TaxTMI 
TaxTMI 
2023 (7) TMI 599
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....n various dates between 05.01.2017 and 05.02.2018 for a total import quantity of 27,169 MT. Out of the aforesaid quantity 12,497.802 MT has been paid for and release secured by R2 from the petitioner. Out of the remaining, which is 14,671.698 metric tonnes, R2 had applied for a licence under the Advance Authorization Scheme (in short 'AA scheme'), and was granted licence dated 17.07.2017. 3. In the meanwhile, an application had been filed by a creditor before the National Company Law Tribunal (NCLT) and by order dated 07.06.2019, Corporate Insolvency Resolution Process (CIRP) was initiated as against R2. A resolution professional was appointed and an order of liquidation has been passed on 02.05.2022, liquidating R2 and sanctioning the scheme proposed by R3 (in short 'R3 or 'scheme proponent'). 4. As petitioner claims title to the goods, representations came to be filed before the Customs Department/in short hereinafter 'R1' seeking re-export of the goods. Since the representations were not been disposed in a timely fashion, WP.No.14441 of 2000 came to be filed seeking directions from this Court to permit re-export of sugar. The prayer was limited to 11,899.21 metric tonnes a....
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....their plea in their representation. On the question of re-export at clause (e) of the operative portion of the order, the officer permits the noticee, that is, R2, to redeem the confiscated goods on payment of redemption fine as a pre-condition to re-export. Thus, and in effect re-export has been permitted on payment of duty and penalty, denying the benefit of Advance Authorisation Scheme. 12. Through all this and even prior to 09.07.2021, being the date of order in W.P.No.11441 of 2020, R1 was clearly aware of the proceedings before the NCLT as against R2. The defence of the resolution professional/liquidator, who appears on behalf of R2 in the present proceedings, is that R1 was well aware that R2 was before the NCLT, despite which, no claim was filed before the NCLT. It was liquidated as early as on 02.05.2022 and hence the impugned order is wholly unsustainable in law. 13. R1, in paragraph 40 in the counter to the present writ petition has sought to extend the coverage of the impugned order to R3 as well. R3 was impleaded on 21.02.2023, and had, prior thereto, filed a writ petition in W.P.No.11441 of 2020, on 20.08.2020 seeking a certiorari to call for and quash order dat....
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....ase, the importers have eschewed the same, admitting that they hold no title to the consignments and also for the reason that they are themselves before the NCLT undergoing Corporate Insolvency Resolution process. 12. The conclusions of the Bombay High Court at paragraph 11 are to the following effect: 11. We have gone through the impugned Order. We concur with the findings and conclusion of the learned Judges when it is held that the title in the said goods had not passed to the 2nd respondent. In view of the fact that the title in the said goods had not passed to the 2nd respondent, the question of confiscation of the said goods which were exported by the 1st respondent, a foreign party did not arise. The title in the said goods had remained with the foreign exporter and the foreign exporter was entitled to have the said goods re-exported on payment of requisite duty for exportation thereof. The importation of the said goods was made against Advance Licence which was validly subsisting at the time when the said goods arrived at the Port of Bombay. Merely because the said licence was subsequently cancelled for lapses on the part of the 2nd respondent, it cannot b....
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....f the Imports (Control)Order. Sub-clause (I) of Clause 5 specifies conditions which can be attached to an import licence at the time of its grant. Sub-clause (2) says that a licence granted under the Order shall be subject to the conditions specified in Fifth Schedule to the Order. Subclause (3) sets out three other conditions mentioned as (i), (ii), and (iii) which shall attach to every import licence granted under the Order. First of these conditions says that the import licence shall be non-transferable except under the written permission of the Licensing Authority or other Competent Authority. Condition (ii)-which is provision relevant herein-says that the goods for the import of which a licence is granted "shall be the property of the licensee at the time of import and thereafter upto the time of clearance through customs." This condition, however, does not apply to STC, MMTC and other similar institutions entrusted with canalisation of imports. It also does not apply to certain eligible export houses, trading houses and public sector agencies mentioned in the second proviso. Condition (iii) says that the goods for which the import licence is granted shall be new goods unless ....
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....rol) Act. The fiction however cannot be carried beyond that. It cannot be employed to attribute ownership of the imported goods to the importer even in a case where he abandons them, i.e. in a situation where he does not pay for and receive the documents of title. It may be that for such act of abandonment, action may be taken against him for suspension/cancellation of licence. May be, some other proceedings can also be taken against him. But certainly he cannot be treated as the owner of the goods even in such a case. Holding otherwise would place the exporter in a very difficult position; he loses the goods without receiving the payment and his only remedy is to sue the importer for the price of goods and for such damage as he may have suffered. This would not be conducive to international trade. We can well imagine situations where for one or other reason, an importer chooses or fails to pay for and take delivery of the imported goods. He just abandons them. (We may reiterate that we are speaking of a case where the import is not contrary to law). It is only with such a situation that we are concerned in this case and our decision is also confined only to such a situation. Condi....
