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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 ..... 02.2018 for a total import quantity of 27,169 MT. Out of the aforesaid quantity 12,497.802 MT has been paid for and release secured by R2 from the petitioner. Out of the remaining, which is 14,671.698 metric tonnes, R2 had applied for a licence under the Advance Authorization Scheme (in short 'AA scheme'), and was granted licence dated 17.07.2017. 3. In the meanwhile, an application had been filed by a creditor before the National Company Law Tribunal (NCLT) and by order dated 07.06.2019, Corporate Insolvency Resolution Process (CIRP) was initiated as against R2. A resolution professional was appointed and an order of liquidation has been passed on 02.05.2022, liquidating R2 and sanctioning the scheme proposed by R3 (in short 'R3 or 'scheme proponent'). 4. As petitioner claims title to the goods, representations came to be filed before the Customs Department/in short hereinafter 'R1' seeking re-export of the goods. Since the representations were not been disposed in a timely fashion, WP.No.14441 of 2000 came to be filed seeking directions from this Court to permit re-export of sugar. The prayer was limited to 11,899.21 metric tonnes as the difference of 2542.5 metric tonnes relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port at clause (e) of the operative portion of the order, the officer permits the noticee, that is, R2, to redeem the confiscated goods on payment of redemption fine as a pre-condition to re-export. Thus, and in effect re-export has been permitted on payment of duty and penalty, denying the benefit of Advance Authorisation Scheme. 12. Through all this and even prior to 09.07.2021, being the date of order in W.P.No.11441 of 2020, R1 was clearly aware of the proceedings before the NCLT as against R2. The defence of the resolution professional/liquidator, who appears on behalf of R2 in the present proceedings, is that R1 was well aware that R2 was before the NCLT, despite which, no claim was filed before the NCLT. It was liquidated as early as on 02.05.2022 and hence the impugned order is wholly unsustainable in law. 13. R1, in paragraph 40 in the counter to the present writ petition has sought to extend the coverage of the impugned order to R3 as well. R3 was impleaded on 21.02.2023, and had, prior thereto, filed a writ petition in W.P.No.11441 of 2020, on 20.08.2020 seeking a certiorari to call for and quash order dated 30.08.2022. The main arguments raised are that (i) R3 has com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consignments and also for the reason that they are themselves before the NCLT undergoing Corporate Insolvency Resolution process. 12. The conclusions of the Bombay High Court at paragraph 11 are to the following effect: 11. We have gone through the impugned Order. We concur with the findings and conclusion of the learned Judges when it is held that the title in the said goods had not passed to the 2nd respondent. In view of the fact that the title in the said goods had not passed to the 2nd respondent, the question of confiscation of the said goods which were exported by the 1st respondent, a foreign party did not arise. The title in the said goods had remained with the foreign exporter and the foreign exporter was entitled to have the said goods re-exported on payment of requisite duty for exportation thereof. The importation of the said goods was made against Advance Licence which was validly subsisting at the time when the said goods arrived at the Port of Bombay. Merely because the said licence was subsequently cancelled for lapses on the part of the 2nd respondent, it cannot be said that the importation of the said four consignments was without a valid and subsisting licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of its grant. Sub-clause (2) says that a licence granted under the Order shall be subject to the conditions specified in Fifth Schedule to the Order. Subclause (3) sets out three other conditions mentioned as (i), (ii), and (iii) which shall attach to every import licence granted under the Order. First of these conditions says that the import licence shall be non-transferable except under the written permission of the Licensing Authority or other Competent Authority. Condition (ii)-which is provision relevant herein-says that the goods for the import of which a licence is granted "shall be the property of the licensee at the time of import and thereafter upto the time of clearance through customs." This condition, however, does not apply to STC, MMTC and other similar institutions entrusted with canalisation of imports. It also does not apply to certain eligible export houses, trading houses and public sector agencies mentioned in the second proviso. Condition (iii) says that the goods for which the import licence is granted shall be new goods unless otherwise mentioned in the licence. Now coming back to Condition (ii), the question is what does it mean and what is the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the importer even in a case where he abandons them, i.e. in a situation where he does not pay for and receive the documents of title. It may be that for such act of abandonment, action may be taken against him for suspension/cancellation of licence. May be, some other proceedings can also be taken against him. But certainly he cannot be treated as the owner of the goods even in such a case. Holding otherwise would place the exporter in a very difficult position; he loses the goods without receiving the payment and his only remedy is to sue the importer for the price of goods and for such damage as he may have suffered. This would not be conducive to international trade. We can well imagine situations where for one or other reason, an importer chooses or fails to pay for and take delivery of the imported goods. He just abandons them. (We may reiterate that we are speaking of a case where the import is not contrary to law). It is only with such a situation that we are concerned in this case and our decision is also confined only to such a situation. Condition (ii) in sub-clause (3) of Clause 5, in our opinion, does not operate to deprive the exporter of his title to said goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orter also by virtue of the contracts entered into by the importer with R2. 