INDUSTRIAL DEVELOPMENT BANK OF INDIA (THROUGH STRESSED ASSETS STABILIZATION FUND CONSTITUTED BY THE GOVERNMENT OF INDIA) [APPELLANT] Vs. SUPERINTENDENT OF CENTRAL EXCISE AND CUSTOMS AND OTHERS [RESPONDENTS]
CIVIL APPEAL NO. 2568 OF 2013
(2JB, SANJIV KHANNA and SUDHANSHU DHULIA JJ., delivered by SANJIV KHANNA, J.)
Facts: The present appeal by Industrial Development Bank of India takes exception to the judgment dated 26th August 2008 passed by the full bench of the Andhra Pradesh High Court in Original Side Appeal No. 1 of 2005 , whereby it has been held that notwithstanding the winding up order dated 1st December 2003 in the case of M/s. Sri Vishnupriya Industries Limited , and the provisions of Section 529A and 530 of the Companies Act, 1956 , the customs authorities have the first right to sell the imported goods under the Customs Act, 1962 and adjust the sale proceeds towards payment of customs duty.
Issue: Whether the Customs Act creates a first charge for payment of the customs dues?
Held: The court allowed the present appeal and set aside the impugned judgment dated 26th August 2008 in Original Side Appeal No. 1 of 2005, and thereby directed the sale proceeds to be deposited in the Court and converted into fixed deposit receipts, along with the interest accrued thereon, to be paid to the Official Liquidator to be distributed in accordance with the provisions of Sections 529A and 530 of the Companies Act. It was held that, “the debt ‘due and payable’, when it falls within the four corners of clause (a) to Section 530(1) of the Companies Act, would be treated as preferential payment, but it would not override and be given preference over the payments of overriding preferential creditors covered under Section 529A of the Companies Act.”
The court observed that “the provision of Section 142A of the Customs Act, insofar as it protects the rights of overriding preferential creditors governed and covered by Section 529A of the Companies Act, is clarificatory and declaratory in nature, and does not lay down a new dictum or confer any new right as far as the present case is concerned. However, the enactment of section 142A of the Customs Act does confer or create a first charge on the dues ‘payable’ under the Customs Act, notwithstanding provisions under any Central Act, but not in cases covered under Section 529A of the Companies Act, RDDBFI Act, SARFAESI Act and the IBC. Section 142A of the Customs Act, post its enactment, would dilute the impact of Section 530 of the Companies Act, which had restricted preferential treatment to government taxes ‘due and payable’ limited to twelve months prior to the ‘relevant date’, without preferential right for taxes that had become ‘due and payable’ in the earlier period.”
