Corporate Debtor loses title to imported goods for non-payment of customs duty; Customs Authorities empowered to sell goods for recovery.

The judgment concluded that the Corporate Debtor had relinquished its title to the imported goods by not filing a bill of entry and not paying customs duty for several years. Consequently, the Custom Authorities are empowered to sell the goods to recover government dues. The appeal was allowed, and the impugned order was modified, allowing the goods to be released or disposed of as per the applicable provisions of the Customs Act by the proper officer.

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Issues Involved:
1. Ownership of the goods in the Customs Bonded Warehouses.
2. Jurisdiction of NCLT/NCLAT.
3. Applicability of the Insolvency and Bankruptcy Code (IBC) vis-à-vis the Customs Act.
4. Priority of claims and distribution of dues under IBC.
5. Liquidator's right to take possession of the warehoused goods without paying customs duty.

Detailed Analysis:

1. Ownership of the Goods in the Customs Bonded Warehouses:
- The Appellant argued that the warehoused goods do not belong to the debtor, and hence the Liquidator cannot take control of them. The goods have been warehoused since 2005, and the debtor could not have taken possession without paying customs duty.
- The Respondent asserted that the Corporate Debtor is the owner of the goods, as evidenced by the filing of bills of entry for warehousing and the submission of claims under Section 72 of the Customs Act. The Respondent argued that the Appellant's claim acknowledges the Corporate Debtor’s ownership.
- The judgment concluded that the Corporate Debtor had relinquished its title to the imported goods by not filing a bill of entry and not paying customs duty for several years. Consequently, the Custom Authorities are empowered to sell the goods to recover government dues.

2. Jurisdiction of NCLT/NCLAT:
- The Appellant did not raise the issue of jurisdiction before the NCLT but argued that the NCLT/NCLAT cannot usurp the legitimate jurisdiction of other courts or statutory authorities.
- The Respondent contended that the NCLT has jurisdiction under Section 60(5) of the IBC to adjudicate disputes arising from or relating to the insolvency of the Corporate Debtor.
- The judgment referenced the Supreme Court's decision in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, which held that NCLT has jurisdiction over matters relating to insolvency but should not usurp the jurisdiction of other courts when the dispute does not solely arise from the insolvency.

3. Applicability of the Insolvency and Bankruptcy Code (IBC) vis-à-vis the Customs Act:
- The Appellant argued that the Customs Act is a complete code in itself and that the goods cannot be released from the warehouse without paying import duties.
- The Respondent argued that Section 238 of the IBC provides an overriding effect over other laws, including the Customs Act, and that the Appellant's claims should be dealt with under the waterfall mechanism provided under Section 53 of the IBC.
- The judgment held that the IBC does not override the Customs Act in this context. The imported goods, which were not cleared for home consumption, are subject to customs duty, and the Liquidator cannot claim these goods without paying the customs dues.

4. Priority of Claims and Distribution of Dues under IBC:
- The Respondent argued that the distribution of all debts, including customs dues, should be governed by the IBC, with government dues placed in the fifth position in priority under Section 53.
- The judgment emphasized that the Customs Act provides that goods once warehoused cannot be released without paying import duties. The claims of the Customs Authorities stand outside the proceedings under Sections 529, 529A, and 530 of the Companies Act, 1956, and are not subject to the priority distribution under the IBC.

5. Liquidator's Right to Take Possession of the Warehoused Goods Without Paying Customs Duty:
- The Appellant argued that the Liquidator cannot take possession of the warehoused goods without paying the applicable customs duty.
- The Respondent contended that the Liquidator has the right to take control of the Corporate Debtor’s assets, including warehoused goods, without upfront payment of customs duty.
- The judgment concluded that the Liquidator cannot take possession of the goods without paying customs duty. The goods lying in the customs bonded warehouses cannot be treated as assets of the Corporate Debtor, and the Liquidator cannot claim them without settling the customs dues.

Order:
- The appeal was allowed, and the impugned order dated February 25, 2020, passed by the NCLT, Ahmedabad Bench, was modified. The goods can be released or disposed of as per the applicable provisions of the Customs Act by the proper officer.

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