19. He draws attention to some clauses under the contract to show that there was a continuing relationship between the parties and consequently a burden to comply with all statutory requirements cast both upon R2 as well as the petitioner. He relies upon Sections 3(30) and 3(31) of the Insolvency and Bankruptcy Code, 2018 (in short '2018 Code'/'IB Code') defining 'secured creditor' and 'security interest' that, according to him, would support their case in full. 20. His argument is that the definition of 'security interest' includes any right created in a secured creditor by virtue of an 'agreement or arrangement securing payment or performance of any obligation of any person'. Thus, on account of the relationship inter se R2, and the Petitioner, the bills of entry and warehousing bond, the liability originally vesting upon R2 would now vest in the petitioner. 21. Reference is made to the decisions in the case of (i) Japan Airlines Company Limited V. Commissioner of Income Tax, New Delhi [(2015 ) 10 SCC 591], (ii)Bank of India V. Ahmedabad Manufacturing and Calico Printing Co. Limited [(1972) 42 Comp Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land' for which rent is to be paid. 26. Their argument was premised on the language deployed in Section 194I dealing with rent and tax deduction thereon and the definition of rent under clause (i) of that provision as per which rent meant 'any payment by whatever name called under any lease, sub-lease, tenancy or any other agreement/arrangement for the use of land or building'. 27. While deciding this question, the Court concurred with the view taken by the Madras High Court in the case of Commissioner of Income Tax v. Singapore Airlines Limited (Tax Case Appeal No.15 of 2006 dated 13.07.2012), wherein this Court had concluded that charges fixed by the Airports Authority of India for landing, parking and take off services would not amount to 'use of land' and no tax deduction need be made thereupon. 28. This judgment is of no assistance to R1, since that statutory provision is completely distinguishable from the provisions of Section 3(31) of the IB Code. Thus, the interpretation thereof would not be applicable to the present case. The purpose of the phrase agreement/arrangement in the definition of the term rent under Section 194I is to determine the scope of payments for use o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise in the present case. 34. The importer/petitioner is an unpaid vendor with no connection whatsoever with the Customs Department. It continues to hold possession of the goods. To state that the Customs Department would have a claim on the petitioner's goods based on violations committed by another party would be stretching the term 'security interest' beyond permissible scope, distorting the concept of security interest under the Code. 35. Faced with this position, R1 then makes an attempt to cement its claim as against R2. The two legal issues that arise in this context are (i) whether the condition imposed under the AA Scheme has been triggered and (ii) if the answer to (i) is in the affirmative, whether R1 is in a position to raise a claim in the subsisting circumstances. 36. As far as the first issue is concerned, it is the case of R2 that no liability stands triggered. The AA is accompanied by a condition sheet and an additional condition sheet that read as follows, respectively: O/o Additional Director General of Foreign Trade 4th Floor, Shastri Bhawan Annexe, 26, Haddows Road, Chennai-600006 CONDITION SHEET Attached to DES Authorisation No: 0410163331 Dated: 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid thereunder. 8. Wherever, the input item list contains Acetic Anhydride, Ephedrine, and Pseudo-ephedrine, the authorisation holder shall be required to obtain an NOC from the Narcotic Commissioner of India, Central Bureau of Narcotic, Gwalior before effecting such imports, a per paragraph 4.08 of HBP 2015-2020. 9. Import of Scraps/Metal Scraps shall be subject to the conditions of the relevant licensing notes under relevant Chapters of ITC(HS) Classification Book. Import of Chemical falling under Montreal Protocol and Schedule I, II and III of the Chemical Weapons Convention shall be subject to the conditions specified thereunder and as appearing in the ITC(HS) classifications. 10. The authorisation holder to comply with the provisions of paragraph 4.10 and paragraph 4.35 of Handbook of Procedures 2015-2020, as amended from time to time, with regard to transfer of any material from one unit of the authorisation holder to any other unit of the authorisation holder included in the IEC or to the supporting manufacturer/jobber. 