TaxTMI 
TaxTMI 
2008 (8) TMI 568
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....r the right of the concerned Government Department, to recover dues of tax, the customs duty in particular, arises for consideration in this appeal. 3. M/s. Sri Vishnupriya Industries Ltd., the first respondent herein, was incorporated under the Act, with an objective of undertaking manufacturing activity. It established a factory at Panyam in Kurnool district. To carry on its activity, it intended to import machinery and components, from foreign countries. Accordingly, it submitted an application to the Customs Department, to provide the facility of private bonded customs warehouse, under the Export Promotion Capital Goods (EPCG) Scheme. On a permission being accorded for this purpose, it imported machinery, packed in 128 wooden cases, in three different consignments from Italy, and the same was stored in the private customs godown. Under the law in force, at the relevant point of time, the company was under obligation to pay customs duty to the tune of about Rs. 13.75 crores, and the goods were to have been cleared on payment of the said amount. Inasmuch as the first respondent did not get the imported goods cleared, even after the lapse of the stipulated period, the appellant....
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....he Madras High Court in UTI Bank Ltd. v. Dy. CCE [2007] 135 Comp. Cas. 329 ^1. The Division Bench of this court felt that in view of the conflicting views expressed by two different High Courts, one of them, by a Full Bench, the question relating to priority of claims, in the context of winding up, requires consideration by a Full Bench of this court. Accordingly, this Bench was constituted. 7. Sri A. Rajashekar Reddy, learned Assistant Solicitor General, on behalf of the appellant, submits that the liability to pay the customs duty remains fastened with the imported goods, till they are cleared and the process of winding up, irrespective of its mode, does not have the effect of wiping away the liability, to pay customs duty. He contends that when the company, before its liquidation, could not have secured the possession of the imported goods, except by paying the customs duty, the official liquidator, who virtually officiates the company, cannot stand on a better footing. He further submits that the view expressed by the company court, on the legality of the detention of the imported goods, or any consequential steps, is clearly outside its purview. He contends that the Customs....
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.... on the issue. 11. Part VII of the Act prescribes the procedure to be followed, in the course of winding up of the companies, and provides for the rights and obligations of the various individuals and agencies, in the process of winding up. There would not be much of a problem, in case the assets of a company under winding up, are in excess of, or sufficient to, meet its liabilities. Difficulty, however, arises only when they are inadequate. The basic liability in such cases, to arrange for the shortfall, is cast upon a category of persons, known as "contributories". This expression is defined under section 428 of the Act, as under :- "428. Definition of 'contributory'.-The term 'contributory' means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid-up; and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory." 12. The other provisions of Chapter I of Part VII, broadly deal with the nature and extent of liability of a....
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.... of assets.-(1) As soon as may be after making a winding up order, the court shall settle a list of contributories, with power to rectify the register of members in all cases where rectification is required in pursuance of this Act, and shall cause the assets of the company to be collected and applied in discharge of its liabilities: Provided that, where it appears to the court that it will not be necessary to make calls on, or adjust the rights of, contributories, the court may dispense with the settlement of a list of contributories. (2) In settling the list of contributories, the court shall distinguish between those who are contributories in their own right and those who are contributories as being representatives of, or liable for, the debts of, others." 15. The first respondent filed application under section 468, and it is apt to reproduce the provision :- "468. Delivery of property to liquidator.-The court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories, and any trustee, receiver, banker, agent, officer or other employee of the company, to pay, deliver, surrender or transfer forthwith, o....
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....ate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) Any suit or proceeding by or against the company which is pending in any court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that court. (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court." 18. In the Customs Act, sections 72 and 142 are relevant. In the order under appeal, extensive discussion was undertaken, with reference to these provisions. They read as under :- "72. Goods improperly removed from warehouse, etc.-(1) In any of the following cases, that is to say- (a )where any warehoused goods are removed from a warehouse in contravention of section 71; (b )where any war....
