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TMI Blog2024 (4) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order allowed the Application and directed for release forthwith the assets comprising machineries of the Corporate Debtor. Aggrieved by the impugned order, Principal Commissioner of Customs and others, who were Respondents in the Application have come up in this Appeal. 2. Brief facts necessary to be noticed for deciding the Appeal are: (i) Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor - M/s. B.K.M. Industries Ltd. commenced vide order dated 30.12.2020. (ii) M/s. B.K.M. Industries prior to initiation of CIRP has entered into an agreement with Maruti Cottex Limited for purpose of facilitating transfer of machinery owned by the Corporate Debtor ("CD") to its 100% subsidiary at Nigeria. The second consignment, which as being exported by Maruti Cottex Ltd. was seized by the Custom Authorities on 06.03.2019. A Show- Cause Notice was issued to the Corporate Debtor as well as Maruti Cottex Ltd. to show cause as to why the penalty be not imposed, goods be seized and value of the goods should not be redetermined etc. with regard to consignment seized by the Custom Authorities. Show-cause notice was replied by the Corporate Debtor as well as M/s Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the Customs Department. 5. Shri Rishav Banerjee, learned Counsel appearing for the RP supporting the impugned order submits that when the moratorium was imposed on 30.12.2020, the ownership of the machineries still lay with the Corporate Debtor. The order dated 30.12.2020 itself allow the Corporate Debtor to pay the redemption fine as per Section 125 of the Customs Act within 120 days and before the expiry of said period, the CIRP commenced on 30.12.2020. As per Section 126 of the Customs Act, vesting of the machineries in the Central Government can take place once the right of the Appellant to pay the redemption fine under Section 125 of the Customs Act has not been availed of within the time limit prescribed. In other words, till such time the period of 120 days is not over, no vesting can take place. According to the learned Counsel for the Respondent vesting could not have been taken place till 02.04.2021, before which the CIRP commenced. Hence, the RP was entitled to take possession of the assets of the Corporate Debtor under Section 18(f) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC"). The learned Counsel for the Respondent in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Customs Act, 1962. However, I allow the goods to be redeemed on payment of redemption fine of Rs. 16,83,872/- (Rupees Sixteen Lakhs Eighty Three Thousand Eight Hundred and Seventy Two Only) in terms of Section 125(i) of the Customs Act, 1962. (iii) ******************* (iv) ******************* (v) I impose a penalty of Rs. 16,83,872/- (Rupees Sixteen Lakhs Eighty Three Thousand Eight Hundred and Seventy Two Only), on M/s BKM Industries Ltd, in terms of Section 114(iii) of the Customs Act, 1962. (vi) I impose a penalty of Rs.10,00,000 (Rupees Ten Lakhs Only) on on M/s BKM Industries Limited in terms of Section 114AA of the Customs Act, 1962. (vii) ******************** (viii) ******************** " A copy of the aforesaid order dated 3rd December, 2020 is annexed hereto and marked with the letter 'A-6'. It is pertinent to mention that the said order has been passed prior to the commencement of the CIRP of the Corporate Debtor and the Corporate Debtor, has chosen not to prefer an appeal therefrom." 8. In sub-paragraph (p), (q) and (r), the RP has referred to letters written by RP to Customs Department to hand over and/or return the assets. The averments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) It is stated in the application that the respondents have till date failed and neglected to respond to the applicant and/or hand over/ cooperate with the applicant for taking control and custody of the assets of the Corporate Debtor comprising of the machineries, as aforesaid. (viii) Heard the Ld. Counsel for the parties, perused the application and the documents attached therewith. (ix) In the facts of the present case, we direct the respondents in terms of prayer (a) to release forthwith the assets comprising machineries of the Corporate Debtor mentioned in details in a schedule at Annexure "A-5" of this application within six weeks of uploading this order on the portal." 11. When we look into the order of the Adjudicating Authority, it is clear that the order contains only direction to release the goods to the Customs Department without giving any reason and without even adverting to the facts, which were mentioned by the Applicant himself in the Application as noted above. The order of Adjudicating Authority, which does not give any reason for allowing the Application, deserves to be set aside on this ground alone. 12. We, however, proceed to examine the respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion ( Determination of Value of Export Goods) Rules,2007 and the value is to be redetermined as USD 225071.25 (Rs. 1,68,38,720/-, in terms of Rule 6 of Customs Valuation ( Determination of Value of Export Goods) Rules,2007. Thus, the export goods do not correspond to the value declared by the exporter, I find that the goods are liable for confiscation in terms of Section 113(i) of the Customs Act, 1962. However, as the goods are not prohibited goods, I allow the option of release of goods to the Exporter on payment of redemption fine, in terms of Section 125(i) of the Customs Act, 1962." 