TaxTMI 
TaxTMI 
2026 (9) TMI 213
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....ct, 1962 [hereinafter referred to as the 'Customs Act'], ordered recovery of interest under Section 28AA thereof and imposed a penalty of Rs. 4,00,000/- under Section 117 of the Customs Act. The demand arises out of the import of Digital and Network Video Recorders by the Petitioner vide Bill of Entry No. 7856824 dated 15.09.2023. 2. The principal grievance of the Petitioner is not with the classification of the imported goods or the quantum of differential duty in isolation, but with the continuation and culmination of the customs proceedings after commencement and completion of the Corporate Insolvency Resolution Process [hereinafter referred to as 'CIRP'] of the Petitioner. The Petitioner contends that the underlying liability relates to a transaction which admittedly preceded the Insolvency Commencement Date, and that the Customs Department did not submit any claim before the Resolution Professional [hereinafter referred to as 'RP'] during the CIRP. According to the Petitioner, upon approval of the Resolution Plan under Section 31 of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as the 'IBC'], such unfiled pre-CIRP claims stood extinguished and could not ....
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....imported by the Petitioner were not eligible for the benefit of Serial No. 499A of Notification No. 50/2017-Customs and were liable to Basic Customs Duty at 20% instead of 10%. A short levy of Rs. 5,89,366/- was accordingly alleged. 8. Thereafter, Show Cause Notice No.27/2025-26 dated 10.09.2025 [hereinafter referred to as 'SCN'] was issued under Section 28(1) of the Act, proposing rejection of the benefit of Serial No. 499A of the aforesaid Notification, recovery of differential customs duty of Rs. 5,89,366/- along with interest under Section 28AA of the Act, and imposition of penalty under Sections 112(a)(ii) and/or 117 of the Act. Personal hearings were thereafter scheduled on 29.10.2025, 19.11.2025, 11.02.2026, 19.03.2026 and 19.05.2026. 9. In the meantime, the CoC approved the Resolution Plan submitted by Adani Enterprises Limited on 31.10.2025. The RP thereafter submitted an application under Sections 30(6) and 31(1) of the IBC before the NCLT seeking approval of the Resolution Plan. The NCLT ultimately approved the Resolution Plan vide Order dated 17.03.2026. The Petitioner states that the Resolution Plan thereby became binding under Section 31(1) of the IBC upon the P....
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....ical difficulties on the ICEGATE portal. The Respondent-Authority, therefore, proceeded to hold that there was no dispute on the merits of the classification or exemption issue and considered the principal controversy to be the effect of the NCLT proceedings and the Approved Resolution Plan. 15. The present Writ Petition came to be instituted thereafter, challenging the Impugned Order principally on the ground that the demand pertains to a pre-CIRP transaction and that the Customs Department admittedly failed to submit its claim during the CIRP. The Petitioner contends that, by operation of Section 31(1) read with Section 238 of the IBC and Clause 4.12.1 of the Approved Resolution Plan, the liability stood extinguished upon approval of the Resolution Plan and could not thereafter be adjudicated or recovered. CONTENTIONS OF THE PARTIES: 16. Heard learned Counsel representing the Petitioner and learned Counsel representing the Respondents and perused the pleadings, the Impugned Order and the material placed on record. 17. Learned Counsel representing the Petitioner has made the following submissions: i. The entire customs liability arises from the import dated 15....
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....laims which had already stood extinguished under the IBC. vi. The Petitioner has also relied upon the CBIC Standard Operating Procedure dated 23.05.2022, Instruction No. 1083/04/2022-CX09, to submit that the Customs authorities themselves recognise their status as Operational Creditors and the necessity of timely submission of claims during CIRP proceedings. 18. Per contra, learned counsel representing the Respondents has made the following submissions: i. The pendency of CIRP does not bar the Customs Authorities from determining the customs duty, interest or penalty payable by the Corporate Debtor. Reliance is placed upon ABG Shipyard Liquidator v. Central Board of Indirect Taxes & Customs (2023) 1 SCC 472, wherein the Supreme Court held that the Customs Authorities can determine the quantum of customs duty, though recovery thereof would remain subject to the provisions of the IBC. ii. Pendency of CIRP does not impede framing of an assessment, though recovery of the assessed liability cannot be undertaken contrary to the IBC. In this regard, reference can be made to the decision in M/s Rajesh Projects India Ltd. v. Commissioner, Central Tax, Delhi Wes....
