Customs Department can’t sell assets of ‘bankrupt companies’ to recoup dues: Supreme Court

NEW DELHI: In a key decision, the Role of the Supreme Court Friday mentioned that after the initiation of proceedings under the Insolvency Code and Chapter (IBC) against an importing or exporting company, the customs divisional authorities may not sell items of this business for the making of dues.
A bench of Chief Justice NV Ramana and Justices J Ok Maheshwari and Hima Kohli canceled one NCLAT Order allowing customs authorities to dispose of products from their warehouse belonging to an organization, ABG Shipyard, to understand the rights referring to customs liability on imported objects.
Writing the judgement, the CJI mentioned: “The IPC would prevail over Customs law, insofar as, after the imposition of a moratorium by means of Articles 14 or 33 (5) of the IPC, as the case could also l However, the defendant authority only has a limited competence to assess/decide on the amount of customs liability and the various levies. The customs authority does not have the power to bring about the reinstatement of duties via sale/confiscation as provided in the Customs Act. »
Allowing the appeal filed by the liquidator of ABG Shipyard against the NCLAT judgement, the bench said: “The defendant does not have the power to bring about the restitution of the rights by sale/forfeiture, as provided for in the law on Customs.”
He mentioned that the customs authorities could assess the value of the products and the related customs liability and “submit their claims (regarding customs duties/operating debts) according to the established process, in strict compliance with the deadlines prescribed by the law. ‘IBC, earlier than the supervisory authority. In any case, the IRP/RP/liquidator can immediately secure the shipments from the customs authority for appropriate processing, through the IBC. Accordingly, we allow the attraction and set aside the contested NCLAT order and judgment.”

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