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....According to them, the burden cast upon R2 under the Advance Authorisation Scheme, and the liability for non-compliance, would extend to the importer also by virtue of the contracts entered into by the importer with R2. 19. He draws attention to some clauses under the contract to show that there was a continuing relationship between the parties and consequently a burden to comply with all statutory requirements cast both upon R2 as well as the petitioner. He relies upon Sections 3(30) and 3(31) of the Insolvency and Bankruptcy Code, 2018 (in short '2018 Code'/'IB Code') defining 'secured creditor' and 'security interest' that, according to him, would support their case in full. 20. His argument is that the definition of 'security interest' includes any right created in a secured creditor by virtue of an 'agreement or arrangement securing payment or performance of any obligation of any person'. Thus, on account of the relationship inter se R2, and the Petitioner, the bills of entry and warehousing bond, the liability originally vesting upon R2 would now vest in the petitioner. 21. Reference is made to the decisions in the case of (i) Japan Airlines Company Limited V. Commis....
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....rlines, had urged that landing, parking and take-off facilities provided under an agreement/arrangement with the Airports Authority of India does not tantamount to 'use of land' for which rent is to be paid. 26. Their argument was premised on the language deployed in Section 194I dealing with rent and tax deduction thereon and the definition of rent under clause (i) of that provision as per which rent meant 'any payment by whatever name called under any lease, sub-lease, tenancy or any other agreement/arrangement for the use of land or building'. 27. While deciding this question, the Court concurred with the view taken by the Madras High Court in the case of Commissioner of Income Tax v. Singapore Airlines Limited (Tax Case Appeal No.15 of 2006 dated 13.07.2012), wherein this Court had concluded that charges fixed by the Airports Authority of India for landing, parking and take off services would not amount to 'use of land' and no tax deduction need be made thereupon. 28. This judgment is of no assistance to R1, since that statutory provision is completely distinguishable from the provisions of Section 3(31) of the IB Code. Thus, the interpretation thereof would not be app....
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....y in amalgamation and the company court, in considering the scheme of amalgamation was required to take, in holistic perspective, the interests of all stakeholders. This situation does not arise in the present case. 34. The importer/petitioner is an unpaid vendor with no connection whatsoever with the Customs Department. It continues to hold possession of the goods. To state that the Customs Department would have a claim on the petitioner's goods based on violations committed by another party would be stretching the term 'security interest' beyond permissible scope, distorting the concept of security interest under the Code. 35. Faced with this position, R1 then makes an attempt to cement its claim as against R2. The two legal issues that arise in this context are (i) whether the condition imposed under the AA Scheme has been triggered and (ii) if the answer to (i) is in the affirmative, whether R1 is in a position to raise a claim in the subsisting circumstances. 36. As far as the first issue is concerned, it is the case of R2 that no liability stands triggered. The AA is accompanied by a condition sheet and an additional condition sheet that read as follows, respectively....
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....ructions contained in paragraph 4.21 of the HBP. (2015-2020), as the case may be maintenance of a true and proper account of consumption and utilisation of inputs and furnish returns to the concerned Regional Authority as per the provisions of FTP and the procedure laid thereunder. 8. Wherever, the input item list contains Acetic Anhydride, Ephedrine, and Pseudo-ephedrine, the authorisation holder shall be required to obtain an NOC from the Narcotic Commissioner of India, Central Bureau of Narcotic, Gwalior before effecting such imports, a per paragraph 4.08 of HBP 2015-2020. 9. Import of Scraps/Metal Scraps shall be subject to the conditions of the relevant licensing notes under relevant Chapters of ITC(HS) Classification Book. Import of Chemical falling under Montreal Protocol and Schedule I, II and III of the Chemical Weapons Convention shall be subject to the conditions specified thereunder and as appearing in the ITC(HS) classifications. 10. The authorisation holder to comply with the provisions of paragraph 4.10 and paragraph 4.35 of Handbook of Procedures 2015-2020, as amended from time to time, with regard to transfer of any material from one unit....
