DEPUTY COMMISSIONER (WORKS CONTRACT) v. NATIONAL COMPANY LAW TRIBUNAL

“47. Therefore, this Court in V.M. Deshpande cases held that the authorities can only take steps to determine the tax, interest, fines or any penalty which is due. However, the authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium. We are of the opinion that the above ratio squarely applies to the interplay between the IBC and the Customs Act in this context.

48. From the above discussion, we hold that the respondent could only initiate assessment or reassessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33(5) of the IBC. The interim resolution professional, resolution professional or the liquidator, as the case may be, has an obligation to ensure that assessment is legal and he has been provided with sufficient power to question any W.P.(C) No.39185/2022 -12- assessment, if he finds the same to be excessive.

49. There is another aspect of this case that needs to be highlighted to portray the inconsistency of the Customs Act vis-à-vis the IBC during the moratorium period. In the present case, the demand notice dated 11-7-2019 was issued by the respondent under Section 72 of the Customs Act, in clear breach of the moratorium imposed under Section 33(5) of the IBC. Issuing a notice under Section 72 of the Customs Act for non-payment of customs duty falls squarely within the ambit of initiating legal proceedings against a corporate debtor. Even under the liquidation process, the liquidator is given the responsibility to secure assets and goods of the corporate debtor under Section 35(1)(b) of the IBC.”

5.2 The twin questions framed by the Court have been answered in paragraph 57 of the aforesaid judgment. Paragraphs 56 and 57 are reproduced hereunder: “56. For the sake of clarity following questions, may be answered as under: (a) Whether the provisions of the IBC would prevail over the Customs Act, and if so, to what extent?

56.1. The IBC would prevail over the Customs Act, to the W.P.(C) No.39185/2022 -13- extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/ confiscation, as provided under the Customs Act. (b) Whether the respondent could claim title over the goods and issue notice to sell the goods in terms of the Customs Act when the liquidation process has been initiated?

56.2. Answered in negative.

57. On the basis of the above discussions, following are our conclusions:

57.1. Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

57.2. After such assessment, the respondent authority has to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, W.P.(C) No.39185/2022 -14- before the adjudicating authority.

57.3. In any case, the IRP/RP/liquidator can immediately secure goods from the respondent authority to be dealt with appropriately, in terms of the IBC.”

5.3 Thus, after declaring the moratorium, there is an embargo on enforcing the demand, but there is no embargo under Section 14, read with Section 33(5) of the IBC, for determining the quantum of tax and other levies, if any, against the Corporate Debtor.

6. This Court finds the impugned order passed by the National Company Law Tribunal, Kochi Bench, as preposterous and untenable. The Company Law Tribunal has no power and authority under the IBC to declare an assessment order as void ab initio and non est in law. Such an order only reflects the competence of the persons who are manning such an important Tribunal. The Order shows the lack of basic W.P.(C) No.39185/2022 -15- understanding of the law. Instead of considering the application by the 2nd respondent for permission to file an appeal against the assessment order, the National Company Law Tribunal, Kochi Bench, has assumed the jurisdiction of the Constitutional Court to declare the assessment order as void ab initio.

7. In view thereof, impugned order unsustainable, and the same is set aside. The writ petition is allowed. The matter is remitted back to the National Company Law Tribunal, Kochi Bench, to consider and pass an order on the application of the 2nd respondent in IA(IBC) 331/KOB/2022 in IBA/38/KOB/2019 at an early date. Sd/- DINESH KUMAR SINGH JUDGE W.P.(C) No.39185/2022 -16- APPENDIX OF WP(C) 39185/2022 PETITIONER EXHIBITS Exhibit P1 Exhibit P2 Exhibit P3 RESPONDENT EXHIBITS Exhibit R2(a) Exhibit R2(b) TRUE COPY OF THE ASSESSMENT ORDER NO.32072000387/2015-16 DATED 25.02.2021. TRUE COPY OF THE FORM 'C' APPLICATION SUBMITTED BY THE PETITIONER DATED 04.01.2022. TRUE COPY OF THE ORDER OF THE 1ST RESPONDENT DATED 26.10.2022. The true copy of the IA (IBC) 331/KOB/2022 filed by this respondent before the 1st respondent The true copy of the Circular No.187/19/2022GST issued by the GST Policy Wing, Central Board Of Indirect Taxes and Customs, Department Of Revenue, Ministry Of Finance, Government Of India