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TMI Blog2023 (7) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... ation inter se the two parties. Thus, there has been no creation of security interest giving rise to any scope for action by R2 as against the petitioner - That apart, there has been no communication of any sort between R1 and the petitioner till the passing of impugned order, wherein also, the stand of R2 is that its claim cannot be entertained as the petitioner is not a party to dispute adjudged by this office . The aforesaid conclusion reflects the categoric stand of R2 that the petitioner is wholly unconnected with the customs department. However, re-export requires the permission of the customs department, and it is to this limited extent that they have a role to play. The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (2016 Regulations) provide for a clear and transparent procedure by which the public/creditors are made aware of the proceedings before the NCLT. The proceedings of the NCLT are stated to be uploaded promptly and advertisements are issued in publications with sufficient circulation to enable the creditors to be aware of pending proceedings - It is thus necessary for the concerned creditor, whether operational or financial t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have, if convinced of the violation committed by R2, secured its interest at the relevant point in time and in any event prior to 07.06.2019, when moratorium was imposed. iv) Securing of interest could have been of two kinds: a) by issuance of notice and passing of order-in-original denying the benefit of exemption granted under advance authorization scheme in a timely fashion or b) by filing a claim before the Resolution Professional appointed by the NCLT. Neither of the two options were availed. v) R1 was well aware of the proceedings pending before the NCLT even as early as in July, 2021 when order dated 09.07.2021 had been passed in the Writ Petition. Hence, the consequences from the failure to file a claim in time before the authority must be suffered. As a matter of prudence, the Departments must consider appointing a Nodal officer who would monitor the proceedings before the NCLT on a regular basis. This process does not appear very cumbersome as the proceedings are stated to be available online for periodical reference and timely action. The impugned order dated 30.08.2022 insofar as it raises a demand on duty and penalty as a pre-condition to re-export by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dugar [(56) ELT 739] that the petitioner, as an unpaid exporter held title over the goods. The validity/consequence of the advance licence obtained by R2 in regard to the goods imported, was unavailable to this Court. 6. Hence, R1 was, in conclusion, directed to dispose the representations seeking re-export within four weeks from date of that order bearing in mind that the goods were perishable. It was made clear that the re-export would be ordered upon payment of applicable charges. 7. At the outset, it is an admitted position that there has been a violation of the time frame fixed under order dated 09.07.2021. What R1 has done is to pursue the show cause notice issued on 30.01.2020 to R2 and pass an order on 30.08.2022 addressing therein, the representation of the petitioner as well. 8. However, much water has flowed under the bridge post issuance of show cause notice dated 30.01.2020 as the noticee, R2, has, in the meantime been liquidated by an order of the NCLT and the company has been taken over by R3. It is for this reason that there has been no response by R2 to the notice issued by R1 prior to the order passed on 30.08.2022. 9. Noting that there was no response from R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly the challenge to order dated 30.08.2022 by R3 was only by way of abundant caution and closure of the writ petition relegating R3 to appeal cannot create any liability, if there is no liability created by operation of statute or law. This Court is of the considered view that R3 stands outside the purview of any liability under order dated 30.08.2022 and the attempt of R1, albeit by way of counter, to draw R3 into the storm of controversy, is wholly misconceived. 15. The specific submission of the petitioner is that the directions in order dated 09.07.2021 have not been adhered to scrupulously. Admittedly, there is unexplained delay in complying with the direction in order of this Court and R1 has not bothered in counter to address or explain the specific ground raised relating to delay. However, in conclusion, the request for re-export has been accepted, though on terms of payment of customs duty and penalty denying the benefit of the Advance Authorisation Scheme. 16. The petitioner argues that it cannot be mulcted with any liability as it is an unpaid importer/seller and the goods have not been cleared by customs. The goods are in a bonded warehouse and the petitioner, throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmitted subject, however, to payment or requisite export duty payable in respect thereof. The 1st respondent is entitled to detention certificate in respect of the goods covered by the said four consignments for the period the said goods were wrongfully detained rendering the 1st respondent liable to pay demurrage to Bombay Port Trust. 