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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 ..... aying the redemption fine given under the order dated 03.12.2020 has not been availed of, which is an admitted fact. The submission, which has been pressed by the learned Counsel for the Respondent is that since the period of 120 days did not expire and the CIRP commenced, the vesting of goods in Central Government shall not take place. Vesting of goods under Section 126, sub-section (1) is not dependent on exercise of option to pay the redemption fine. The payment of redemption fine and redeeming the goods is a benefit, which is provided by the statute, which option can be availed after the confiscation of the goods - In the present case, it is not the case of RP that any option was exercised for payment of redemption of fine. In the entire pleading of the Application, there is no claim of exercise of any option. Thus, the argument of Shri Rishav Banerjee that there shall be no vesting till the period for exercising the option comes to an end, has no relevance in the present case. More so, even CIRP commenced against the Corporate Debtor on 30.12.2020, it was always open for the RP, who was entitled to represent the Corporate Debtor to exercise option and redeem the goods by payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, 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 Maruti Cottex Ltd. and by an order dated 03.12.2020, Additional Commissioner confiscated the goods seized on 06.03.2019 in terms of Section 113(i) of the Customs Act, 1962. The Additional Commissioner also gave option for the goods to be redeemed on payment of redemption fine of Rs.16,83,872/- under Section 125(i) of the Customs Act, 1962. After the confiscation, the goods remained in the custody of the Customs Department. (iii) The Interim Resolution Professional ("IRP") of the B.K.M. Industries Ltd. issued a letter dated 05.06.2021 to the Customs Department for return of the goods. Reminders were issued on 07.07.2021 and 05.08.2021 for return of the machinery lying with the Customs Department. (iv) Having received no response to the letter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 of his submission relied on 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; judgment of the Delhi High Court in Writ Petition (C) No. 2063/2011 - MMTC v Surjit Singh Kanda & Ors.; as well as the judgment of Delhi High Court in Gillette India Ltd. v. Commr. of Customs - 2019 SCC OnLine Del 8199. He has also relied on judgment of this tribunal in Commissioner of Customs(Preventive), West Bengal v Ram Swarup Industries Ltd & Ors. Company Appeal (AT)(Ins.) No. 563 of 2018 and contended that since the ownership rights of the machineries were of the Corporate Debtor, the RP has right to take control and custody of any asset, though the Customs Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 made in paragraph- (7) - (p), (q) and (r) are as follows: "(p) The Applicant, under the circumstances stated in the paragraphs hereinbefore, issued a letter dated 5th June, 2021 to the Respondent No.2 requesting it to hand over and/ or return the assets comprising of the machineries seized and lying in the custody of the Respondent Authorities to the Corporate Debtor. A copy of the aforesaid letter dated 5th June, 2021 issued by the Applicant to the Respondent No.2 is annexed hereto and marked with the letter 'A-7'. The Respondent No.2 failed and neglected to respond to the aforesaid letter issued by the Applicant. (q) The Applicant again issued another letter dated 7th July, 2021 to the Respondent, No: 2 referring to his earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority, 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 respective submissions of the parties on merits of the Application. The order dated 03.12.2020 passed by the Customs Authorities was after issuing Show-Cause Notice to Corporate Debtor as well as Maruti Cottex Ltd., who sought to export the consignment of machineries obtained from the Corporate Debtor. The findings in the order of the Additional Commissioner are contained in paragraph 43, which are as follows: "43. Having found that the Department has followed the procedure envisaged under Customs Valuation (Determination of value of Export Goods ) Rules, 2007, I find that the Case laws relied upon by the notices, viz, M/s MCL and M/s BKMIL in support of their claim that due procedure has not been followed by Department while redetermining the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eject 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 Only) in terms of Rule 6, ibid, read with the provisions of Customs Act, 1962. (ii) I order for confiscation of the goods seized vide Panchanama dated 06.03.2019, as detailed in