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....or indigenous unless such item(s) is/are endorsed on the authorisation by RA in terms of para 4.15 of the FTP 2015-2020 Date: 17.07.2017 Place Chennai sd/- Assistant Director General of Foreign Trade 37. While R1 would draw attention to the conditions at clauses 4, 6, 7, 10 and 11 above, the rival contention is that the export obligation must be fulfilled within 6 months from date of clearance of each consignment by the customs authority. To this, the petitioner points out that the consignments yet await clearance as they are still under bond and the goods are yet to cross the customs frontier. 38. R1 then draws attention to the observation in the impugned order, wherein the officer specifically states that out-of-charge order has been passed on 19.01.2018 for the first 18 bills of entry and on 28.02.2018 for the last bill of entry (see para 9.1(v) under head 'discussion and findings'). 39. Thus, in terms of Appendix 4j of HBP 2015-2020 the officer states that the importer has to fulfill export obligation within six months from date of clearance of export consignment, i.e., 22.07.2018, 21.08.2018 and 27.08.2018. This has not bee....
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....4. Much has been made by R1 on the point that it constitutes a secured creditor, placing reliance upon the judgment of the Apex Court in the case of State Tax Officer V. Rainbow Papers Limited [(2022) SCC on line SC 1162] and the order of the learned single Judge in the case of Dishnet Wireless Limited V. Assistant Commissioner of Income Tax (OSD) [(2022) SCC online Madras 3643]. 45. The decision in Dishnet has been challenged in Writ Appeals in W.A.Nos.1796 of 2022 etc. batch and the connected Miscellaneous Petitions seeking interim protection have been ordered on 16.08.2022 granting interim stay of the decision for a period of six weeks. 46. The Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons P. Ltd., Vs. Edelweiss Asset Reconstruction Co. Ltd., [(2021) 9 SCC 657] considered the impact of a resolution plan, and, taking note of the legislative intent of formulation of the resolution plan, held that the plan would be sacrosanct and binding on all stakeholders after it obtains a seal of approval from the adjudicating authority. 47. The ratio of the judgment is to the effect that no surprise claims should be flung on the successful resolution application afte....
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....imit stipulated under Regulation 16 of the 2016 Regulations that is, within 30 days from date of publication of advertisements in order to secure its rights. In the present case, it is nobody's case that R1 has filed a claim and the fact that it has not, is admitted. Consequence would have to flow from this position. 53. That apart, the judgment in the case of Rainbow turns on an appreciation of the legal position that the GVAT Act contains Section 48 under which there was a first charge created on the property of a defaulting sales tax assessee. Section 48 of the GVAT Act states 'notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case maybe, such person'. 54. The provision in pari materia with Section 48 of the GVAT Act under the Customs Act, 1962 is Section 142A, extracted below: 142A. Liability under Act to be first charge.- Notwithstanding anything to the contrary contained in any Central Act or State Act, any amou....
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....ction 3(30) of the IB Code. In any event, even without recourse to this position and as seen earlier, no claim has been filed by R1 before the Liquidator which even a secured creditor is bound to do in terms of Regulation 16 of the 2016 Regulations. Regulation 16 reads thus: 16. Submission of claim. (1) A person, who claims to be a stakeholder, shall submit its claim, or update its claim submitted during the corporate insolvency resolution process, including interest, if any, on or before the last date mentioned in the public announcement. (2) A person shall prove its claim for debt or dues to him, including interest, if any, as on the liquidation commencement date. 61. Thus, any person who claims to be a stakeholder, financial/ operational/secured/unsecured is liable to submit a claim as this is a precondition/ requisite for any benefit to be obtained by an entity claiming to be a creditor in the proceedings before the NCLT. R1 has missed the bus in entirety. 62. A public announcement is to be issued in Form A as per Regulation 6 of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and has in th....
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....fore the NCLT and in fact R3, who is R2 in the present Writ Petition, and R4, who is not a party to the present proceedings had been represented by their respective Resolution Professionals. Thus, a claim should have been made at least in July, 2021 in the proceedings pending before the NCLT. 69. The scheme was sanctioned by the NCLT on 02.05.2022 and is stated to have been challenged by R1 by way of appeal filed in January, 2023 before the NCLAT. I am not per se concerned with that appeal. However, one point that niggles in the back of my mind is the consequence of success by the customs department in that appeal. If it were to so succeed and the scheme were to be set aside, the question that would arise is as to who would bear the burden of the duty. 70. Thus, in the interests of a complete resolution of the matter before me, though the sole point urged by the petitioner is its entitlement to re-export without the burden of duty and penalty, I must consider the possibility of success of R1 in the appeal stated to have been filed by it before the NCLAT. 71. The appeal is stated to have been filed in terms of Section 421 of the Companies Act, 2013 (in short '2013 Act') and....
