2022 (10) TMI 1019 - HC - Customs

Customs Commissioner's Appeal Dismissed Due to Failure to Claim in Insolvency Process

The court dismissed the appeal as the Commissioner of Customs did not lodge a claim during the insolvency resolution process, and all liabilities were ... Demand of customs duty - CIRP proceedings under IBC were concluded - Benefit of concessional rate of duty exemption - sr. no. 34 of Notification no.21/2002-Cus dated 1.03.2002 as amended - Whether it is correct to hold that carotene value in crude palm oil decreases due to passage of time relying upon the test report which no where provides that carotene value in crude palm oil decreases with passage of time? - HELD THAT:- In the facts of the present case also, no claim was filed by the appellant-Commissioner of Customs with regard to demand after the issuance of the notice under IBC for initiation of the resolution process before the Resolution Professional. In terms of the provisions of the IBC, Resolution Plan was approved by the Committee of Creditors on 30.04.2019 and thereafter the same was approved by NCLT and the corporate insolvency resolution process was completed on 6.09.2019. It is also not in dispute that plan has been successfully implemented and consequently change in control and ownership of the respondent has taken place with effect from 18.12.2019 and there is no involvement of any erstwhile promoters and erstwhile directors on the Board of Directors of respondent. Taking into consideration the fact of the completion of the resolution process of the respondent by the NCLT and undisputed fact that the appellant has not lodged any claim in the capacity of the Operational Creditor before the Resolution Professional, this appeal is required to be disposed of as having become infructuous and abated - Appeal disposed off. Issues Involved:1. Whether 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 as amended.2. Whether CESTAT was correct in holding that carotene value in crude palm oil decreases due to passage of time.3. The impact of insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) on the present appeal.Issue-wise Detailed Analysis:1. Concessional Rate of Duty Exemption:The appellant Commissioner of Customs challenged the CESTAT's decision to extend the benefit of concessional rate of duty exemption under sr. no. 34 of Notification no.21/2002-Cus dated 1.03.2002 as amended. The CESTAT had ruled in favor of the respondent, which was formerly known as Ruchi Soya Industries Limited, against the order dated 18.08.2009 by the Commissioner of Customs, Jamnagar.2. Carotene Value in Crude Palm Oil:The appellant also contested CESTAT's finding that the carotene value in crude palm oil decreases over time, arguing that the test report did not support such a conclusion. The correctness of this scientific determination was a central issue.3. Impact of Insolvency Proceedings:The respondent underwent insolvency proceedings under the IBC, initiated by Standard Chartered Bank. The National Company Law Tribunal (NCLT) admitted the application for Corporate Insolvency Resolution Process (CIRP) on 15.12.2017. The Resolution Plan was approved by the NCLT on 24.07.2019 and 4.09.2019, transferring the management of Ruchi Soya Industries Limited to Patanjali Foods Limited.3.1. Non-Lodging of Claim by the Customs Department: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. As per the respondent, this failure meant the appeal should be dismissed without considering the merits, as supported by the Supreme Court's decision in M/s. Ruchi Soya Industries Ltd. Civil Appeal Nos. 447-448 of 2013, which held that all claims not part of the Resolution Plan would not survive post-approval by the NCLT.3.2. Legal Precedents and Provisions:The respondent relied on several legal precedents and provisions to argue that the appeal was infructuous:- Section 32A of the IBC, which states that the liability of a corporate debtor ceases upon completion of the CIRP.- The Supreme Court's decision in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta, which emphasized that all claims must be submitted to the Resolution Professional.- The Rajasthan High Court's decision in Ultra Tech Nathdwara Cement Ltd. v. Union of India, which reiterated the binding nature of the Resolution Plan on all statutory dues.- Section 238 of the IBC, which provides the IBC with overriding effect over other laws.3.3. Appellant's Position:The appellant's counsel acknowledged the moratorium imposed by the NCLT and admitted that no claim was filed within the specified time limit. Nevertheless, he argued that the appeal should be decided on merits, referencing the Supreme Court's order dated 17.02.2022 in I.A. No.85939/2021 in Civil Appeal No.447-448 of 2013.Judgment:The court concluded that since the appellant Commissioner of Customs did not lodge any claim before the Resolution Professional, and the Resolution Plan was approved by the NCLT, the appeal had become infructuous. The court noted that the liability of the corporate debtor for any offence committed prior to the CIRP commencement ceases upon approval of the Resolution Plan under section 31 of the IBC. Consequently, the appeal was disposed of as abated, and the proposed questions were not answered.Conclusion:The appeal was dismissed on the grounds that the appellant did not lodge a claim during the insolvency resolution process, and all liabilities were extinguished upon approval of the Resolution Plan. The court emphasized the binding nature of the Resolution Plan on all stakeholders, including statutory authorities, as per sections 31 and 32A of the IBC.