Customs Department appeal abated after corporate insolvency resolution process completion under Section 32A IBC

The Gujarat HC held that the Customs Department's appeal became infructuous and abated following completion of the corporate insolvency resolution process under IBC. The Resolution Plan was approved by creditors on 20.04.2019 and by NCLT, with the process completing on 6.09.2019. Since the appellant-Commissioner failed to file any claim as operational creditor with the Resolution Professional during the insolvency proceedings, and given the change in ownership/control effective 18.12.2019, all prior liabilities were extinguished under Section 32A of IBC. The appeal was disposed of as abated.

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Issues Involved:
1. Concessional rate of duty exemption under Notification No. 21/2002-Cus.
2. Ignoring the Government institution's report in favor of a private report.
3. Carotene value in crude palm oil and its decrease over time.
4. Impact of insolvency proceedings on the appeal.

Detailed Analysis:

1. Concessional Rate of Duty Exemption:
The appellant questioned whether the CESTAT was correct in extending the benefit of concessional rate of duty exemption under sr. No. 34 of Notification No. 21/2002-Cus dated 1.03.2002. The CESTAT had granted this benefit to the respondent, which was challenged by the Commissioner of Customs.

2. Ignoring Government Institution's Report:
The appellant argued that the CESTAT erred by ignoring the report of a Government institution and instead relying on a private report, without demonstrating that the Government report was erroneous. This was a significant point of contention in the appeal.

3. Carotene Value in Crude Palm Oil:
The appellant also questioned whether the CESTAT was correct in holding that the carotene value in crude palm oil decreases over time, relying on a test report that allegedly did not provide such information. This issue pertained to the interpretation of scientific data and its impact on duty exemptions.

4. Impact of Insolvency Proceedings:
The respondent, formerly known as Ruchi Soya Industries Limited, was subjected to insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The Standard Chartered Bank initiated these proceedings, and the National Company Law Tribunal (NCLT) admitted the application on 15.12.2017. The Resolution Plan was approved by NCLT, and the management of the respondent was transferred to Patanjali Foods Limited.

4.1 Non-Lodging of Claim by Customs:
The appellant Commissioner of Customs did not lodge any claim before the Resolution Professional after public notices were issued under sections 13 and 15 of the IBC. The respondent argued that this failure meant the appeal should be dismissed without considering the merits.

4.2 Supreme Court's Decision:
The respondent relied on a Supreme Court decision in a related case, where it was held that all claims not part of the Resolution Plan would not survive once the plan was approved by NCLT. This was a critical precedent affecting the current appeal.

4.3 Section 32A of the IBC:
Section 32A of the IBC clarifies that upon completion of the corporate insolvency resolution process, the liability of the corporate debtor for offences committed prior to the process ceases. This means the appellant's claims related to imports made in 2004 would be extinguished.

4.4 Rajasthan High Court's Decision:
The respondent also cited a Rajasthan High Court decision reiterating that statutory dues not part of the Resolution Plan are extinguished once the plan is approved by the adjudicating authority.

4.5 Overriding Effect of IBC:
Section 238 of the IBC provides that its provisions will have an overriding effect in case of any inconsistency with other laws. This further supported the respondent's argument that the appeal should be dismissed.

4.6 Implementation of Resolution Plan:
The Resolution Plan was successfully implemented, resulting in a change in management and control of the respondent. This was crucial in determining the appeal's outcome.

5. Appellant's Position:
The appellant acknowledged the insolvency proceedings and the non-lodging of claims but argued that the appeal should be decided on merits. They pointed out that the demand pertained to a period before the initiation of the insolvency resolution process.

6. Court's Conclusion:
The court noted that the appellant had not lodged any claim within the specified time limit as per IBC provisions. The Resolution Plan was approved, and the corporate insolvency resolution process was completed. The court referenced the Supreme Court's ruling that claims not part of the Resolution Plan would not survive.

7. Sections 31 and 32A of IBC:
The court emphasized that sections 31 and 32A of the IBC provide that once a Resolution Plan is approved, all claims not part of it are extinguished. This included statutory dues owed to the Central Government or any local authority.

8. Supreme Court's Interpretation:
The court cited the Supreme Court's interpretation that all claims must be submitted to the Resolution Professional and that any claims not included in the Resolution Plan are extinguished.

9. Final Judgment:
The appeal was disposed of as infructuous and abated, with all proposed questions not answered. The court held that any liability of the appellant was extinguished due to the successful implementation of the Resolution Plan and the change in management and control of the respondent.

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