 2002.

Court decision

In favour of the petitioner: by order dated 08.10.2015 the Court quashed the impugned seizure memorandum and allowed the writ petition with no costs, initially remanding the matter to the first respondent to decide on merits within four weeks in line with the IDBI case; on 29.10.2015 the operative portion was modified on being mentioned to delete the remand, so the seizure memorandum stands quashed outright.

Facts

Textech Indo (India) P. Ltd., a dealer in textile machinery, bought 128 machines of Gangotri Textiles Ltd. (imported under the EPCG Scheme at concessional duty with unfulfilled export obligations) in an e-auction held on 08.07.2015 by State Bank of India under the SARFAESI Act, paid the entire Rs.15,05,00,000, obtained a sale certificate and resold 44 of the 128 machines. On 22.09.2015 the Senior Intelligence Officer, DRI, Coimbatore served a summons on the petitioner and the same day issued a seizure memorandum restraining it from removing the unsold machines, in the course of investigation under the Customs Act, 1962. The petitioner filed a writ under Article 226 seeking quashing of the seizure memorandum and a direction to drop all further proceedings.

Key provisions

• Section 142, Customs Act, 1962 — Recovery of sums due to Government
• Section 142A, Customs Act, 1962 — Liability under Act to be first charge