13. In paragraph-58, after returning the finding and in consideration of issues, the Additional Commissioner passed the following directions: "(i) I reject the FOB value of Rs. 8,18,57,300/- (Rupees Eight Crores Eighteen Lakhs Fifty Seven Thousand and Three Hundred only) as declared in the Shipping Bill No. 7043751 dt. 21.08.2018 for the Machinery items, in terms of Rule 8 of the Customs Valuation (Determination of value of Export Goods ) Rules, 2007 and the value of the goods is redetermined as Rs. 1,68,38,720/- (Rupees One Crore Sixty Eight Lakhs Thirty Eight Thousand Seven Hundred and Twenty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of goods attempted to be improperly exported, etc. The following export goods shall be liable to confiscation:-- (a) any goods attempted to be exported by sea or air from any place other than a customs port or a customs airport appointed for the loading of such goods; (b) any goods attempted to be exported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the export of such goods; (c) any 1*** goods brought near the land frontier or the coast of India or near any bay, gulf, creek creek or tidal river for the purpose of being exported from a place other than a land customs station or a customs port appointed for the loading of such goods; (d) any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; (e) any 1*** goods found concealed in a package which is brought within the limits of a customs area for the purpose of exportation; (f) any 1*** goods which are loaded or attempted to be loaded in contravention of the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be concluded under the proviso to sub-section (2) of section 28 or under clause (i) of sub-section (6) of that section in respect of the goods which are not prohibited or restricted, the provisions of this section shall not apply: Provided further that], without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. (2) Where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods. (3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending. Explanation.-For removal of doubts, it is hereby declared that in cases where an order under sub-section (1) has been passed before the date on which the Finance Bill, 2018 receives the assent of the President and no appeal is pending aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he option of payment redemption fine nor redeemed the goods, but sill they continued to be owner of the goods cannot be accepted. 17. Now, we proceed to examine the cases, which have been relied by learned Counsel for the Respondent. The judgment of the Hon'ble Supreme Court in Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes & Customs, (2023) 1 SCC 472 was a case where CIRP commenced on 01.08.2017 and the Custom Department for the first time issued notice demanding custom duty on 29.03.2019. The Liquidator in the above circumstances filed an IA No.474 of 2019 for release of the goods, which was allowed by the Adjudicating Authority on 25.02.2020, against which order, Appeal was filed before this Tribunal. This Tribunal allowed the Appeal filed by the Custom Department, against which Corporate Debtor through Liquidator filed the Appeal in the Hon'ble Supreme Court. In the judgment, Hon'ble Supreme Court, after considering the issues raised recorded the clear finding that Demand Notice issued by Customs Department was on 29.03.2019, i.e., after imposition of moratorium. Findings in paragraph-44 of the judgment are as follows: "44. At the cost of repe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, before the adjudicating authority." 20. The judgment of the Hon'ble Supreme Court in Sundaresh Bhatt was on entirely different footing, where the CIRP commenced prior to taking any action by the Customs Department and for the first time Customs Department has issued Demand Notice on 29.03.2019, i.e., much after initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s payable in respect of such goods."] " ( emphasis supplied ) 21. Confiscation of the imported goods under the said Act (which we are treating as valid in the present case) does not vest unconditional right, title and interest in such confiscated goods in the Customs Department as, if the importer avails of the right vested under section 125 of the said Act, the confiscation order would not take effect. Only in the eventuality of the importer, or from whose possession or custody the goods have been ceased, failing to exercise the option to pay fine, duty and other charges payable in respect of the imported goods, the customs department would get the right to deal with the goods as its own. 22. No doubt, section 126 of the said Act provides that: "126. On confiscation, property to vest in Central Government. (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government. (2) The officer adjudging confiscation shall take and hold possession of the confiscated goods." However, the said provision cannot be read in isolation and has to be read in conjunction with section 125 of the said Act, as aforesaid. Confiscation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the sale of such goods the duty, penalty and interest and should return the excess to the owner. The issue which was came for consideration before the full bench was interpretation of Section 126, sub-section (1). The issue was noticed in paragraph-2, which is as follows: "2. The answer to the above question would require interpretation of the expression "vest with the Central Government" occurring in section 126(1) of the Act. In this context, this Bench has also been tasked with examining the correctness of the decision of a DB of this court in MMTC v. Surjit Singh Kanda (2013) 196 DLT 725. The background facts" 24. The above judgment of the Hon'ble Delhi High Court also does not support the submission of the Appellant that till the option to pay the redemption fine is not exercised within time period, there shall be no vesting of the goods by the Central Government by virtue of Section 126. 25. The clear provision of Section 126(1), we have already noticed above and the scheme of Section 125, which is for different purpose and object. Accordingly to our considered opinion vesting of goods is on confiscation by the Central Government by provision of Section 126, su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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