IBC Section 246: Amendments of Act 1 of 1944

Section 246 of Insolvency and Bankruptcy Code, 2016: Amendments of Act 1 of 1944

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

The Central Excise Act, 1944 shall be amended in the manner specified in the Second Schedule.

Legal Commentary & Landmark Judgments: Section 246

Section 246 amends the Central Excise Act, 1944 to subordinate indirect tax recovery dues to the priority distribution waterfall under the Code.

Subordination of Excise Dues: Amends Act 1 of 1944 in the manner specified in the Second Schedule to the Code.
Primacy of Code Waterfall: Ensures that statutory recovery rights of excise authorities are made subject to the insolvency resolution and liquidation priority of the Code.
Elimination of Crown Debt Priority: Subordinates historical central excise claims to the rights of secured financial creditors and workmen.

Key Landmark Precedents:

Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (2023) 10 SCC 60: The Supreme Court affirmed that consequential amendments to tax statutes like Section 246 establish the legislative intent to subordinate government tax dues to the Code's waterfall.
Ghanashyam Mishra & Sons v. Edelweiss Asset Reconstruction (2021) 9 SCC 657: Held that indirect tax departments cannot claim first charge over corporate debtor assets once resolution is underway.

Courtroom Practice & Strategic Litigation Guidance:

Excise recovery officers attempting to attach assets of a corporate debtor during CIRP must be reminded of Section 246 and Section 238; any continuing attachment constitutes contempt of tribunal orders.