2025 (1) TMI 671 - AT - Central Excise

Recovery of fraudulently availed Cenvat Credit in terms of Rule 14 of CC Rules read with proviso (1) to Section 11A of CEA - Whether approval of a Resolution Plan by the NCLT extinguishes the claims of all creditors, including statutory authorities, and abates ongoing proceedings related to such claims? - HELD THAT - The identical matter has been considered by two coordinate benches of the Tribunal; Mumbai Bench in the case of M/s Jet Airways (India) Limited vs. Commissioner of Service Tax-IV 2023 (5) TMI 767 - CESTAT MUMBAI and Hyderabad Bench in the case of Icomm Tele Ltd. vs. Commissioner of Central Tax, Puducherry 2023 (10) TMI 1344 - CESTAT HYDERABAD . It is pertinent to refer the findings of Mumbai Bench of the Tribunal in the case of M/s Jet Airways (India) Limited which was disposed of vide its order 2023 (5) TMI 767 - CESTAT MUMBAI and it was ordered that the appeals stand abated once the Resolution Plan has been approved by NCLT and the CESTAT has become functus officio in the matters relating to this appeal. Conclusion - Once the Resolution Plan has been approved by the NCLT, thereafter, the present appeal stands abated as the CESTAT has become functus officio in the matter relating to the present appeal. The appeal filed by the appellant is disposed of as abated.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the appeal against the order of the Commissioner (Appeals) regarding the fraudulent availing of Cenvat Credit can proceed when a Resolution Plan has been approved by the NCLT under the Insolvency and Bankruptcy Code, 2016 (IBC).
Whether the approval of a Resolution Plan by the NCLT extinguishes the claims of all creditors, including statutory authorities, and abates ongoing proceedings related to such claims.
Whether the appellant is entitled to a refund of the pre-deposit made during the appeal process once the Resolution Plan is approved.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Continuation of Appeal Post-Resolution Plan Approval

Relevant legal framework and precedents: The legal framework involves the Insolvency and Bankruptcy Code, 2016, particularly Section 31, which deals with the approval of Resolution Plans. The precedent set by the Supreme Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. & Ors is pivotal, establishing that once a Resolution Plan is approved, all claims not part of the plan are extinguished.
Court's interpretation and reasoning: The court interpreted that the approval of the Resolution Plan by the NCLT effectively abates any ongoing appeals related to claims not included in the plan, rendering the tribunal functus officio.
Key evidence and findings: The court considered the Resolution Plan approved by the NCLT and the legal position established by the Supreme Court, which clarified that all claims not included in the Resolution Plan are extinguished.
Application of law to facts: The court applied the established legal principles to the facts of the case, concluding that the appeal stands abated following the approval of the Resolution Plan.
Treatment of competing arguments: The court addressed the department's argument that the appeal should be abated due to the approved Resolution Plan, finding this consistent with the Supreme Court's ruling.
Conclusions: The court concluded that the appeal is abated as the tribunal is functus officio post-Resolution Plan approval.

Issue 2: Entitlement to Refund of Pre-Deposit

Relevant legal framework and precedents: The precedent from the Supreme Court case of Ruchi Soya was considered, which held that claims not part of the Resolution Plan do not survive, and any pre-deposit made should be refunded.
Court's interpretation and reasoning: The court reasoned that since the claims are extinguished, the appellant is entitled to a refund of the pre-deposit made during the appeal process.
Key evidence and findings: The court relied on the Supreme Court's decision in Ruchi Soya, which directed the refund of pre-deposits in similar circumstances.
Application of law to facts: The court applied the principles from Ruchi Soya to determine that the appellant should receive a refund of the pre-deposit.
Treatment of competing arguments: The court did not encounter significant competing arguments against the refund entitlement.
Conclusions: The court concluded that the appellant is entitled to a refund of the pre-deposit following the extinguishment of claims.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Once a resolution plan is duly approved by the Adjudicating Authority under subsection (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders."
Core principles established: The approval of a Resolution Plan by the NCLT extinguishes all claims not included in the plan, and no further proceedings can be initiated or continued concerning those claims.
Final determinations on each issue: The appeal is abated due to the approved Resolution Plan, and the appellant is entitled to a refund of the pre-deposit made during the appeal process.

The judgment underscores the binding nature of NCLT-approved Resolution Plans on all creditors and the consequent abatement of related legal proceedings, reinforcing the finality and comprehensiveness of the insolvency resolution process under the IBC.

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