The Amravati Bench of the National Company Law Tribunal (NCLT) ruled recently that a corporate debtor is not required to pay customs duty while selling floating dry dock (FDD) to a foreign buyer during liquidation. The Customs Department has been ordered by the bench of Rajeev Bharadwaj (Judicial Member) and Sanjay Puri (Technical Member) to reimburse the applicant for the Rs. 6,39,26,500 in customs duty that was paid in protest (by the liquidator).
Ship repair, ship building, conversion, offshore fabrication, and related services were provided by the Respondent/Corporate Debtor (CD), Sembmarine Kakinada Ltd, an integrated offshore and marine engineering company. In 2012, CD claimed complete exemption and imported a floating dry dock (FDD) under Bill of Entry number. 8617966 dt. 29.11.2012. By virtue of the Director General of Shipping’s Registration Certificate with No. SRU/2012/04 dated 22.10.212, the FDD was additionally registered as the “Ship Repair Unit.”
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By obtaining a duty exemption against Sr. No. 459 of Notification No. 12/2012-Customs dated 17.03.2012, read with condition No. 79 appended to Sr. No. 459, it is argued that the CD has not paid any custom duty. The Customs Department has the right to recoup the amount of duty forfeited if the post-importation requirements outlined in condition no. 79′ are not met at any point after import.
According to the Liquidator’s Form B Public Announcement of 04.11.2021, the stakeholders were asked to make claims by 01.12.2021, at the latest, after which the CD assets were put up for auction in accordance with the notice. In order to keep the FDD afloat, the Liquidator asked the Applicant to do necessary maintenance and repairs. Later, via shipping bill, the liquidator exported the FDD to the overseas buyer, M/s. Asyad Dry Dock LLC, Oman, and received customs clearance on the same day, February 10, 2023.
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As per the tribunal, the Speaking Order No. 04/2023 (KVK), which was issued on May 9, 2023, is the result of a recently started legal action that was completed during the moratorium period set by the Liquidation period. The applicant argued that the custom duty should not be regarded as a continuing responsibility and a pending legal matter because it was imposed as a result of the sale of FDD to the overseas buyer in 2023 and not of any action taken by the CD prior to the CIRP period. It is evident from this that the Speaking Order violates the moratorium set forth in Section 33(5) of the IB Code of 2016.
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