Annexure enclosed thereto, revalued at Rs. 1,68,38,720/- (Rupees One Crore Sixty Eight Lakhs Thirty Eight Thousand Seven Hundred and Twenty Only) in terms of Section 113(i) of 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) I impose a penalty of Rs. 16,83,872/- (Rupees Sixteen Lakhs Eighty Three Thousand Eight Hundred and Seventy Two Only), on M/s Maruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions of section 33 or section 34; (g) any 1*** goods loaded or attempted to be loaded on any conveyance, or water-borne, or attempted to be water-borne for being loaded on any vessel, the eventual destination of which is a place outside India, without the permission of the proper officer; (h) any 1*** goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77; (i) any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77; (ii) any goods entered for exportation under claim f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 against such order as on that date, the option under said sub-section may be exercised within a period of one hundred and twenty days from the date on which such assent is received." 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." 15. Section 126, sub-section (1) of the Customs Act, clearly provides that when any goods are confiscated under the Act, such goods shall thereupon vest in the Central Government and the sub-section (2) provides that Officer adjudging confiscation shall take and hold possession of the confis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 repetition, we may note that the demand notices issued by the respondent are plainly in the teeth of Section 14 of the IBC as they were issued after the initiation of the CIRP proceedings. Moratorium under Section 14 of the IBC was imposed when insolvency proceedings were initiated on 1-8-2017 [Icici Bank Ltd. v. ABG Shipyard Ltd., 2017 SCC OnLine NCLT 554] . The first notice sent by the respondent authority was on 29-3-2019. Further, when insolvency resolution failed and the liquidation process began, NCLT passed an order on 25-4-2019 [Sunil Kumar Jain v. Sundaresh Bhatt, 2019 SCC OnLine NCLT 9931] imposing a moratorium under Section 33(5) of the IBC. It is only after this order that the respondent issued a notice under Section 72 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues/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 CIRP on 01.08.2017. The above judgment of Hon'ble Supreme Court, in no manner supports the submission of learned Counsel for the Respondent. 21. The next judgment relied by the learned Counsel for the Respondent is judgment of the Delhi High Court in MMTC v Surjit Singh Kanda & Ors. - Writ Petition (C) No. 2063/2011. The Hon'ble Delhi High Court in the said case had occasion to examine Sections 125 and 126 of the Customs Act, which empowers the redemption after payment of redemption fine. The Division Bench of the Hon'ble Delhi High Court took the view that till the period for redemption, the confiscation order would not take effect. In paragraphs 20, 21 and 22 following has been laid down: "20. We repeatedly called upon the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 imported goods (import whereof is not prohibited in law) is done only as a means to recover its dues by the Customs Department. It does not mean that the Department can appropriate the said goods forever, even when the penalty, duty and other charges are paid by the importer. Admittedly, the Customs Department has already recovered its entire customs duty, penalty & interest amounting to Rs.2.27 Crores from the MMTC in respect of the 19 Kgs. of gold which was not utilized by Shri S.S.Kanda for export of jewellery." 22. It is relevant to notice that above Division Bench judgment in MMTC came to be questioned in the full Bench judgment of the Hon'ble Delhi High Court in Gillette India Ltd. v. Commr. of Customs - (2019) SCC On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport 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, sub-section (1) and the option to pay redemption fine and redeeming the goods, is only a benefit given to the Corporate Debtor, which however, shall not arrest the vesting of the goods as contemplated by Section 126, sub-section (1). We, thus, do not accept the submission of learned Counsel for the Respondent in the present case that till the option for payment of redemption fine is not exercised within 120 days, the goods continued to vest in the Corporate Debtor. 26. The learned Counsel for the Respondent also referred to the judgment of this tribunal in Commissioner of Customs(Preventive), West Bengal v Ram Swarup Industries Ltd & Ors. Company Appeal (AT)(Ins.) No. 563 of 2018, which was a case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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