11. Import and Export of items Prohibited/Restricted/Reserved for State Trading Enterprises shall be governed by the provisions contained in paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illed within 6 months from date of clearance of each consignment by the customs authority. To this, the petitioner points out that the consignments yet await clearance as they are still under bond and the goods are yet to cross the customs frontier. 38. R1 then draws attention to the observation in the impugned order, wherein the officer specifically states that out-of-charge order has been passed on 19.01.2018 for the first 18 bills of entry and on 28.02.2018 for the last bill of entry (see para 9.1(v) under head 'discussion and findings'). 39. Thus, in terms of Appendix 4j of HBP 2015-2020 the officer states that the importer has to fulfill export obligation within six months from date of clearance of export consignment, i.e., 22.07.2018, 21.08.2018 and 27.08.2018. This has not been done and thus, according to R1, the condition for duty exemption has not been satisfied. 40. One question that arose was whether the passing of an out-ofcharge order would tantamount to 'clearance' for the condition under the AA to stand triggered. A note has been circulated by learned Standing Counsel explaining the position in the following terms: 'Under the EDI system, the Bill of entry, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged in Writ Appeals in W.A.Nos.1796 of 2022 etc. batch and the connected Miscellaneous Petitions seeking interim protection have been ordered on 16.08.2022 granting interim stay of the decision for a period of six weeks. 46. The Hon'ble Supreme Court in the case of Ghanashyam Mishra and Sons P. Ltd., Vs. Edelweiss Asset Reconstruction Co. Ltd., [(2021) 9 SCC 657] considered the impact of a resolution plan, and, taking note of the legislative intent of formulation of the resolution plan, held that the plan would be sacrosanct and binding on all stakeholders after it obtains a seal of approval from the adjudicating authority. 47. The ratio of the judgment is to the effect that no surprise claims should be flung on the successful resolution application after the resolution plan is approved by the NCLT. The dominant purpose of the plan is to enable the successful resolution applicant to start with a clean slate without having to deal with any claims that are made after the resolution plan is finalized. 48. The ratio of this judgment would apply across the Board to all stakeholders whether statutory, operational or financial. As held by the Hon'ble Supreme Court and as argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contains Section 48 under which there was a first charge created on the property of a defaulting sales tax assessee. Section 48 of the GVAT Act states 'notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case maybe, such person'. 54. The provision in pari materia with Section 48 of the GVAT Act under the Customs Act, 1962 is Section 142A, extracted below: 142A. Liability under Act to be first charge.- Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assessee or any other person under this Act, shall, save as otherwise provided in section 529A of the Companies Act, 1956 (1 of 1956), the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993 (51 of 1993) and 2 [the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 2002 (54 of 2002) and the Insolvency and Bankruptcy Code, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, on or before the last date mentioned in the public announcement. (2) A person shall prove its claim for debt or dues to him, including interest, if any, as on the liquidation commencement date. 61. Thus, any person who claims to be a stakeholder, financial/ operational/secured/unsecured is liable to submit a claim as this is a precondition/ requisite for any benefit to be obtained by an entity claiming to be a creditor in the proceedings before the NCLT. R1 has missed the bus in entirety. 62. A public announcement is to be issued in Form A as per Regulation 6 of the Insolvency Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and has in this case, been issued on 10.06.2019 in strict compliance with the requirements under the Regulations in English and Vernacular language, published in the Hindu and Dinamalar, Chennai, Thanjavur and Cuddalore District. 63. It puts the public to notice that the NCLT, Division Bench, Chennai has ordered announcement of Corporate Insolvency Resolution Process (CIRP) of R2 on 07.06.2019. It calls upon the creditors of R2 to submit their claims with proof on or before 21.06.2019 to the Interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , one point that niggles in the back of my mind is the consequence of success by the customs department in that appeal. If it were to so succeed and the scheme were to be set aside, the question that would arise is as to who would bear the burden of the duty. 70. Thus, in the interests of a complete resolution of the matter before me, though the sole point urged by the petitioner is its entitlement to re-export without the burden of duty and penalty, I must consider the possibility of success of R1 in the appeal stated to have been filed by it before the NCLAT. 71. The appeal is stated to have been filed in terms of Section 421 of the Companies Act, 2013 (in short '2013 Act') and this is pointed out to get over the argument of the other parties that the appeal is not maintainable as it has been filed beyond the statutory period and in light of the fact that there is no provision for condonation of delay. 72. Section 421, insofar as it is relevant to this issue states thus: 421. Appeal from orders of Tribunal.