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2024 (4) TMI 1211 - AT - Central ExciseAvailment of CENVAT Credit on inputs / capital goods - Abatement of appeal as per Rule 22 of the CESTAT (Procedure) Rules, 1982 - Applicability of Rule 22 of the CESTAT (Procedure) Rules, 1982 in cases where Resolution Plan is approved under the Insolvency and Bankruptcy Code, 2016 - if the appeal abates, any further course of action / direction to be issued with regard to deposits made by the erstwhile appellants under Section 35F of the Central Excise Act, 1944? HELD THAT - As evident from Rule 22 and Rule 41 of the Rules, It is quite clear that the effect of an appeal abating would result in eliminating or nullifying the appeal for a reason unrelated to the merits of the claim/issues raised and agitated in the appeal. Abatement is commonly understood as extinguishing the right of action itself. It further categorizes to state, that the right of prosecution is effectually wiped out and that would equally apply to an action to cease, terminate or come to an end prematurely. Moreover, the effect of the various clauses of the Resolution Plan is to wipe-out and extinguish all sub-judice claims in the matter - In effect, winding up is a reference to the closing down of business operations of a corporate, whereby the assets are sold off, creditors paid and the remaining assets distributed amongst the owners. On the other hand, liquidation is essentially an accounting process by way of which the commercial operations and the existence of the corporate / company concerned are brought to an end. The assets and properties of business are redistributed amongst the various stakeholders. Thus what has essentially transpired in the present appeals is the closure of business operations of the erstwhile appellant viz. BSL and its acquisition and to accord it a fresh lease of life as per the terms of the Resolution Plan (including warding off all accrued debts and liabilities of the erstwhile organization) under a whiff of fresh air under a new corporate entity (M/s. Tata Steel Limited, in the present case). For all practical and legal purposes, the original corporate debtor (BSL) is wound up and ceases to exist from the date of the NCLT order. No statutory returns are being filed, no listing on other statutory boards like stock exchange, banks or other governmental organizations with legal recognition like labour, environment, etc., remains thereafter i.e., with effect from the date of adjudication and passing of the Order under Section 31 of the Code. Scope of the inherent powers contemplated under Rule 41 of the Rules - HELD THAT - Exercise of any powers not expressly conferred by law ceases to exist. The judicial authority is divested acting de hors the powers not expressly vested. There is therefore no doubt that the Tribunal is automatically rendered functus officio upon the characterization of an appeal as abates based on the outcome of the proceedings initiated by the NCLT / NCLAT and the approval accorded in terms of the prescriptions laid down under the Code. In terms of Rule 22 of the CESTAT (Procedure) Rules, functus officio in the matter has been rendered and the present order in the proceedings is merely in the process of conveying the directive of formalized abatement. Refund of pre-deposit - HELD THAT - The order of abatement cannot be construed to mean that the issue involved has been decided in favour of the appellant. The question of refund of pre-deposit is a natural corollary to the successful outcome of the appeal. Provisions of Rule 22 are in the nature of an exception where the issues raised in appeal filed are not required to be arbitrated upon and given a decisive pronouncement. To situations concerning insolvency proceedings, the provision of law available is Rule 22 of the CESTAT (Procedure) Rules, 1982, the scope of which has already been discussed in earlier paragraphs and which thereby have rendered the Tribunal functus officio in the matter. It is thus felt that no such order can be passed by the Tribunal in view of the existing provisions in law. Applicability of Rule 22 of the CESTAT (Procedure) Rules, 1982 in cases where Resolution Plan is approved under the Insolvency and Bankruptcy Code, 2016 - HELD THAT - An identical question regarding recovery or otherwise of the adjudged amount by the Revenue cropped up in the case of Ultratech Cement Nathdwara Cement Limited v. Commissioner of Customs, Jamnagar (Preventive) 2022 (10) TMI 936 - CESTAT AHMEDABAD wherein the very question raised by the learned Sr. Counsel that Rule 22 of The Rules was applicable to a company only when it gets wound up was one of the issues under consideration. It was categorically asserted by the Tribunal that there is no provision under the Customs and Central Excise Act/Rules to give effect to NCLT proceedings. The Tribunal being a creature of the statute, in the absence of any explicit provision, it is handicapped to decide on the same. The Tribunal has consistently held that the appeal abated (once the IRP is appointed and Resolution Plan approved) as per Rule 22 of the CESTAT (Procedure) Rules, 1982 and that is the only relief / Order that could be passed as prescribed under the Rules. Thus, any order passed by the Tribunal beyond the vested powers would ipso facto be non-est in law. Thus, the position as explained with reference to Rule 22 and Rule 41 of the CESTAT (Procedure) Rules, 1982, the observations of the Hon ble Apex Court in the case of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. 2021 (4) TMI 613 - SUPREME COURT , the SOP prescribed by the C.B.I.C. dated 23.05.2022 referred to supra and the Resolution Plan as approved by the NCLT (extracted copy of which has been presented before us by the appellant-company), the present appeals, therefore, abate. With the abatement of the appeals, the Tribunal is rendered functus officio in matters relating to these appeals - the impugned Orders-in-Original (as mentioned in paragraph 1 of this Order) get merged with the order of the NCLT dated 15.05.2018, approving the Resolution Plan. Appeal disposed off.
Issues Involved:
1. Availment and denial of CENVAT Credit on inputs/capital goods. 2. Impact of Corporate Insolvency Resolution Process (CIRP) on pending appeals. 3. Application of Rule 22 of the CESTAT (Procedure) Rules, 1982 regarding abatement of appeals. 4. Refund of pre-deposit in cases where appeals abate due to insolvency proceedings. Detailed Analysis: 1. Availment and Denial of CENVAT Credit: The appeals were filed by the appellant company challenging the denial of CENVAT Credit on inputs and capital goods by the Commissioner through various Orders-in-Original. The Revenue filed cross-appeals where CENVAT Credit was allowed. The Tribunal noted that penalties were waived during the stay petition hearings as the appellant had reversed the CENVAT Credit involved. 2. Impact of CIRP on Pending Appeals: During the pendency of the appeals, insolvency proceedings were initiated against the appellant company under the Insolvency and Bankruptcy Code, 2016, leading to the approval of a Resolution Plan by the NCLT. The Tribunal recognized that the CIRP, culminating in the Resolution Plan, governed the rights and liabilities of the appellant company, effectively altering the legal landscape of the appeals. 3. Application of Rule 22 of the CESTAT (Procedure) Rules, 1982: The Tribunal held that the appeals abated under Rule 22 of the CESTAT (Procedure) Rules, 1982, as no application for continuance was filed by the successor-in-interest post-insolvency proceedings. Rule 22 stipulates that proceedings abate unless continued by a successor or legal representative. The Tribunal emphasized that the appeals ceased to exist, having been rendered infructuous due to the insolvency proceedings and the approved Resolution Plan. 4. Refund of Pre-deposit: The appellant sought a refund of the pre-deposit made during the appeal process, arguing it was a security deposit, not a tax or duty. The Tribunal, however, found itself functus officio, unable to issue directions for refund post-abatement of the appeals. It referred to the Supreme Court's decision in Ruchi Soya Industries Ltd. v. Union of India, which directed refund in a different context, but distinguished the present case due to the statutory abatement under Rule 22. The Tribunal concluded that the appeals abated with the approval of the Resolution Plan, and it had no jurisdiction to order a refund of the pre-deposit. The Tribunal's role was limited to acknowledging the abatement, and any further claims, including the refund of pre-deposit, were outside its purview due to the statutory framework governing insolvency proceedings.
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