2023 (9) TMI 1014 - AT - Customs

IBC Moratorium Inapplicable to Benefiting Debtors; Customs Act Entitles Interest on Delayed Refund

The Tribunal held that the moratorium under Section 14 of IBC does not apply to proceedings benefiting the corporate debtor. Thus, the appeal could ... Moratorium under Section 14 of the Insolvency and Bankruptcy Code - proceedings in favour of the corporate debtor not barred by moratorium - interest on delayed refunds under Section 27A of the Customs Act, 1962 - date of receipt of refund application as the trigger for payment of interest - Explanation to Section 27A deeming appellate/court order as an order under sub section (2) of Section 27Moratorium under Section 14 of the Insolvency and Bankruptcy Code - proceedings in favour of the corporate debtor not barred by moratorium - Continuation and disposal of the appeal despite pending corporate insolvency resolution proceedings before the NCLT. - HELD THAT: - Applying the reasoning in the cited Delhi High Court decision, the Tribunal held that the moratorium in Section 14(1)(a) is intended to protect the corporate debtor's assets from actions that would dissipate or diminish them (debt recovery actions) and does not extend to all proceedings. Where proceedings are in the favour of the corporate debtor and do not risk dissipation of assets, they are not caught by the embargo. Since this appeal seeks relief in favour of the appellant (claiming interest on a refund), its continuation and disposal would not adversely affect the insolvency resolution process or the resolution plan. Accordingly, the appeal could be heard and disposed of despite the pending IBC proceedings. [Paras 4]Proceedings not stayed; appeal may be continued and disposed of.Interest on delayed refunds under Section 27A of the Customs Act, 1962 - date of receipt of refund application as the trigger for payment of interest - Explanation to Section 27A deeming appellate/court order as an order under sub section (2) of Section 27 - Entitlement to interest on the refunded amount and the correct temporal point from which interest is payable under Section 27A. - HELD THAT: - Section 27A fixes entitlement to interest where a duty ordered to be refunded is not refunded within three months from the date of receipt of the refund application. The Tribunal found that the appellant filed the refund application on 22.04.2003 and the refund was actually granted on 25.06.2012. Applying the statutory wording and the precedent of the Supreme Court (Ranbaxy) and other authorities relied upon by the appellant, interest is payable from the date immediately after the expiry of three months from the date of receipt of the application (i.e., from 22.07.2003) until the date of refund (25.06.2012). The Commissioner (Appeals)'s view that interest would run only from three months after the Commissioner (Appeals)'s order was rejected as contrary to Section 27A and settled law; the Explanation to Section 27A does not alter the statutory trigger which is the original application date. [Paras 4]Appellant entitled to interest on the refunded amount from 22.07.2003 (three months after application) to 25.06.2012, at the rate prescribed under the Customs Act.Final Conclusion: Impugned order set aside; appeal allowed. The appellant is awarded interest on the refunded amount from three months after the date of the refund application until the date of grant of refund, and the appeal was properly heard despite ongoing IBC proceedings. Issues Involved:1. Applicability of moratorium under Section 14 of IBC during the company resolution process.2. Entitlement to interest on delayed refund under Section 27A of the Customs Act, 1962.Summary:Issue 1: Applicability of Moratorium under Section 14 of IBCThe Tribunal addressed whether the proceedings could continue given the pending company resolution process under IBC before the NCLT. The appellant argued that since the proceedings were in favor of the appellant company, the moratorium under Section 14 of IBC did not apply. The Tribunal referred to the Delhi High Court's order in the case of Power Grid Corporation of India Limited vs. Jyoti Structures Limited, which clarified that the moratorium provision is intended to prohibit debt recovery actions against the assets of the corporate debtor and does not apply to proceedings that benefit the corporate debtor. Therefore, the Tribunal concluded that the appeal could proceed and be disposed of.Issue 2: Entitlement to Interest on Delayed RefundThe appellant contended that under Section 27A of the Customs Act, 1962, interest is payable if the refund is not granted within three months from the date of the initial application. The appellant had filed for a refund on 22.04.2003, but the refund was only granted on 25.06.2012. The Tribunal noted that the refund was delayed due to litigation and was not granted within the stipulated three months. The Tribunal found that the Commissioner (Appeals) incorrectly interpreted Section 27A by stating that interest was payable only after three months from the order dated 13.04.2012. The Tribunal upheld the appellant's entitlement to interest from 22.07.2003 (three months after the refund application) to 25.06.2012, in line with the Supreme Court's judgment in Ranbaxy Laboratories Ltd.Conclusion:The impugned order was set aside, and the appeal was allowed, entitling the appellant to interest on the delayed refund from 22.07.2003 to 25.06.2012 as per the prescribed rate under the Customs Act, 1962.