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....hority under part VI of the Code, shall be preferred before the NCLAT within 30 days and the proviso permits condonation of 15 days in filing the appeal if the NCLAT were satisfied that there was sufficient cause for not filing the appeal within the 30 days period provided under Section 61(2). 76. The NCLT adjudicates upon matters falling under the 2013 Act as well as the IB Code and Section 60 dealing with adjudicating authority for corporate persons, in sub-section (1), states thus: 60. (1) The Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located. 77. Thus, those appeals relating to those matters adjudicated upon by the NCLT falling under the IB Code would be filed in terms of Section 61 of the Code before the NCLT and those matters heard by the NCLT relatable to the provisions of the Companies Act would be filed in terms of Section 421 of the 2013 Act. 78. All matters adjudicated upon by the NCLT relatable ....
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....ee in India and the purchaser of the sugar. Hence, it is distinguishable on facts and in law. 84. In Municipal Corporation of Greater Mumbai (MCGM) v. Abhilash Lal and others [(2020) 13 SCC 234] cited by R1, three Judges considered the interpretation of Section 238 of the IB Code to conclude that the Court would not override the right of the Corporation to control and regulate its properties. The attempt seems to be to state that the Code cannot nullify any rights of the Customs Department. Then again, this case has been cited out of context as it does not address the question that arises for decision before me. 85. In ED and F Man Commodities India Pvt. Ltd. v. Union of India (2022 (381) E.L.T. 644 (Guj.)), the Division Bench of the Gujarat High Court considered a prayer for mandamus by an unpaid vendor for a direction to the Customs Authority to extend the period of completion of export obligation in respect of the advance licence obtained by the customs by the assessee/purchaser, arrayed as R5 in that matter, and various other prayers. In that context and in light of the prayer sought, the Bench states as follows: 34. Under the Customs Act, 1962, the person who fi....
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..... 86. Thereafter at paragraph 37, the Bench states 'with all that has been observed above, still the writ applicant being the unpaid owner and exporter of the goods can claim ownership of the goods and also reshipment'. Paragraph 42, where the Gujarat High Court has clarified the observations and conclusion in the judgment in the case of Sampat Raj Dugar (supra) are relevant and read as follows: 45. In the aforesaid context, we may refer to and rely upon an order passed by a learned Single Judge of the Madras High Court in the case of M/s.Pacific (HK) Limited vs. The Commissioner of Customs (Airport and Air Cargo Complex), Meenambakkam, Chennai, reported in (2012) 281 ELT 522, wherein the importer had refused to clear and take delivery of the goods, and as the cost of the goods had not been paid, the petitioner therein had requested the authorities to permit re- export/reshipment of the goods. In such circumstances, a writ- application was filed before the Madras High Court under Article 226 of the Constitution of India. While disposing of the writ- application, the Court observed as under : "4. The learned counsel appearing on behalf of the petitioner had subm....
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....it has been stated that the amount due to be paid to the petitioner, by the third respondent, for the goods in question, could not be paid due to severe financial constraints. Therefore, the goods could not be cleared and taken by the third respondent. It had also been stated that the value of the imported goods had not been paid, till date. As such, the petitioner continues to be the owner of the goods in question, as the third respondent, being the importer of the goods, had abandoned the goods in question. 9. In view of the above contentions, raised on behalf of the petitioner, as well as the respondents, and on a perusal of the records available, it is clear that the petitioner has the right to request the respondents for the necessary permission, to re-ship or to re-export the goods in question. Further, as the third respondent does not have any serious objection for the re-export of the goods in question, the respondents are directed to permit the petitioner to re-export the goods in question, as prayed for by the petitioner, in the present writ petition. However, it is made clear that it is open to the authorities concerned, to pass an appropriate order, with the vi....
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....of that petitioner for re-shipment unacceptable and had permitted it to make a representation before the authorities seeking re-export, though on terms. That apart, an added dimension in the present case is that the assessee/R2 has been liquidated and no valid claim has been made before the authorities. 91. The show cause notice has been issued after moratorium has been imposed by the NCLT and the order determining liability has been issued long past the date of liquidation. This, when the customs department was well aware of the assessee/R2 being before the NCLT. Thus, and all the more, would the petitioner in the present case be eligible for re-export upon payment of charges alone. 92. In time, I would still maintain that it is only re-export charges that would be payable by the petitioner and not duty and penalty as computed under the impugned order, for the following reasons: i) It is an admitted position that the petitioner is an unpaid exporter. R2 has, admittedly, not settled the amounts relating to 11,000 MT of sugar. ii) Order dated 30.08.2022 has been passed on R2 post the date of liquidation. In any event, any liability under that order would atta....