Published on: 03 September 2023 at 11:39 IST
Court: Supreme Court
Citation: IDBI V. Central Excise & Customs (2023)
Honourable Supreme Court of India has held that the Customs Duty dues payment holds a higher rank in hierarchy of the creditors from the recovery from the defunct company by the virtue of Section 142A of the Customs Act, 1962. It is held that the Customs Duty will be given preference to the recovery being made under Recovery of Debts Due to Banks and the Financial Institutions Act, 1993, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016.
29. Section 142A of the Customs Act was inserted by Act 8 of 2011 with effect from 8th April 2011. It does not apply to the present litigation. Section 142A of the Customs Act protects and ensures that the dues under the Customs Act do not, in any way, affect the rights of third parties under Section 529A of the Companies Act or rights of the parties as per provisions of the Recovery of Debts Due to Banks and the Financial Institutions Act, 1993, the Securitisation and Reconstruction of Financial Assets and the Enforcement of Security Interest Act, 200238 and the IBC. Read in this manner, it is clear to us 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.
Drafted By Abhijit Mishra
