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SUPREME COURT OF INDIA
N.V. RAMANA, CJI., J.K. MAHESHWARI, HIMA KOHLI, JJ.
Sundaresh Bhatt, Liquidator Of Abg Shipyard - Appellants
Versus
Central Board Of Indirect Taxes And Customs – Respondent
Civil Appeal No. 7667 of 2021
Decided on : 26-08-2022
JUDGMENT : IBC - Insolvency and Bankruptcy Code - 62(1) - [Section 12(1) of the IBC] - The judgment discusses the applicability of the Insolvency and Bankruptcy Code (IBC) over the Customs Act, particularly in relation to the imposition of moratorium and the authority of the respondent to initiate recovery proceedings during the moratorium period. The court held that the IBC prevails over the Customs Act, limiting the respondent's jurisdiction to only assess and determine the quantum of customs duty and other levies during the moratorium. The respondent is not empowered to initiate recovery of dues through sale or confiscation as provided under the Customs Act. The court also emphasized the obligation of the interim resolution professional, resolution professional, or liquidator to secure goods from the respondent authority and deal with them appropriately in accordance with the IBC.
Fact of the Case:
The Corporate Debtor, ABG Shipyard, was in the business of shipbuilding and regularly imported goods for ship construction. The National Company Law Tribunal (NCLT) initiated the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, imposing a moratorium under Section 13(1)(a) of the IBC. The respondent, Customs Authority, issued demand notices for non-payment of customs duty and other levies during the moratorium period. The NCLT allowed the release of the warehoused goods to the liquidator, but the National Company Law Appellate Tribunal (NCLAT) set aside the directions, allowing the respondent to sell the goods as per the Customs Act.
Finding of the Court:
The court found that the respondent's actions of issuing demand notices and initiating recovery proceedings during the moratorium period violated the provisions of Sections 14 and 33(5) of the IBC. It held that the respondent's authority was limited to assessing and determining the quantum of customs duty and other levies during the moratorium, and it could not initiate recovery through sale or confiscation. The court emphasized the obligation of the interim resolution professional, resolution professional, or liquidator to secure goods from the respondent authority and deal with them appropriately in accordance with the IBC.
Ratio Decidendi: The court held that the IBC prevails over the Customs Act, limiting the respondent's jurisdiction to only assess and determine the quantum of customs duty and other levies during the moratorium. The respondent is not empowered to initiate recovery of dues through sale or confiscation as provided under the Customs Act. The court also emphasized the obligation of the interim resolution professional, resolution professional, or liquidator to secure goods from the respondent authority and deal with them appropriately in accordance with the IBC.
Final Decision: The court allowed the appeal and set aside the impugned order and judgment of the NCLAT, with no orders as to costs.
JUDGMENT :
The present Civil Appeal under Section 62(1) of the Insolvency and Bankruptcy Code, 2016 (“IBC”) arises out of the impugned judgment dated 22.11.2021 passed by the National Company Law Appellate Tribunal, New Delhi (“NCLAT”) in Company Appeal (AT) (Insolvency) No. 236 of 2021. Vide the impugned judgment, the NCLAT has allowed the appeal filed by the respondent against the order of the National Company Law Tribunal, Ahmedabad (“NCLT”)/Adjudicating Authority whereby the Adjudicating Authority directed the release of certain goods lying in the Customs Bonded Warehouses without payment of custom duty and other levies.
2. A conspectus of the facts necessary for the disposal of the present appeal is as follows: ABG Shipyard (“Corporate Debtor”) was in the business of shipbuilding prior to the initiation of corporate insolvency proceedings against it. As a part of its business enterprise, it used to regularly import various materials for the purpose of constructing ships which were to be exported on completion. Some of these goods were stored by the Corporate Debtor in Custom Bonded Warehouses in Gujarat and Container Freight Stations in Maharashtra. Bills of entry for warehousing were submitted at the relevant time. The Corporate Debtor also took the benefit of an Export Promotion Capital Goods Scheme (“EPCG Scheme”) and was granted a license under the said scheme (“EPCG License”) with respect to the said warehoused goods.
3. On 01.08.2017, the National Company Law Tribunal, Ahmedabad (“NCLT”) passed an order commencing the Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor, and the appellant was appointed as the Interim Resolution Professional. In the same order, the NCLT also declared a moratorium under Section 13(1)(a) of the IBC.
4. On 21.08.2017, the appellant informed the respondent of the initiation of CIRP and sought custody of the warehoused goods and requested the respondent not to dispose of or auction the same. On 29.03.2019, the respondent for the first time, issued a notice to the Corporate Debtor regarding non-fulfilment of export obligations in terms of the EPCG license demanding customs duty of Rs. 17,13,989/with interest. From 02.04.2019 to 07.04.2019, the respondent issued five different demand notices to the Corporate Debtor regarding non-fulfillment of export obligations under different EPCG licenses for various amounts. The details of the demand notices issued by the Respondent for non-fulfilment of EPCG License conditions by the Corporate Debtor are tabulated herein for ease of reference:
| S. NO. | DATE | DETAILS OF DEMAND NOTICE | DEMANDED AMOUNT (PLUS INTEREST AS APPLICABLE) |
| 1. | 29.03.2019 | EPCG License No. 5230007265 dated 16.07.2010 | Rs. 17,13,989 |
| 2. | 02.04.2019 | EPCG License No. 5230008206 dated 16.11.2010 | Rs. 96,20,325 |
| 3. | 04.04.2019 | EPCG License No. 5230007016 dated 17.05.2010 | Rs. 53,29,072 |
| 4. | 05.04.2019 | EPCG License No. 5230007082 dated 03.06.2010 | Rs. 2,05,73,402 |
| 5. | 05.04.2019 | EPCG License No. 5230006881 dated 31.03.2010 | Rs. 6,64,646 |
| 6. | 07.04.2019 | EPCG License No. 5L32206936 dated 20.04.2010 | Rs. 12,04,09,501 |
5. On 25.04.2019, the NCLT passed an order commencing liquidation against the Corporate Debtor under Section 33(2) of the IBC. Vide the said order, the NCLT declared that the earlier moratorium imposed under Section 13(1)(a) of the IBC shall cease to have effect by the operation of Section 14(4) of the IBC. However, a fresh direction was passed under Section 33(5) of the IBC barring the institution of any suit or legal proceeding by or against the Corporate Debtor. Further, the NCLT also appointed the appellant as the liquidator vide the same order.
6. Thereafter, the respondent filed claims before the appellant for goods warehoused in both Gujarat and Maharashtra on 20.05.2019,
The main legal principle established in the judgment is that the Insolvency and Bankruptcy Code (IBC) prevails over the Customs Act, limiting the authority of the respondent to only assess and determ....
The IBC's moratorium provisions shield and protect the corporate debtor from pecuniary attacks, and the authorities cannot enforce recovery or levy interest on tax due during the moratorium.
The moratorium under Section 33(5) of the IBC prohibits legal proceedings against a corporate debtor during liquidation, and any notices issued by the State for breach of the Tenancy Act are invalid ....
Once a resolution plan is approved under the Insolvency and Bankruptcy Code, claims not presented during insolvency proceedings are extinguished, prohibiting further recovery actions by revenue autho....
NCLT has jurisdiction under IBC Section 60(5)(c) to defreeze demat accounts holding corporate debtor's undisputed shares, frozen for crystallized listing fee dues, as issue relates to insolvency proc....
Only claims existing on liquidation commencement date, filed within stipulated time, are admissible; post-liquidation assessments during moratorium invalid without approval, rejecting delayed additio....
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