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....Resolution Plan under Section 31(1) of the IBC, the Respondents could continue to adjudicate and enforce a claim which was not submitted before the RP. 21. The answer to the aforesaid question requires the statutory scheme of the IBC to be considered first. The IBC was enacted with the object of consolidating and amending the law relating to insolvency resolution and, importantly, to ensure resolution in a time-bound manner, maximise the value of assets, to promote entrepreneurship, and balance the interests of stakeholders. The scheme is consequently not one which merely provides a forum for recovery of individual debts. It seeks to achieve resolution of the Corporate Debtor as a going concern within a defined and structured process. 22. The expression "claim" assumes central significance in this scheme. Section 3(6) of the IBC defines "claim" as follows: "3. Definitions In this code, unless the context otherwise requires,- ... (6) 'claim' means- (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of c....
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....possible creditor and inform such creditor of the commencement of CIRP. The legislature has prescribed a public mechanism precisely for this purpose. In the present case, the Public Announcement was admittedly issued on 06.06.2024 and 17.06.2024 was prescribed as the last date for submission of claims. The record further establishes that the Customs Department did not submit any claim before the RP within the prescribed period. 28. The Respondents have sought to contend that the Customs Department was not separately informed of the CIRP. The contention cannot be accepted. Once the statutory mechanism of public announcement has been followed, there is no further requirement shown to have been imposed upon the Corporate Debtor to individually notify every statutory authority which may potentially have a claim against it. The responsibility of identifying and filing its claim lies upon the creditor. The Respondents cannot, therefore, rely upon an alleged absence of individual intimation to overcome their failure to participate in the statutory process. 29. More importantly, the present claim was not even an unknown or subsequently arising liability. The underlying transaction ha....
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....scussed hereinabove, one of the principal objects of the I&B Code is providing for revival of the corporate debtor and to make it a going concern. The I&B Code is a complete Code in itself. Upon admission of petition under Section 7 there are various important duties and functions entrusted to RP and CoC. RP is required to issue a publication inviting claims from all the stakeholders. He is required to collate the said information and submit necessary details in the information memorandum. The resolution applicants submit their plans on the basis of the details provided in the information memorandum. The resolution plans undergo deep scrutiny by RP as well as CoC. In the negotiations that may be held between CoC and the resolution applicant, various modifications may be made so as to ensure that while paying part of the dues of financial creditors as well as operational creditors and other stakeholders, the corporate debtor is revived and is made an on-going concern. After CoC approves the plan, the adjudicating authority is required to arrive at a subjective satisfaction that the plan conforms to the requirements as are provided in sub-section (2) of Section 30 of the I&B Code. On....
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.... adjudicating authority grants its approval under Section 31 could be continued." (Emphasis supplied.) 33. The same principles have been noticed by this Court in Ireo Fiveriver Pvt. Ltd. (supra), while relying upon the decision of the Supreme Court in Ghanashyam Mishra & Sons (P) Ltd. (supra) and Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta (2020) 8 SCC 531. The relevant extracts of the same is reproduced hereinbelow: "4. We also take note of the identical position which was expressed by the Supreme Court in Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, [(2020) 8 SCC 531] where the following pertinent observations came to be made:- "105. Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In SBI v. V. Ramakrishnan, (2018) 17 SCC 394, this Court relying upon Section 31 of the Code has held: "25. Section 31 of ....
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.... as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove. For these reasons, NCLAT judgment must also be set aside on this count. 5. In view of the aforesaid principles, the successful resolution applicant cannot be foisted with any liabilities other than those which are specified and factored in the Resolution Plan and which may pertain to a period prior to the resolution plan itself having been approved. (Emphasis supplied.) 34. Similarly, in Vaibhav Goel & Anr. v. Deputy Comissioner of Income Tax & Anr. 2025 INSC 375, the Supreme Court re-iterated the same line of reasoning. The relevant paragraph of the aforesaid judgment is produced below: "In view of the declarati....
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....e IBC, which contains an express non-obstante clause and gives the IBC overriding effect in the event of inconsistency with another law. The same is extracted hereinbelow: "The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 39. This Court is also mindful of the fact that the Customs Act is undoubtedly a special enactment governing the levy, assessment and collection of customs duties. However, the issue before this Court is not whether the Customs Act confers power upon the Respondent-Authority to determine a customs liability in the ordinary course. The issue is whether such power can be exercised in a manner which defeats the statutory consequences flowing from the IBC after approval of a Resolution Plan. In case of an inconsistency between the two statutory regimes, Section 238 requires the provisions of the IBC to prevail. 40. This distinction was considered by the Supreme Court in ABG Shipyard (supra). The Court recognised that the Customs authorities could determine the quantum of customs duty and other s....
