The Delhi High Court clarified that a customs duty claim arising before the commencement of a corporate insolvency process, which was not submitted during the CIRP, is extinguished once the resolution plan is approved under Section 31 of the IBC. The court quashed the customs authority’s order imposing differential duty, interest and penalty on Jaiprakash Associates Limited.
Background & Facts
The Dispute
The petitioner, Jaiprakash Associates Limited, imported Digital and Network Video Recorders on 15.09.2023 (Bill of Entry No.7856824) with an assessable value of Rs.45,40,569. The goods were initially classified under CTH 85219090 and the petitioner availed a basic customs duty of 10% under Serial No.499A of CBIC Notification No.50/2017-Customs dated 30.06.2017.
Key Facts
- 15.09.2023: Import of DVRs; differential duty later claimed.
- 03.06.2024: NCLT admitted petition and CIRP commenced (Insolvency Commencement Date).
- 06.06.2024: Public announcement inviting claims issued.
- 17.06.2024: Last date for claim submission under Regulation 12(1) of the CIRP Regulations.
- 24.07.2025: Pre-Notice Consultation letter issued by Additional Commissioner of Customs.
- 10.09.2025: Show Cause Notice No.27/2025-26 issued, proposing rejection of benefit, recovery of differential duty of Rs.5,89,366, interest under Section 28AA and penalty under Section 117.
- 29.10.2025, 19.11.2025, 11.02.2026, 19.03.2026, 19.05.2026: Personal hearings scheduled.
- 31.10.2025: Committee of Creditors approved the Resolution Plan submitted by Adani Enterprises Ltd.
- 17.03.2026: NCLT approved the Resolution Plan (order dated 17.03.2026).
- 18.05.2026: Petitioner submitted written submissions to the Additional Commissioner, enclosing the NCLT order and invoking Clause 4.12.1 of the approved plan.
- 02.06.2026: Impugned Order-in-Original No.23/2026-27/ACC Import/2789 dated, confirming differential duty, interest and a penalty of Rs.4,00,000.
- 02.09.2026: Judgment pronounced by the Delhi High Court.
Procedural History
- 15.09.2023 - Import transaction completed.
- 03.06.2024 - CIRP commenced before NCLT, Allahabad Bench.
- 06.06.2024 - Public announcement issued inviting claims.
- 24.07.2025 - Pre-Notice Consultation letter issued by Customs.
- 10.09.2025 - Show Cause Notice issued.
- 31.10.2025 - CoC approved the Resolution Plan.
- 17.03.2026 - NCLT approved the Resolution Plan.
- 02.06.2026 - Additional Commissioner issued the Impugned Order.
- 02.09.2026 - Writ Petition filed under Article 226; judgment delivered.
Relief Sought
The petitioner sought quashing of the Order-in-Original dated 02.06.2026, setting aside the differential customs duty, interest and penalty, and a declaration that the pre-CIRP customs liability could not be enforced after approval of the resolution plan.
The Legal Issue
Whether a customs duty claim arising from a transaction that occurred before the Insolvency Commencement Date, but which was not submitted as a claim during the CIRP, can be adjudicated and enforced after the resolution plan has been approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016.
Arguments Presented
For the Petitioner
- The import transaction predates the CIRP; the Customs Department failed to file a claim within the statutory window, rendering the claim extinguished under Clause 4.12.1 of the approved Resolution Plan.
- Section 3(6) of the IBC defines a “claim” broadly to include any right to payment, irrespective of adjudication; therefore the underlying customs liability is a claim within the meaning of the Code.
- Section 31(1) makes the approved plan binding on the corporate debtor and on governmental authorities, including the Central Government, thereby freezing all claims not incorporated in the plan.
- The 2019 amendment to Section 31 is declaratory and retrospective; it gives effect to the Supreme Court’s reasoning in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. (2021) 9 SCC 657.
- Non-obstante clause in Section 238 of the IBC overrides any inconsistent provision of the Customs Act.
For the Respondent
- The Customs Authority retains the power to determine the quantum of duty and to levy interest and penalty, even during the pendency of a CIRP, as held in ABG Shipyard Ltd. v. Central Board of Indirect Taxes & Customs (2023) 1 SCC 472.
