CFM Asset Reconstruction Pvt. Ltd. Vs Assistant Commissioner CGST (Calcutta High Court)
In a significant ruling, the High Court of Calcutta, presided over by Justice Raja Basu Chowdhury, has affirmed the priority of secured creditors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) over statutory dues under the Central Goods & Services Tax Act, 2017 (CGST Act). The judgment, delivered in the case of CFM Asset Reconstruction Pvt. Ltd. & Ors. v. Assistant Commissioner CGST and C. Ex. & Ors. (WPA 3564 of 2025 with WPA 26115 of 2024), disposed of a writ petition in favor of the assessee, CFM Asset Reconstruction Pvt. Ltd.
The case arose when CFM Asset Reconstruction Pvt. Ltd., a secured creditor under the SARFAESI Act, challenged the GST department’s actions of issuing an attachment order and initiating auction proceedings over a secured asset. The petitioner contended that it had a registered charge in its favor and had invoked Section 13(4) of the SARFAESI Act. The respondents, representing the CGST authorities, argued that tax dues under the CGST Act had priority.
The High Court, relying on Section 26E of the SARFAESI Act and a Supreme Court ruling in the case of Kotak Mahindra Bank Ltd. v. Girnar Corrugators Private Limited & Ors. [(2023) 3 SCC 2010], held that the CGST department’s dues do not override the rights of secured creditors. Section 26E of the SARFAESI Act, inserted in 2016, includes a non-obstante clause, signifying its precedence over earlier enactments. The court emphasized that when a later enactment includes a non-obstante clause, the legislature intends for the subsequent statute to prevail.
