2008 (8) TMI 568 - HC - Companies Law

Winding up - Delivery of property to liquidator - whether the claim of a secured creditor has precedence over the right of the concerned Government Department, to recover dues of tax, the customs duty in particular? Held that - The company court had assumed to itself, the jurisdiction not conferred upon it, by the Companies Act. If the proceedings initiated by the appellant were defective in any manner or contrary to the provisions of the Customs Act, the aggrieved party was entitled to pursue its remedies before the appellate forum constituted under that Act or in any other forum. By no stretch of imagination, the company court can be said to have the jurisdiction to pronounce upon the legality, or otherwise of the proceedings arising under the Customs Act. Appeal allowed. The liability of a company to pay the customs duty on the imported goods shall remain unaffected by the proceedings of winding up, initiated against such company; and the claim of a secured creditor against imported, but uncleared goods shall not have any precedence over the right of the Customs Department, to proceed against such goods, to recover the dues of customs duty.

Summary

Issues Involved:
1. Priority of claims between secured creditors and the Customs Department for recovery of customs duty.
2. Jurisdiction of the company court over proceedings under the Customs Act.
3. Legality of the detention and sale of imported goods under the Customs Act.

Detailed Analysis:

1. Priority of Claims:
The primary issue was whether the claim of a secured creditor has precedence over the right of the Customs Department to recover dues of customs duty. The court concluded that the liability to pay customs duty on imported goods remains unaffected by the winding-up proceedings of a company. The Customs Department's right to recover customs duty takes precedence over the claims of secured creditors. This was supported by the judgment in *Collector of Customs v. Dytron (India) Ltd.*, which held that customs duties must be paid before the goods can be considered part of the company's assets available for distribution in liquidation.

2. Jurisdiction of the Company Court:
The court examined whether the company court had jurisdiction to pronounce on the legality of proceedings under the Customs Act. It was determined that the company court overstepped its jurisdiction by adjudicating issues that should be addressed by the appellate forums constituted under the Customs Act. The company court cannot declare the proceedings of the Customs Department as void or non est.

3. Legality of Detention and Sale:
The court reviewed the procedures followed by the Customs Department in detaining and attempting to sell the imported goods to recover customs duty. The initial judgment by the single judge found the detention orders void due to non-compliance with the required procedures under sections 72 and 142 of the Customs Act. However, the appellate court held that any defects in the Customs Department's procedures should be contested in the appropriate appellate forums, not the company court.

Conclusion:
The appeal was allowed, and the order of the company court was set aside. The court held that:
- The liability of a company to pay customs duty on imported goods remains unaffected by winding-up proceedings.
- The claim of a secured creditor does not have precedence over the Customs Department's right to recover customs duty from imported but uncleared goods.

The judgment clarified that the company court does not have the jurisdiction to adjudicate the legality of proceedings under the Customs Act, emphasizing the need for such matters to be resolved in the appropriate forums designated by the Customs Act.