13. While dismissing the appeal filed by the Union of India and confirming the order of the learned single Judge, the Bench permits re-export subject to payment by the first respondent of requisite export duty. Consequently, the appellant, being the Customs Department was directed to issue a detention certificate in respect of the goods covered by the consignments in question. The first respondent in that case, the importer, was held liable to pay demurrage to the Bombay Port Trust. 14. The Union of India carried the matter in appeal before the Supreme Court and at paragraph 19, the issues that arose have been decided as follows: 19. We may first consider the question of title to the said goods. If we keep aside the provisions of law relied upon by the appellants viz., definition of `importer' in Section 2(26) of the Customs Act, Clause 5(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence is granted shall be the property of the licensee at the time of import and thereafter upto the time of clearance through Customs." The Rulemaking authority (Central Government), which issued the order, must be presumed to be aware of the fact that in many cases, the importer is not the owner of the goods imported at the time of their import and that he becomes their owner only at a later stage, i.e., when he pays for and obtains the relevant documents. Why did not Central Govt. yet declare that such goods shall be the property of the licensee from the time of import? For appreciating this, one has to ascertain the object underlying the said provision. The interpretation to be placed upon the provision should be consistent with and should be designed to achieve such object. In this context, it should also be remembered that expressions like `Property of' and `Vest' do not have a single universal meaning. Their content varies with the context. The aphorism that a word is not a crystal and that it takes its colour from the context is no less true in the case of these words. In our opinion the object underlying condition (ii) in Clause 5(3) is to ensure a proper imple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Country are unavailable to him for various reasons including abandoning of the consignment by the Indian importer, or as in the present case, the importers not being in a position to take possession and claim ownership of the goods, it would place the foreign exporter in an unenviable position. Having lost possession of the goods, he would also not be in a position to enforce payment for the same, which would be detrimental to international trade. 16. Statutory provisions and regulations cannot, the Bench holds, be interpreted in a manner so as to deprive the exporter of his title to the goods imported. The above conclusion of the Supreme Court would apply on all fours to the present matter, quite apart from the position that the importers have themselves expressed no-objection to the release of the goods to the petitioner. In that case, the Supreme Court holds that the importer would have to be heard by the Customs Department before any order is passed dealing with the goods in any way, including re-export. This question does not arise in the present case in view of their no objection to the release. 17. Admittedly order dated 09.07.2021 has attained finality and was clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus: 'Security Interest' means right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a transaction which secures payment or performance of an obligation and includes mortgage, charge, hypothecation, assignment and encumbrance or any other agreement or arrangement securing payment or performance of any obligation of any person: Provided that security interest shall not include a performance guarantee;' 23. In my considered view, the attempt of R1 is misconceived on a plain reading of the definition. Security interest as envisaged, must be created by virtue of a 'transaction' securing payment or performance of an obligation. In the present case, there is no cause of action whatsoever that would construe a 'transaction' inter se R1 and the petitioner, much less one which secures payment or performance of an obligation inter se the two parties. Thus, there has been no creation of security interest giving rise to any scope for action by R2 as against the petitioner. 24. That apart, there has been no communication of any sort between R1 and the petitioner till the passing of impugned order, wherein also, the stand of R2 is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst which a claim/demand is made or a charge laid, must be party to the transaction. In the present case, R1 has neither an agreement/arrangement with the petitioner nor does the in-bond warehousing agreement entered into between R2 and R1 make any reference to the petitioner. 