New Delhi : When the recovery of dues from an insolvent company by its creditors is stayed, the Customs authorities do not have the power to initiate recovery of dues under the Customs Act, as per an order of the Supreme Court .
The top court last Friday ruled in a case between the liquidator of ABG Shipyard and the Central Board of Indirect Taxes and Customs that the Insolvency and Bankruptcy Code (IBC) shall prevail over the Customs Act to the extent that the moratorium is imposed on the creditor. it happens. The Customs Authority has only a limited jurisdiction to assess or determine the quantum of recovery action, customs duty and other levies.
The Supreme Court in the order held that the Customs Authority does not have the power to initiate recovery of arrears by way of sale or confiscation, as provided under the Customs Act.
The order said that after such assessment, the customs authority shall submit its claims relating to customs arrears/operational debt as per the prescribed procedure, in strict compliance with the time period prescribed under IBC.
The order states that in any case, the insolvency resolution professional or the liquidator, in the context of the IBC, may immediately obtain goods from the respondent authority, so as to be dealt with appropriately.
The apex court judgment clarifies that the tax authority has to follow the IBC procedures for recovery of any tax when the lenders and resolution professionals examine the feasibility of the scheme to save the company from its financial stress.
The ruling states that the authorities can only take steps to determine the tax, interest, penalty or any penalty and cannot enforce the claim for recovery or levy of interest on tax during the period of the moratorium.
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