2023 (9) TMI 1014 - AT - Customs

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

Videocon Industries Ltd Versus C.C.E. & S.T. -Vadodara-ii

The Tribunal held that the moratorium under Section 14 of IBC does not apply to proceedings benefiting the corporate debtor. Thus, the appeal could ... Rejection of claim of interest on refund - rejection on the ground that the appellant was granted the refund within three months from the order passed by Commissioner (Appeals) - continuation of proceeding during moratorium period - HELD THAT:- As regard the issue that when the IBC proceeding is undergoing and pending before the NCLT whether this appeal can be heard and disposed of. It is found that the moratorium is provided under Section 14 of the IBC Code, the Delhi High Court in POWER GRID CORPORATION OF INDIA LTD VERSUS JYOTI STRUCTURES LTD. [2017 (12) TMI 1660 - DELHI HIGH COURT] dealt with the provision of Section 14 of IBC and in view of the judgment read with Section 14 it is clear that the moratorium provision would apply to all those proceedings which are against the corporate debtor. However, in the present appeal the proceeding is in favour of the appellant (Corporate Debtor) as in this appeal the appellant is claiming the interest on refund. Therefore, following the aforesaid order of the Delhi High Court by conclusion and disposal of this appeal would not affect adversely the resolution plan therefore, in this appeal proceeding can be continued and appeal can be disposed of. Therefore, the appeal is taken up for disposal. The learned Commissioner (Appeals) rejected the claim of interest on refund referring the provision of Section 27 A of Customs Act, 1962 on the ground that the refund was payable within three months from the order dated 13.04.2012 of Commissioner (Appeals) whereby the refund was allowed - From the plain reading of Section 27A it is clear that the assessee is entitled for the refund if the same is not refunded within three months from the date of receipt of application under sub section (1) of Section 27. In the clear provision under Section 27 A and the landmark judgment of Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd [2011 (10) TMI 16 - SUPREME COURT], the appellant is entitled for interest on the amount already refunded for the period from 22.07.2003 (three months after the date of application) till 25.06.2012 (date of grant of refund). As regard the contention of the Commissioner (Appeals) that interest is payable after three months from the date of Commissioner (Appeals) order wherein the refund was allowed is absolutely absurd and contrary to Section 27 A and principle laid down by Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd - the appellant is legally entitled for interest on the refund granted to them after three months from the date of the application i.e. 22.07.2003 till the grant of refund i.e. 25.06.2012 as per the rate of interest as prescribed under the Customs Act, 1962. Appeal allowed. 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.