30. The agreements between the petitioner and R2 serve only to secure the interests of the former and do not impact in any way, either by reducing or expanding, the rights of R1. Thus, there is a clear absence of the requisite nexus between the petitioner and R1, and the argument that R1 holds a security interest in the goods qua the petitioner, is too circuitous to be countenanced apart from being untenable in law. 31. In the case of Premier Automobiles Limited, a learned single Judge of the Bombay High Court considered a challenge to an order passed by the Industrial Court, Bombay. The facts and legal position in that matter are also entirely at variance from those in the present case. In the case of Ahmedabad Manufacturing & Calico Printing Company Limited, a learned single Judge of the Bombay High Court was deciding a petition filed by Bank of India for sanction of scheme of arrangement under the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed under paragraph 4.22 of the Foreign Trade Policy 2015-2020. …………….. goods 3. Foreign Exchange remittance against this authorisation shall be governed by the instructions issued by the Reserve Bank of India from time to time. 4. The Export obligation shall be fulfilled by the authorisation holder as per the terms and conditions specified in the Foreign Trade Policy 2015-20 and the Handbook of Procedures, 2015-20 and other guidelines issued by the Director General of Foreign Trade from time to time. 5. The Authorisation holder shall deliver or cause to deliver to this office within 2 months from the date of expiry of the export obligation period stated above, documents as prescribed under paragraphs 4.44 and 4.46 of Handbook of Procedures, 2015-2020, as amended, from time to time, as evidence of fulfillment of export obligation imposed on this authorisation. In case of bonafide defaults provisions of paragraph 4.49 of the Handbook of Procedures, 2015-2020 as amended from time to time shall apply. Failure to fulfillment of the export obligation in the manner as prescribed in the Handbook of Procedures, 2015-20 shall attract penal proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of ITC(HS), the exporter would be required to take a separate export licence. 13. The DES Authorisation holder shall execute BG/LUT with Customs Authority, as per the procedure prescribed by them before effecting imports, However, for domestic procurement of input, BG/LUT shall be executed with the concerned regional Authority in the manners specified in paragraph 2.35 of the FTP, 2015-2020. 14. Factory Address(es) of the Authorisation holder and/or the Supporting Manufacturer where the goods imported shall be processed. …… goods 15. Name and Address(es) of the Co-Authorisation holder in terms of Para 4.35 of Handbook of Procedures, 2015- 2020: Name and Address of the Co-Licensee: No Co-Licensee. Additional Condition Sheet 1. IMPORTS SHOULD PRECEED EXPORTS (as per Public Notice No.8 dated 1.5.2015) 2. EXPORT OBLIGATION PERIOD FOR THE RAW SUGAR IMPORTED UNDER THIS ADVANCE AUTHORIZATION SHALL BE SIX MONTHS FROM THE DATE OF CLEARANCE OF EACH CONSIGNMENT BY CUSTOMS AUTHORITY, 3. THE CONTENT OF SUCROSE BY WEIGHT, IN DRY STATE IN RAW SUGAR MUST CORRESPOND TO A POLARIMETER READING OF LESS THAN 99.5% BUT NOT LESS THAN 96.5% (as per note No.1 to SION E-52) 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d officer (Inspector and Superintendent) for the examination of the goods. Along with the B/E, the CHA is to present all the necessary documents. After completing examination of the goods, the Shed Inspector enters the report in System and The Superintendent gives 'out of charge' in case of already assessee Bs/E. Thereupon, the system prints Bill of Entry and order of clearance'. 41. Simultaneous therewith, the bill of entry for warehousing (provisional) for some consignments have been furnished, dated 17.01.2017. Thus, in cases of provisional bills of entry (warehousing) as contra distinguished between bill of entry for home consumption, while the goods may not have crossed the customs frontier as they are being retained in the customs warehouse, the importer would be bound by the terms/conditions under AA which require processing and export to be carried out within a period of six months from date of out-of-charge order. 42. Thus, the answer to issue (i) is that the condition prescribed under the AA scheme stands triggered, though proper procedure prescribed in this regard must be followed for necessary consequences to follow. Coming to the second issue, the out-of-charge order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. 49. The judgment in Ghanashyam Mishra has been followed in Ruchi Soya Industries Ltd. V. Union of India ((2022) 6 SCC 343). In the case of Rainbow, the Hon'ble Supreme Court considered the claim of the Commercial Taxes Department challenging an order by the National Company Law Board Appellate Tribunal (in short 'NCLAT') holding that the State cannot claim first charge over the property of a corporate debtor as Section 48 of the Gujarat Value Added Tax Act, 2003 (in short 'GVAT Act') did not prevail over Section 53 of the IB Code. 50. The aforesaid judgment would be of no assistance to R1 in the present matter. It is an admitted position that R1 has not made a claim before the Liquidator appointed by the NCLT to stake its right in the distribution of assets. The right of any creditor whether a financial creditor, operational creditor, secured or unsecured creditor would arise only in the event, and upon condition, that a claim is made by that creditor. In the event no claim has been put forth that creditor would have no recourse to the distribution of assets by the Liquidator appointed. 