Tribunal orders Customs Department to release materials to liquidator under Insolvency and Bankruptcy Code

The Tribunal ruled in favor of the applicant-liquidator, directing the Customs Department to allow the removal of materials from customs bonded warehouses without payment of customs duty. The Customs Department was instructed to lodge their claims under the Insolvency and Bankruptcy Code (IBC), emphasizing the IBC's priority over the Customs Act. The decision highlighted that the provisions of the IBC, being the later statute, prevail over conflicting statutes. The Customs Department was also prohibited from auctioning or selling the materials, ensuring compliance with the IBC's asset distribution hierarchy.

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Issues Involved:
1. Removal of materials from customs bonded warehouses without payment of customs duty.
2. Priority of claims under the Insolvency and Bankruptcy Code (IBC) over the Customs Act.
3. Application of the non-obstante clause in conflicting statutes.
4. Distribution of proceeds from the sale of liquidation assets under section 53 of the IBC.

Issue-wise Detailed Analysis:

1. Removal of Materials from Customs Bonded Warehouses Without Payment of Customs Duty:
The applicant-liquidator sought the removal of materials lying in customs bonded warehouses without any conditions or payment of customs duty. The materials were imported under the Export Promotion Capital Goods Scheme (EPCG Scheme) but the corporate debtor failed to submit the Export Obligation Discharge Certificate (EODC), leading to demands for customs duty by the Customs Authority.

2. Priority of Claims under the Insolvency and Bankruptcy Code (IBC) Over the Customs Act:
The applicant argued that section 238 of the IBC, which contains a non-obstante clause, gives the IBC provisions priority over other laws, including the Customs Act. The Customs Authority's claim for customs duty should be treated as government dues and dealt with under the waterfall mechanism of section 53 of the IBC.

3. Application of the Non-obstante Clause in Conflicting Statutes:
Both the Customs Act and the IBC contain non-obstante clauses. The applicant contended that in cases where two special statutes contain non-obstante clauses, the later statute (IBC in this case) prevails, citing Supreme Court decisions in Solidaire India (P.) Ltd. v. Fairgrowth Financial Services Ltd. and Maruti Udyog Ltd. v. Ram Lal.

4. Distribution of Proceeds from the Sale of Liquidation Assets Under Section 53 of the IBC:
The applicant emphasized that section 53 of the IBC provides a specific order of priority for distributing proceeds from the sale of liquidation assets. Government dues, including customs duty, are ranked under section 53(e)(i), which means they do not have priority over secured creditors and workmen's dues.

Judgment:
The Tribunal directed the Customs Department to allow the removal of materials from customs bonded warehouses without payment of customs duty. The Customs Department was instructed to lodge their claims with the liquidator under the provisions of the IBC. The Tribunal emphasized that the IBC's provisions, being the later statute, have an overriding effect over the Customs Act. The Customs Department was also restrained from auctioning or selling the materials, which would violate the IBC and disadvantage the liquidator.

Conclusion:
The Tribunal allowed the application, directing the Customs Department to release the materials without customs duty payment and to lodge claims with the liquidator. The decision reinforced the precedence of the IBC over the Customs Act in liquidation proceedings, ensuring the distribution of assets follows the order of priority under section 53 of the IBC.

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