Delhi High Court
Commissioner Of Customs vs Official Liquidator on 27 September, 2017
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 25th September, 2017
Pronounced on : 27th September2017
+ CO.A(SB) 36/2014
COMMISSIONER OF CUSTOMS
..... Appellant
Through : Mr.Amit Bansal and Mr.Akhil
Kulshreshtha, Advs.
versus
OFFICIAL LIQUIDATOR
..... Respondent
Through : Mr.D.Bhattacharya, Adv. for OL
Mr.Anand M.Mishra, Adv. for ex-
management
CORAM:
HON'BLE MR. JUSTICE YOGESH KHANNA
YOGESH KHANNA, J.
1. This appeal is against an order dated 23rd May, 2014 passed
by the Official Liquidator whereby the claim of the customs to an
extent of Rs.1,46,06,654/- against the respondent company in
liquidation was rejected by the Official Liquidator on the ground
that the order dated 10.05.2011 was passed by the custom
authorities without informing the Official Liquidator of the
proceedings pending before it despite the fact that winding up
order was passed in this case on 18.08.2008.
2. The claim of the Customs authorities relate to payment of
the custom duty of Rs.52.00 Lac along with simple interest @ 15%
payable by the respondent company in liquidation from the date of
the import till the actual payment, since it had not filed any
evidence of fulfilling its export obligations. The penalty of Rs.1.00
Lac was also levied upon the respondent company. This order of
the Commissioner Customs was served by speed post at the
registered office of the respondent company at S-61, Greater
Kailash-II, New Delhi, which on 10.05.2011 admittedly was in
possession of the Official Liquidator and hence the Official
Liquidator cannot allege that the custom authorities did not inform
the Official Liquidator of such duty/penalty levied upon the
respondent company. It is further alleged the custom authorities
were never in the know of the respondent company having gone in
liquidation.
3. It is further alleged by learned counsel for customs that they
had made a claim before the Official Liquidator and the Official
Liquidator vide its letter No.3773 dated 04.05.2011 had informed
the office of the Commissioner of Customs as under:-
"Sir,
With reference to your letter dated 26-04-2011
address to M/s Attar filte Ltd S-61, Greater Kailash
Part-II New Delhi-48 in this connection I am to state
that M/s Attar Filte Ltd was ordered to be wound up
by the Hon‟ble High Court of Delhi vide its order
dated 18/08/2008 and the Official Liquidator attached
to this Hon‟ble Court has been appointed as its
Provisional Liquidator with direction to take charge
of assets, records and books of accounts of the
respondent company.
The official liquidator has no assets of the Company
(in liqn) till date. No claim has been invited by this
office, if you have any due against the Company, you
can file the Claim in Form No 66 of the Companies
Act, 1956, as and when the claim will be invite by this
office through newspaper.
Further I am to inform that the ex-director of the
Company Sh Vicky Jain has not filed the Statement of
Affairs of the Company (in liqn) till date. The
Liquidation proceeding are going on against the Ex-
director of the Company (in liqn). The next date of
hearing of this case 22-09-2011 before the Hon 'ble
High Court of Delhi.
(SANJAY YADAV)
DY. OFFICIAL L.IQUIDATOR
DELHI HIGH COURT"
4. The Official Liquidator also wrote a letter No.3720 dated
07.12.2013 to the office of Commissioner of Customs and it reads
as under :
"Sir
With reference to your claim in form No 66 filed on
22-07-2013 to this office I am to say that, on
examination of your claim it is observed that there is
no supporting documents pertaining to your claim.
You are therefore requested to provide the following
documents at the earliest.
1 Copy of detailed computation of your
claim as mentioned in your affidavit with
proof of debt along with break up
(Including of the duty and penalties
amount)
2 Certified copy of the order wherein
penalties amounting of Rs 1,00000/- are
levied as mentioned in your form No 66.
Further to say that in case no response/reply received
within 14 days from date of receipt of the letter your
claim shall be treated as rejected.
Yours faithfully
DY.OFFICIAL LIQUIDATOR
DELHI HIGH COURT"
5. Thereafter the office of the Commissioner of Customs wrote
to the Official Liquidator its letter No.23506 dated 26.12.2013 as
under :
"Sir,
Subject: In the matter of M/s Attar Filte Ltd. (In
Liqn.) in CP No. 216/07- Reg;
Please refer to your office reference No.
CO.LIQN/TC-III/3720 dated 17.12.2013 on the
above subject.
As desired detailed computation chart of interest as
on date with break up (including of the duty and
penalties amount) and certified copies of the
Adjudication Order wherein penalties and Duty
amount levied/confirmed are mentioned is enclosed
herewith for information please.
Further, your kind attention is invited to the claim of
Customs Department in this case for
Rs.1,46,06,654/- (Duty Rs.52,00,000/- + Interest of
Rs.93,06,654/- &. Penalty of Rs. 1,00,000/-)
calculated upto 10.07.2013) filed by the department.
Further, the interest on the above said duty
calculated as on date i.e. from 07.07.2000 to
31.12.2013 arrived Rs.1,05,30,000/- (@ 15% per
annum as per Adjudication Order). You are,
therefore, requested to consider our claim of
Rs.1,58,30,000/- (Customs Duty Rs.52,00,000/- +
Interest of Rs.1,05,30,000/- & Penalty of Rs.
1,00,000/-).
Yours faithfully,
Deputy Commissioner of Customs (Recovery)"
6. However despite calling for the claim in proper format
supported by documents, strangely enough, the Official Liquidator
rejected the claim on the plea that it was not informed of the
proceedings before the Commissioner of Customs and hence could
not contest the levy of duty/penalty upon the respondent.
