2023 (12) TMI 577 - HC - Customs

Short payment of Customs Duty - Approval of Resolution Plan - extinguishment of claims once resolution plan approved u/s 31 of IBC - overriding effect of IBC over Customs Act - HELD THAT - Undisputedly, the Supreme Court in ABG Shipyard Liquidator vs. Central Board of Indirect Taxes Customs 2022 (8) TMI 1161 - SUPREME COURT has unequivocally held that the provisions of the IBC would override and have precedence over the Act. Insofar as the extinguishment of claims is concerned, the said issue too is no longer res integra and stands authoritatively answered by the Supreme Court in Essar Steel India Ltd. Committee of Creditors vs. Satish Kumar Gupta 2019 (11) TMI 731 - SUPREME COURT and Ghanashyam Mishra Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Pvt. Ltd. 2021 (4) TMI 613 - SUPREME COURT , where it was held that 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. The impugned order cannot be sustained - petition allowed.

Summary

Issues involved:
The judgment involves challenging the order passed by the Commissioner of Customs and the consequential duty demand based on the Insolvency and Bankruptcy Code, 2016 (IBC).

Impugned Order and Duty Demand:
The petitioner contested the order and duty demand related to the period prior to Corporate Insolvency Resolution Process (CIRP) and import of capital goods under EPCG licenses. The petitioner argued that these demands should be extinguished post approval of the Resolution Plan under Section 31 of the IBC.

Resolution Plan Approval and Claims:
The Resolution Plan was approved by the NCLT, NCLAT, and Supreme Court, involving claims by customs authorities. Two claims were admitted and disbursed as per the Resolution Plan, while two other authorities did not claim before the Resolution Professional.

Legal Provisions and Precedents:
The judgment highlighted Section 31 of the IBC, emphasizing its binding nature post approval of the Resolution Plan. It referenced the Supreme Court's decision in ABG Shipyard Liquidator case, which established the precedence of IBC over the Customs Act. The judgment also cited Essar Steel and Ghanashyam Mishra cases, affirming the extinguishment of dues not part of the Resolution Plan.

Conclusion:
The Court ruled in favor of the petitioner, stating that the demands pertaining to the period before the Resolution Plan approval should be extinguished under the IBC. The impugned order was quashed, and the writ petition was allowed.