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JC - Legal Updates - Insolvency and Bankruptcy Code will prevail over Customs Act

Legal Updates

30 Aug 2022

Insolvency and Bankruptcy Code will prevail over Customs Act

Brief Overview:

In the matter of Sundaresh Bhatt, Liquidator of ABG Shipyard Vs. Central Board of Indirect Taxes and Customs (Order dated 26.08.2022, Civil Appeal No. 7667 of 2021), the Apex Court has held that the Insolvency and Bankruptcy Code, 2016 (IBC), would prevail over the Customs Act, 1962, and once moratorium is imposed under the provisions of IBC, the Authority under the Customs Act would have a limited jurisdiction to assess/determine the quantum of customs duty and other levies.

Technical Details:

The noteworthy findings of the Apex Court, were inter alia as under:

(a)   The Customs Act and the IBC act in their own spheres. In case of any conflict, the Code would override the Customs Act.

(b)   Once the moratorium is imposed in terms of Sections 14 or 33(5) of the IBC, the Authority under the Customs Act would have a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The Authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

(c)   After the aforesaid assessment, the Authority would have to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC before the Adjudicating Authority.


(a)   The Authority under the Customs Act can only take steps to determine the tax, interest, fines, or any penalty which is due. However, the Authority cannot enforce a claim for recovery or levy of interest on the tax due during the period of moratorium, in violation of sections 14 or 33(5) of the IBC.

(b)   The interim resolution professional, resolution professional or the liquidator, has an obligation to ensure that assessment is legal, and he has been provided with sufficient power to question any assessment, if he finds the same to be excessive.


For any further information, please contact Mr. Shubhabrata Chakraborti (shubhabrata.chakraborti@jclex.com) or Ms. Jinal Shah (jinal.shah@jclex.com).