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Hon'ble Pankaj Mithal, J.

M/S Kashi Ram Panna Lal Industries Private Limited had mortgaged its unit at 97-Khanchandpur, Rania, Kanpur Dehat with the U.P. Financial Corporation (in short UPFC) for a loan. It defaulted in the payment of loan. Therefore UPFC took possession of the unit and advertised it for sale vide Dainik Jagran dated 25th February 2003. Petitioner a separate legal entity and a private limited company offered to purchase the aforesaid unit and its tender was accepted by the UPFC on 3.5.2003. In pursuance of the above acceptance, UPFC executed a sale dated 9.5.2003 in favour of Subhash Chandra Gupta and Raj Kumar Gupta, the Directors of the Company on receiving the sale consideration of Rs. 60,000,00/-. The sale deed specifically provided that the property is being transferred free from all charges and encumbrances. Thus, the aforesaid two purchasers became the absolute owners of the unit whereon petitioner is running its business.

It appears that the previous owners M/S Kashi Ram Panna Lal Industries Private Limited were in arrears of excise dues also and as such the department of Central Excise vide letter dated 27.5.2003 called upon the UPFC to clear the aforesaid dues. The response of the above letter, if any, is not available on record. However, when the sale deed was executed, two demand notices dated 12.10.2004 and 25.10.2004 were issued and served upon the petitioner requiring it to pay excise dues of Rs. 36,57,000/- of previous owners. The aforesaid two demand notices have been challenged by the petitioner by means of present writ petition.

Necessary counter and rejoinder affidavits have been exchanged between the petitioner and the excise department ie. respondents no. 1 and 2. No counter affidavit has been filed on behalf of the UPFC despite service of notice upon its counsel. Notices to respondent no. 4 were directed to be issued vide order dated 24.11.2004 and office reports dated 3.12.2004 and 11.1.2005 states that neither notices sent by registered post fixing a date have been returned undelivered nor AD has been received back. Despite deemed service upon respondent no. 4 no one has appeared and filed any response on his behalf.

The Apex Court in Macson Marbles (Supra) nowhere held that Rule 340 of the Rules create a 'charge' over the excisable goods or property in favour the Central Excise Department.

In view of the above, the debt of UPFC had a priority being a secured creditor by virtue of a deed of mortgage over the dues of the Central Excise which had no 'charge' over the property in the absence of any provision creating any 'charge' over it. Thus, UPFC rightly invoked its preferential claim and transferred the property.