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....ereunder as if it were an arrears of land revenue; or (ii )the proper officer may, on an authorisation by a Commissioner of Customs and in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person : Provided that where the person (hereinafter referred to as predecessor) by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government under this Act including the amount required to be paid to the credit of the Central Government under section 28B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of wh....
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....sions noted above, the chemicals were not available legally for sale to the purchasers at all. That is to say that the assets would form a part of the assets of the company available for distribution by virtue of liquidation subject to payment of the customs duties and interest, etc. The provisions of sections 529 and 530 of the Companies Act, 1956, apply to situations where the claim of creditors in respect of the sale proceeds of the assets of the company sold in liquidation are to be determined. The customs authorities claim to the chemicals in question, in which the customs authorities had a statutory right of detention and confiscation, had to be met before the chemicals could be validly sold as assets of the company in liquidation. The claim of the customs authorities would, therefore, stand outside the proceedings under sections 529, 529A and 530 of the 1956 Act." (p. 347) 21. In UTI Bank Ltd.'s case (supra) what fell for consideration before the Madras High Court was the primacy of claims arising under the Central Excise Act, on the one hand, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the Secur....
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....ESI Act, took possession of the same or the first respondent has got priority over the property for its dues as per the provisions of the Customs Act and Central Excise Act." (p. 23) 23. From this, it is evident that reference to the Customs Act, in the last sentence of the paragraph was casual and not pertinent. Further, section 142 of the Customs Act was extracted in that judgment, only to emphasise the similarity between the corresponding provisions of the Central Excise Act. Beyond that, there does not appear to be any occasion to make a reference to the Customs Act. Therefore, the judgment of the Full Bench can be said to be an authority limited to the resolution of conflict between the provisions of the Central Excise Act on the one hand and the Securitisation Act on the other. It is well-settled principle of law that a judgment becomes a precedent, for what it actually decides and not as regards the occasional or casual observations made in it. The clear distinction between a ratio decidendi on the one hand, and the obiter dicta, on the other, needs to be maintained. 24. Be that as it may, it becomes necessary to deal with the conflict between the provisions of the Cus....
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....uthorities proceed against the property or goods, for recovery of dues of tax or duty, the primacy accorded to the secured creditors becomes manifest. In case they are the subject-matter of security, the secured creditors remain outside the winding up proceedings. 29. The imported goods, on the other hand, stand on a totally different footing. The importer, whether an individual, or a company would be entitled to take possession of the goods, only after clearing the customs duty. That is the reason why, even where the goods land in the country, they are shifted to customs godown, so that the delivery thereof can be effected, on clearance of customs duty. The importer cannot claim the delivery of such goods, unless he clears customs duty. When the company could not have got the possession of the goods, without payment of the customs duty, it is just unthinkable that a person, who represents it, can do so. The customs duty is more an incidence or consequence of import of the goods, than the liability of the importer to pay it. In a given case, though the goods may have been imported by A, in effect, they may belong to B. The dispute as to entitlement to get release of the goods be....
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....ated in the judgments referred to above do cover, certain aspects of this case. It has already been pointed out that the liability to pay the customs duty on the goods imported by a company does not get wiped away, or altered, on the company being brought under liquidation, and the custody of imported goods can be secured, only by paying the customs duty, and in no other manner. 33. We have carefully gone through the judgment rendered by the learned Single Judge. Substantial part of it was devoted to examine whether the appellant herein has followed the procedure prescribed under the Customs Act, before the imported goods were brought to sale, for recovery of the customs duty. The following points were framed for consideration :- "(1) Whether, in fact there is demand made by the proper officer under sub-section (1) of section 72 of the Customs Act, and if so, whether the proceedings dated 7-1-2002, is a demand made by the proper officer or is merely a letter? (2) Whether, the proper officer before proceeding to cause to be detained and sold the goods warehoused, under sub-section (2) of section 72 of the Customs Act, is required to issue notice to the owner of the goods? ....