2021 (5) TMI 45 - HC - Customs

Court validates amended customs duty rate, effective 17.9.2015, petitioner directed to seek NCLT clarification.

The court upheld the validity of the amended customs duty rate, ruling that the notification came into force on 17.9.2015, rejecting the petitioner's ... Coming into force of a notification by publication in the Official Gazette and electronic dissemination - effect of Information Technology Act, 2000 on statutory publication - status of amended section 25(4) of the Customs Act and its effect - whether customs duty is an 'operational debt' under the IBC and characterization of crown debts - binding effect of an approved corporate resolution plan and extinguishment of pre-plan claims - remand to adjudicating authority for verification of inclusion of statutory dues in resolution planComing into force of a notification by publication in the Official Gazette and electronic dissemination - effect of Information Technology Act, 2000 on statutory publication - status of amended section 25(4) of the Customs Act and its effect - Whether the amending notification increasing Basic Customs Duty came into force on 17.9.2015 despite printed Gazette copies being put up for sale on 21.9.2015. - HELD THAT: - The Court held that by 2015 the practice of dissemination of statutory information had materially changed and the amended notification was posted on the Central Board's website and published in the Official Gazette on 17.9.2015. In that factual and legal context the second limb of the pre-amendment formulation of section 25(4) requiring simultaneous offer for sale had become vestigial. Reliance on Union of India v. Param Industries Ltd. was considered inapplicable on the facts because electronic publication met the conditions contemplated by law and the Information Technology Act, 2000 treats information rendered in electronic form and accessible for subsequent reference as satisfying requirements of written or printed publication. The subsequent legislative amendment to section 25(4) by the Finance Act, 2016 to streamline the provision was noted as supporting the contemporary practice. For these reasons the Court rejected the contention that the notification came into force only when printed copies were offered for sale on 21.9.2015 and held that the amended notification came into force on the date of its publication on 17.9.2015. [Paras 36, 37, 40, 78, 79]The amending notification came into force on 17.9.2015 (date of publication in the Official Gazette and posting on the Central Board's website); the petitioner's contention that it came into force only on 21.9.2015 is rejected.Whether customs duty is an 'operational debt' under the IBC and characterization of crown debts - binding effect of an approved corporate resolution plan and extinguishment of pre-plan claims - remand to adjudicating authority for verification of inclusion of statutory dues in resolution plan - Whether the respondent Customs Department's claim to differential customs duty was extinguished by the corporate resolution plan approved under the IBC and whether customs duty qualifies as an operational debt. - HELD THAT: - The Court recognised that earlier parts of its reasoning distinguished between 'operational debt' and sovereign tax/duty obligations, but observed itself bound by the Supreme Court's interpretation in Ghanashyam Mishra and Sons v. Edelweiss Asset Construction which holds that statutory dues payable to the Central or State Government can fall within the scheme of the IBC and that an approved resolution plan is binding on government authorities so that claims not part of the approved plan stand extinguished. In that light the Court accepted the need to determine, on the facts of the resolution plan, whether the customs duty in question was included or otherwise dealt with by the plan. The Court therefore did not adjudicate the extinguishment on the merits but remitted the matter for the petitioner to obtain a clarification from the National Company Law Tribunal / National Company Law Board regarding whether the corporate resolution plan treated the customs duty as part of the plan. [Paras 81, 82, 83, 84, 85]The question of extinguishment is not finally decided on the merits by this Court; the matter is remitted for the petitioner to obtain clarification from the NCLT/NCLB whether the customs duty was included in or dealt with by the approved corporate resolution plan; meantime status quo directions and timelines are imposed.Final Conclusion: The petition is dismissed insofar as the challenge to the coming into force of the amending notification (held to be 17.9.2015). On the question whether the customs duty claim was extinguished by the approved resolution plan, the Court remits the matter to the petitioner to seek clarification from the National Company Law Tribunal/Board; status quo is directed for 180 days and recovery/remittance is to proceed thereafter unless clarification favourable to the petitioner is produced within the prescribed period. Issues Involved:1. Validity of the reassessment of the Bill of Entry and the applicability of the amended customs duty rate.2. Extinguishment of the customs department's rights to claim customs duty due to the insolvency and bankruptcy proceedings.Issue-Wise Detailed Analysis:1. Validity of the Reassessment of the Bill of Entry:The petitioner challenged the reassessment of Bill of Entry No. 2606926 dated 15.9.2015, arguing that the amendment to Serial No. 55 to Notification No. 12/2012-Customs dated 17.3.2012 via Notification No. 46/2015-Customs dated 17.9.2015, which increased the duty from 7.5% to 12.5%, did not come into force on the date of assessment as per Section 25 of the Customs Act, 1962.The petitioner contended that the notification, although published in the official Gazette on 17.9.2015, did not satisfy the second condition of being offered for sale on the date of its issue, thus invalidating the imposition of the increased duty rate. They supported this with correspondence from the Central Public Information Officer indicating the notification was available for sale only on 21.9.2015.However, the court noted that the notification was published in the official Gazette and on the Central Board of Excise and Customs website on 17.9.2015. The court emphasized that by 2015, information technology advancements had made the physical sale of the Gazette redundant. The court referenced the decision in Union of India versus Param Industries Ltd 2015 (321) ELT 192 (SC), stating that the practice of dissemination had evolved, and the notification's publication in the official Gazette and online was sufficient to bring it into force on 17.9.2015.The court concluded that the amended notification came into force on 17.9.2015, rejecting the petitioner's argument that it was effective only from 21.9.2015.2. Extinguishment of the Customs Department's Rights Due to Insolvency Proceedings:The petitioner argued that the customs department's rights to claim differential duty were extinguished due to the corporate resolution plan approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. The petitioner cited the Supreme Court's decision in Ghanashym Mishra and Sons Vs. Edelweiss Asset Construction, which held that once a resolution plan is approved, all claims not part of the plan are extinguished.The court examined whether customs duty is an 'operational debt' under the Insolvency and Bankruptcy Code, 2016, and whether the customs department is an 'operational creditor.' It noted that 'operational debt' includes dues payable to the government under any law, thus including customs duty.The court acknowledged the Supreme Court's interpretation that statutory dues, including taxes, are considered operational debts and are extinguished if not included in the resolution plan. The court emphasized that the legislative intent was to ensure that all creditors, including government authorities, are bound by the resolution plan.The court directed the petitioner to seek clarification from the NCLT regarding whether the customs duty was included in the corporate resolution plan. The petitioner was given 30 days to approach the NCLT and obtain clarification, with the customs department to be made a respondent in the proceedings.The court ordered that the parties maintain the status quo regarding the duty demand for 180 days from the receipt of the order. If the petitioner fails to obtain clarification within this period, the customs department may proceed to recover the duty with interest.Conclusion:The court rejected the petitioner's argument regarding the effective date of the amended notification, holding that it came into force on 17.9.2015. The court also directed the petitioner to seek clarification from the NCLT on the inclusion of customs duty in the resolution plan, with the customs department's rights to recover the duty contingent on the outcome of this clarification. The writ petition was disposed of with these observations, and no costs were awarded.