51. The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee prior to 07.06.2019 when moratorium was imposed. 56. Under customs law, the bill of entry would constitute a self-assessment till such time it is replaced by assessments under Sections 15, 16, 17 or 128. The assessment of the bill of entry is as on 30.01.2017. The licence for advance authorization came to be issued on 17.07.2017 and hence assessment on bill of entry would have to be read with the exemption granted under the advance authorization scheme dated 17.07.2017, till such time the position regarding exemption was varied or disturbed in any way. 57. This came to be done by R1 only on 30.08.2022 by which time R2 had been released for liquidation and the scheme proponent had come into the picture. Thus, even the provisions of Section142A are of no avail to R1 in the present case. 58. The relevant portion in the case of Rainbow reads thus: 30. The learned Solicitor General rightly argued that in view of the statutory charge in terms of Section 48 of the GVAT Act, the claim of the Tax Department of the State, squarely falls within the definition of "Security Interest" under Section 3(31) of the IBC and the State becomes a secured creditor under Section 3(30) of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken the benefit of the wide timeframe available. 65. The scheme of the IB Code proceeds on the basis that the CIRP shall be time bound and adhere to the statutory time frame, in a scrupulous manner. This is made clear by the provisions of Section 12 which sets out the time limit for completion of insolvency resolution process. A second proviso has been inserted to Section 12(3) making it clear that the outer time limit for completion of CIRP shall mandatorily be within a period of 30 days from commencement of insolvency taking into account any exemptions granted and the time taken in legal proceedings in relation to such process. 66. In light of this discussion and in the absence of any claim made by R1 before the Official Liquidator, there is no force whatsoever in the demand made under the impugned order. It is also quite mystifying as to how R1 proceeds to completely disavow the proceedings before the NCLT in toto. It is not as though the Customs Department is unaware of the proceedings before the NCLT. 67. In fact, in the earlier round of litigation, the Director General of Foreign Trade was arrayed as the first respondent and the Commissioner of Customs as the second respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by such fees, as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days from the date aforesaid, but within a further period not exceeding forty-five days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within that period. 73. Thus, an appeal under Section 421 must be filed within a period of 45 days from the date on which a copy of the order of the Tribunal is made available to the person aggrieved. It is the case of R1 that the appeal was filed as soon as R1 came to know of the order dated 07.06.2019 by the NCLT, that is, as and when a copy of the scheme was filed by R3 in these proceedings. 74. Per contra, the other parties would draw my attention to the provisions of Section 61 of the IB Code reading thus: 61. (1) Notwithstanding anything to the contrary contained under the Companies Act 2013, any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal. (2) Every appeal under sub-section (1) shall be filed within thirty days before the National Company Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a v. Union of India and others [(1992) 3 SCC 512 would amount to smuggling.] is also not of any assistance to R1. In that case, three Judges of the Hon'ble Supreme Court decided a challenge to a detention order passed under the provisions of the COFEPOSA Act and whether removal of goods that were deposited in a warehouse without payment of duty 81. In the present case, it is admitted that the petitioner is an unpaid vendor/importer of the goods and is only seeking re-export. The question that arises is as to whether violation of advance authorisation committed by R2 can have any impact or can pose a hindrance to reexport by the petitioner. This is not the question that arises in N.K.Bapna's case. 82. R1 has also relied on a judgment by the Hon'ble Supreme Court in Dhampur Sugar Mills Limited v. Commissioner [2016 (333) E.L.T. A241 (SC)], wherein the Hon'ble Supreme Court has confirmed a decision of the Allahabad High Court to the effect that the assessee, Dhampur Sugar Mills Limited had failed to establish that raw sugar imported under the advance authorisation scheme was physically incorporated in sugar exported later, when the condition was relaxed only in respect of sugar impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption from the customs duty under the notification meant for the materials imported into India against the valid authorization. The stance of the department that the respondent no.5, as an importer, availed or claimed exemption of a notification that prescribes or lays down a condition of utilization of the imported materials and export of the resultant products for the fulfillment of the export obligation in respect of the authorization also appears to be correct. 