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....s tax or penalty by any person would constitute a "first charge" on the property of such dealer or person. The corporate debtor had defaulted in payment of its tax dues and recovery proceedings had been initiated. In the meanwhile, insolvency proceedings had commenced. During the resolution process, the State tax authorities claimed that the dues payable had to be accrued previously and relied upon Section 48, in addition to Section 53 IBC. The State contended that the non obstante clause in the State enactment and the non obstante clause in IBC operated at different fields, and the State had to be treated as a "secured creditor" by virtue of Section 48 of the State Act. This was rejected by the NCLT [Ramachandra D. Choudhary v. Indian Overseas Bank (CoC), 2019 SCC OnLine NCLT 6672] and NCLAT [Tourism Finance Corpn. of India Ltd. v. Rainbow Papers Ltd., 2019 SCC OnLine NCLAT 910]. However, this Court took note of Sections 30 and 31 IBC and certain other provisions and held that NCLT had erred in its observations. It was held that : (Rainbow Papers case [STO v. Rainbow Papers Ltd., (2023) 9 SCC 545], SCC p. 569, paras 56-58) "56. Section 48 of the GVAT Act is not contrary t....
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....e confined to the facts of that case alone." (Emphasis supplied.) 44. The subsequent jurisprudence therefore does not support a general proposition that statutory dues enjoy a status which permits them to be enforced outside the framework of the IBC. The IBC itself expressly recognises governmental authorities within Section 31(1) of the IBC. The question is consequently not whether statutory dues are capable of constituting claims, but whether the particular statutory dues have been dealt with in the insolvency process and what consequence follows from their omission upon approval of the Resolution Plan. 45. The Respondents' reliance upon the fact that the Customs liability was not before the NCLT also does not advance their case. The very purpose of the claim-submission process is to enable the RP to collate claims and enable the Resolution Applicant and the CoC to take them into account. If a creditor elects not to submit its claim despite the public announcement and the further statutory opportunities available under the CIRP Regulations, the absence of that claim from the material placed before the NCLT cannot subsequently be converted into a reason for permitti....
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....utory scheme provides an independent mechanism for the creditor to submit its claim. The record demonstrates that the Respondents did not avail that mechanism. 51. There is another aspect which cannot be overlooked. The Resolution Plan was not merely approved by the CoC, it was subsequently approved by the NCLT under Section 31(1) of the IBC. The approval therefore attracted the statutory consequence of binding all persons falling within the ambit of Section 31(1), expressly including the Central Government and authorities to whom statutory dues are owed. The Respondent-Authority cannot, therefore, proceed on the footing that its statutory power under the Customs Act remains wholly unaffected by the subsequent approval of the Resolution Plan. 52. The argument based upon the availability of an appeal under the Customs Act must also be considered in this context. Ordinarily, this Court would be slow to entertain a challenge to an adjudication order where an efficacious statutory appellate remedy is available. However, the present challenge does not principally concern the correctness of classification, valuation or the quantum of customs duty. The central issue is whether, in v....
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....he Respondent-Authority could not continue to enforce against the Corporate Debtor a pre-CIRP claim which had not been submitted in the CIRP and which stood extinguished under the Approved Resolution Plan. 57. The Impugned Order was passed on 02.06.2026, i.e. after the NCLT had approved the Resolution Plan on 17.03.2026 and after the Petitioner had expressly brought the said approval and Clause 4.12.1 to the notice of the Respondent-Authority on 18.05.2026. The Respondent-Authority was thus required to consider the statutory consequences of Section 31(1) read with Section 238 of the IBC before proceeding to confirm the demand. 58. Instead, the Impugned Order proceeds substantially on the premise that the Petitioner had not established that the Customs liability had been disclosed before the RP or had formed part of the claims considered under the Resolution Plan. That approach reverses the statutory scheme. The relevant inquiry was whether the Customs Department had submitted its claim pursuant to the public announcement and within the opportunities available under the CIRP Regulations. It admittedly had not. 59. The failure of the Respondents to submit their claim cannot,....