IBC prevails over Customs Act, says Supreme Court

29 Aug 2022 , 08:00 AM

On Friday, the Supreme Court ruled that the Insolvency and Bankruptcy Code (IBC) will take precedence over the Customs Act insofar as once moratorium proceedings under the Code begin, the customs authority lacks the right to begin any recovery operations for dues against the corporate debtor.

The highest court also ruled that once the corporate debtor has begun the liquidation process, the customs authorities cannot claim title to the commodities or issue a notice to sell them in accordance with the Customs Act.

An order of the National Company Law Appellate Tribunal (NCLAT) that had allowed the appeal of the Central Board of Indirect Taxes and Customs (CBIT-C) against the decision of the NCLT directing the release of certain goods residing in the Customs Bonded Warehouses without payment of customs duty and other levies was reversed by a bench consisting of Chief Justice NV Ramana, Justices JK Maheshwari, and Hima Kohli.

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