- (1) Any person aggrieved by an order of the Tribunal may prefer an appeal to the Appellate Tribunal. (2) No appeal shall lie to the Appellate Tribunal from an order m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located. 77. Thus, those appeals relating to those matters adjudicated upon by the NCLT falling under the IB Code would be filed in terms of Section 61 of the Code before the NCLT and those matters heard by the NCLT relatable to the provisions of the Companies Act would be filed in terms of Section 421 of the 2013 Act. 78. All matters adjudicated upon by the NCLT relatable to the 2016 Regulations would be circumscribed by the time limit set out under Section 61 of the Code which is 30 days or 15 days only. Thus, prima facie, the appeal filed by R1 as against the Scheme dated 02.05.2022 is in terms of Section 61 of the Code and not Section 421 of the 2013 Act, and is barred by limitation. I leave this issue at that. 79. R1 also relies upon the decision in Motilal Gupta Karta of Kanta International v. Union of India and others [(1988) 36 E.LT. 44 (Bom.)], wherein a Division Bench of the Bombay High Court upheld confiscation of a consignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arises for decision before me. 85. In ED and F Man Commodities India Pvt. Ltd. v. Union of India (2022 (381) E.L.T. 644 (Guj.)), the Division Bench of the Gujarat High Court considered a prayer for mandamus by an unpaid vendor for a direction to the Customs Authority to extend the period of completion of export obligation in respect of the advance licence obtained by the customs by the assessee/purchaser, arrayed as R5 in that matter, and various other prayers. In that context and in light of the prayer sought, the Bench states as follows: 34. Under the Customs Act, 1962, the person who files a 'bill of entry' under Section 46 of the Act is the importer of the goods covered under the 'bill of entry'. Such 'bill of entry' may be for home consumption (i.e. for clearing the goods from the customs station to any other place in India) or a 'bill of entry' for warehousing (i.e. for depositing the imported goods in a warehouse for a certain period of time). In any case, the person who files the bill of entry is the importer and, therefore, in the present case, the respondent no.5 is the importer of the goods in India. The stance of the respondents, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Air Cargo Complex), Meenambakkam, Chennai, reported in (2012) 281 ELT 522, wherein the importer had refused to clear and take delivery of the goods, and as the cost of the goods had not been paid, the petitioner therein had requested the authorities to permit re- export/reshipment of the goods. In such circumstances, a writ- application was filed before the Madras High Court under Article 226 of the Constitution of India. While disposing of the writ- application, the Court observed as under : "4. The learned counsel appearing on behalf of the petitioner had submitted that the petitioner continues to be the owner of the goods in question, when the importer or the consignee concerned abandons the goods imported on their behalf, as held by the Supreme Court, in Union of India Vs. Sampath Raj Dugar, reported in 1992(58) ELT 163 (SC). 5. It had also been stated that the seller of the goods is deemed to be an `unpaid seller', as per the terms of Section 45 of the Sale Goods Act, 1930, when the whole of the price had not been paid or tendered. Under Section 46 of the said Act it is stated that, notwithstanding the fact that the property in the goods may have passed to the buyer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, it is clear that the petitioner has the right to request the respondents for the necessary permission, to re-ship or to re-export the goods in question. Further, as the third respondent does not have any serious objection for the re-export of the goods in question, the respondents are directed to permit the petitioner to re-export the goods in question, as prayed for by the petitioner, in the present writ petition. However, it is made clear that it is open to the authorities concerned, to pass an appropriate order, with the view to initiate the necessary action against the parties concerned, if it is deemed to be necessary, in respect of the alleged infringement of the relevant provisions of law, if any, as expeditiously as possible, as the petitioner, has been incurring heavy demurrage charges. Further, it is made clear that the respondents are directed to consider the request of the petitioner, for the reshipment and re-export of the goods in question, in view of the above observations made by this Court, in this order, unless there are other legal impediments, for granting such permission, as prayed for by the petitioner. The writ petition is ordered accordingly. No costs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of charges alone. 92. In time, I would still maintain that it is only re-export charges that would be payable by the petitioner and not duty and penalty as computed under the impugned order, for the following reasons: i) It is an admitted position that the petitioner is an unpaid exporter. R2 has, admittedly, not settled the amounts relating to 11,000 MT of sugar. ii) Order dated 30.08.2022 has been passed on R2 post the date of liquidation. In any event, any liability under that order would attach only to R2 and not to the petitioner or R3. iii) R1, ought 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 09.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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