35. We go to the extent of observing that if the export obligation period of 18 months from the date of issue of the authorization has elapsed and no extension has been granted in favour of the respondent no.5 being the authorization holder, then the stance of the department that as the exemption from duty was granted at the time of the import of the goods subject to the conditions of the Customs Notification No.79/2017-Cus and the condition of fulfillment of export obligation within the period specified in the authorization not being complied with, the goods are liable to be confiscated under Section 111(o) of the Act, 1962, also appears to be well justified. 36. The fact that the exporter, i.e. the writ-applicant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip or to re-export the goods in question. As per the decision of the Delhi High Court, in Agrim Sampada Ltd. Vs. Union of India, reported in 2004 (168) ELT 15 (Del), the title in respect of the goods abandoned by the importer would vest with the petitioner. 6. In the counter affidavit filed on behalf of the first respondent it has been stated that the importer has not abandoned the goods, even though he had chosen not to file the bill of entry, in order to escape from the clutches of law and in order to avoid detection of its mode of operation by the investigating agency. During the examination, it had been found that the goods had been mis-declared as imitation stones, in order to evade payment of a higher duty. Therefore, a show cause notice had been issued to the importer for the violation of the provisions of the Customs Act, 1962. Hence, the request of the petitioner for re- shipment or re-export of the goods would not arise. 7. In fact, a show cause notice, dated 8.7.2011, had been issued to M/s.Sky Way Corporation, Jaipur, and certain others, proposing confiscation of the goods, under Section 111(d) of the Customs Act, 1962, read with Section 11(1) of the Foreign Trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the goods are thus in possession of the petitioner. After referring to the decision in M/s.Pacificorp (HK) Limited v. Commissioner of Customs (Airport and Air Cargo Complex), Meenambakkam, Chennai [(281) E.L.T. 522] and an order passed by the Customs, Excise and Gold Tribunal in the case of M.V.Marketing and Supplies v. Commissioner of Customs (Import) [(178) E.L.T. 1034 application for re-export.] the writ petition was disposed granting liberty to that petitioner to make an 88. R1 would emphasise that the Court has directed that reasonable duty be paid on export of the goods. Thus, according to him, even in the case of re-export, duty should be paid on the consignment to be re-exported. There are some distinguishing features in that case which make the conclusion thereof inapplicable to the present matter. 89. In that case, it had been found that the goods had been misdeclared as imitation stones, in order to evade payment of higher duty. A show cause notice had been issued to the importer for the violation of the provisions of the Customs Act, 1962. That apart, show cause notices had been issued to several parties proposing confiscation of the goods, under Section 111(d) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instance of the petitioner, since, though it has been granted re-export that it seeks, such re-export comes with a heavy price tag. 94. The Hon'ble Supreme Court in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard Vs. Central Board of Indirect Taxes and Customs [(2023) 1 SCC 472] has considered the harmonious construction of the Code with the Customs Act. While so, the Court considered that the provisions of the Code were sacrosanct and that the Department would be duty bound to stake claim, though only in terms of Section 53 of the Code and not beyond. At paragraph 50, they state as follows: 50. As laid down earlier, the Customs Act and IBC can be read in a harmonious manner wherein authorities under the Customs Act have a limited jurisdiction to determine the quantum of operational debt - in this case, the customs duty - in order to stake claim in terms of Section 53 of the IBC before the liquidator. However, the respondent does not have the power to execute execute its claim beyond the ambit of Section 53 of the IB C. Such harmonious construction would be in line with the ruling in Gujarat Urja Vikas Nigam Ltd. V. Amit Gupta, (2021) 7 SCC 209, wherein a balance was ..... 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