7. In S.V.Kondaskar, Official Liquidator and Liquidator of the
Colaba Land & Mills Co. Ltd. V. V.M.Deshpande, Income Tax
Officer, Companies Circle I(8), Bombay and Anr. AIR 1972 SC
878 the Court held as under :-
"9. Turning now to the Income-tax Act, it is
noteworthy that section 148 occurs in Chapter XIV
which beginning with section 139 prescribes the
procedure for assessment and section 147 provides
for assessment or reassessment of income escaping
assessment. This section empowers the Income-tax
Officer concerned subject to the provisions of sections
148 to 153 to assess or asses escaped income While
holding these assessment proceedings the Income-tax
Officer does not, in our view, perform the functions of
a court as contemplated by section 446(2) of the Act
Looking at the legislative history and the scheme of
the Indian Companies Act particularly the language
of section 446 read as whole, it appears to us that the
expression „other legal proceeding‟ in sub-section (1)
and the expression legal proceeding in sub-section (2)
convey the same sense and the proceedings in both
the subsections must be such as can appropriately be
dealt with by the winding-up court. The Income-tax
Act is, in our opinion, a complete code and it is
particularly so with respect to the assessment and
reassessment of income-tax with which alone we are
concerned in the present case The fact that after the
amount of tax payable by an assessee has been
determined or quantified its realization from a
company in liquidation is governed by the Act
because the income-tax payable also being a debt has
to rank pari passu with other debts due from the
company does not mean that the assessment
proceedings for computing the amount of tax must be
held to be such other legal proceedings as can fly be
started or continued with the leave of the liquidation
court u/s 446 of the Act. The liquidation court, in our
opinion cannot perform the functions of Income-tax
Officers while assessing the amount of tax payable by
the assesses even if the assessee be the company
which is being wound up by the court. The orders
made by the Income-tax Officer in the course of
assessment or reassessment proceedings are subject
to appeal to the higher hierarchy under the Income-
tax Act. There are also provisions for refrains to the
High Court and for appeals from the decisions of the
High Court to the Supreme Court and then there are
provisions for revision by the Commissioner of
Income-tax. It would lead to anomalous consequences
if the winding-up court were to be held empowered to
transfer the assessment proceedings to itself and
assess the company to income-tax. The argument on
behalf of the appellant by Shri Desai is that the
winding-up court is empowered in its discretion to
decline to transfer the assessment proceedings in a
given case but the power on the plain language of
section 446 of the Act must be held to vest in that
court to be exercised only if considered expedient We
are not impressed by this argument. The language of
section 446 must be so construed as to eliminate such
starting consequences as investing the winding-up
court with the powers of an Income-tax Officer
conferred on him by the Income-tax Act, because, in
our view, the legislature could not have intended such
a result.
10. The argument that the proceedings for
assessment or reassessment of a company which is
being wound up can only be started or continued with
the leave of the liquidation court is also, on the
scheme both of the Act and of the Income Tax Act,
unacceptable. We have not been shown any principle
on which the liquidation court should be vested with
the power to stop assessment proceedings for
determining the amount of tax payable by the
company which is being wound up. The liquidation
court would have fall power to scrutinize the claim of
the revenue after income-tax has been determined and
its payment demanded from the liquidator. It would
be open to the liquidation court then to decide how
far under the law the amount of income-tax
determined by the department should be accepted as
a lawful liability on the funds of the company in
liquidation At that stage the winding-up court can
fully safeguard the interests of the company and its
creditors under the Act Incidentally, it may be pointed
out that at the bar no English decision was brought to
out notice under which the assessment proceedings
were held to be controlled by the winding-up court
On the view that we have taken, the decisions in the
case of Seth Spinning Mills Ltd (In Liquidation) and
the Mysore span silk Mills Ltd (In Liquidation), do
not seem to lay down the correct rule of law that the
Income-tax Officers must obtain leave of the winding-
up court for commencing or continuing assessment or
reassessment proceedings."
8. Further in Sales Tax Officer, Central Circle, New Delhi V.
Byford Ltd. (1984) 55 CompCas 204 (Delhi) this Court held as
under :
"20. The same here. The recovery proceedings can
be stayed by the company judge. But not the penalty
proceedings. It would be starting to hold that the
powers of the company judge are much wider under
s. 391 than when acting as a winding up court under
s. 446(2). In so far as income-tax and sales tax are
concerned the powers are the same. He has no
jurisdiction over them. Exclusive jurisdiction vests
in the authorities created by the I.T. Act and the
Sales Tax Act. The jurisdiction of the company court
is ousted except when recovery proceedings are
started and those authorities lay their hands upon
the estate of the company."
9. Since the facts of the present case, are similar to the facts of
the cases cited above, hence once after inviting claim of the custom
authority; asking it to file it in proper format with documents, the
Official Liquidator should not have rejected it on grounds that it
ought to have been given an opportunity to contest the custom
duty/penalty levied upon the respondent company by Custom
authorities; the duty/penalty having been levied upon the
respondent company under the provisions of Section 117 of the
Customs Act, 1962 by following a procedure established by law.
Hence, the impugned order dated 23.05.2014 passed by the
Official Liquidator needs to be set aside and the claim filed by the
Custom authorities need to be considered and examined as per law
by the Official Liquidator.
10. Directions are issued accordingly and the appeal is disposed
of in terms of above.
YOGESH KHANNA, J
SEPTEMBER 27, 2017
VLD
