The Three Judge Bench of the Supreme Court of India Held that On Execution of Moratorium, Insolvency and Bankruptcy Code (IBC) Prevails over Customs Act to the extent that once moratorium proceedings begin under the Code, the customs authority does not have the power to initiate any recovery actions for dues from the corporate debtor.
A Bench consisting of Chief Justice NV Ramana, Justice JK Maheshwari, and Justice Hima Kohli set aside an order of the National Company Law Appellate Tribunal (NCLAT) by which it had allowed the appeal of the Central Board of Indirect Taxes and Customs (CBIT-C) against the verdict of NCLT directing the release of certain goods lying in the Customs Bonded Warehouses without payment of customs duty and other levies.
On August 1, 2017, the National Company Law Tribunal (NCLT), Ahmedabad passed an order commencing the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor and appointed Bhatt as the Interim Resolution Professional.In the same order, the NCLT also declared a moratorium under Section 13(1)(a) of the IBC.
On August 21, 2017, SundareshBhatt, liquidator(Appellant) informed the customs authorities of the initiation of CIRP and sought custody of the warehoused goods of the company, and requested them not to dispose of or auction the same.However, on March 29, 2019, the customs authority 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 April 2, 2019, to April 7, 2019, the authority issued five different demand notices to the Corporate Debtor regarding the non-fulfilment of export obligations under different EPCG licenses for various amounts.
The bench allowed the liquidator, to immediately secure goods from the customs authority to be dealt with appropriately, in terms of the IBC, and allowed his appeal against the NCLAT. The Bench held that once a moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies.
“The respondent authority does not have the power to initiate the recovery of dues by means of sale/confiscation, as provided under the Customs Act”, the Court said.
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