- Determination of duty does not amount to recovery; the statutory remedy under the Customs Act remains available.
- The claim was not part of the resolution plan; therefore the authority can continue proceedings.
- Reliance on M/s Rajesh Projects India Ltd. v. Commissioner, Central Tax (2024) DHC 2647/2023, which permits assessment during CIRP.
The Court's Analysis
The Court began by interpreting the statutory scheme of the IBC. It noted that the Code’s purpose is to achieve a time-bound resolution of the corporate debtor as a going concern, and that the definition of “claim” in Section 3(6) is deliberately wide, encompassing any right to payment whether adjudicated or not. Consequently, a pre-CIRP customs liability qualifies as a claim under the IBC.
"The expression ‘claim’ assumes central significance in this scheme. Section 3(6) of the IBC defines ‘claim’ as a right to payment, whether or not such right is reduced to judgment, fixed, disputed, legal or equitable…"
The Court emphasized that the public announcement under Regulation 6 of the CIRP Regulations satisfies the statutory requirement of notifying creditors. The responsibility to file a claim lies with the creditor; the corporate debtor is not required to individually inform each statutory authority. The Customs Department’s failure to submit its claim within the prescribed period meant that the claim was excluded from the information memorandum and, consequently, from the resolution plan.
Clause 4.12.1 of the approved Resolution Plan expressly provides that any pre-CIRP claim not submitted to the resolution professional stands extinguished. The Court held that this contractual provision, read with Section 31(1) of the IBC, renders the claim unenforceable after the plan’s approval.
The Court then addressed the respondents’ contention that the Customs Authority could continue to enforce the liability. It distinguished between the power to determine a duty (which remains) and the power to enforce recovery. Post-approval of the plan, Section 31(1) gives a binding effect to the plan on all stakeholders, including governmental authorities. The non-obstante clause in Section 238 makes the IBC prevail over any inconsistent provision of the Customs Act. Hence, while the authority may assess the duty, it cannot proceed with recovery or impose penalties for a claim that has been extinguished by the approved plan.
The Court also relied on Supreme Court precedents, particularly Ghanashyam Mishra (2021) 9 SCC 657, which clarified that the 2019 amendment to Section 31 is declaratory and retrospective, and on Essar Steel India Ltd. v. Satish Kumar Gupta (2020) 8 SCC 531, which affirmed that the plan freezes all claims not incorporated therein.
In sum, the Court concluded that the customs liability, being a pre-CIRP claim not filed during the CIRP, could not be adjudicated or enforced after the resolution plan’s approval.
The Verdict
The writ petition is allowed. The Order-in-Original dated 02.06.2026 is quashed and set aside. The differential customs duty of Rs.5,89,366, the interest under Section 28AA and the penalty of Rs.4,00,000 imposed by the Additional Commissioner are nullified. No costs are awarded. All pending applications in the writ petition are disposed of.
What This Means For Similar Cases
Pre-CIRP Claims Must Be Submitted During CIRP
- Creditors, including statutory authorities, must file their claims within the period prescribed by the public announcement and the CIRP Regulations.
- Failure to do so results in automatic extinguishment of the claim once the resolution plan is approved.
Section 31 Binds Government Authorities
- The approved resolution plan is binding on the Central Government, State Governments and local authorities.
- Any claim not incorporated in the plan cannot be enforced, even if the authority later determines the quantum of duty.
Enforcement vs Determination Distinction
- Authorities may still determine the amount of duty, but enforcement (recovery, interest, penalty) is barred for extinguished claims.
- Section 238 of the IBC overrides conflicting provisions of the Customs Act, ensuring the supremacy of the insolvency regime.
Practical Takeaways for Practitioners
- Advise clients to monitor public announcements during CIRP and file claims promptly.
- When drafting resolution plans, include explicit clauses (e.g., Clause 4.12.1) to extinguish unfiled pre-CIRP claims.
- Anticipate that post-approval enforcement actions by tax or customs authorities will likely be stayed.
- Cite Ghanashyam Mishra and the present judgment when resisting post-approval recovery proceedings.
