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2025 (4) TMI 1109 - AT - Central ExciseClandestine removal - seeking demand of duty on the clearances of the containers without payment of Central Excise duty for the periods from April 2014 to March 2015 and January 2015 to September 2015 - continuation of recovery proceedings or demands against the corporate debtor for dues not included in the approved Resolution Plan after the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) - HELD THAT - The Supreme court in the case of Ghanashyam Mishra Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. 2021 (4) TMI 613 - SUPREME COURT has held that after the approval of the resolution plan by the NCLT a creditor including the Central Government cannot recover any dues from the corporate debtor which are not a part of the resolution plan approved by the NCLT and the debt shall stand extinguished and no such proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority NCLT grants its approval under Section 31 could be continued. It is not ascertainable whether the Department has registered its claim with the Liquidator as above. However now no further proceedings can survive in this appeal. As the NCLT Chennai has already accorded its order for Liquidation of approval of the Resolution Plan in respect of the appellant vide its order dated 27.06.2019 and as application as per Rule 22 has been made by the Official Liquidator appointed by the NCLT for continuance of the appeal the appeal should abate. As such the appeal gets abated in terms of Rule 22 of the CESTAT (Procedure) Rules 1982 and also gets dismissed being infructuous. Conclusion - i) The excise duty demands confirmed by lower authorities cannot be enforced post-Resolution Plan approval. ii) No further proceedings for recovery of dues not included in the Resolution Plan can be initiated or continued against the corporate debtor. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in these appeals are: (a) Whether the demand of Central Excise duty on inputs cleared without payment of duty from a 100% Export Oriented Unit (EOU) is sustainable for the disputed periods, given the exemption under Notification No. 22/2003-CE dated 31.03.2003; (b) Whether, after the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC 2016), the Department (Central Government) can continue recovery proceedings or demands against the corporate debtor for dues not included in the approved Resolution Plan; (c) The applicability and effect of the Supreme Court ruling in Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. on the continuation of recovery proceedings post-approval of a Resolution Plan; (d) The procedural consequence under Rule 22 of the Customs, Excise, Service Tax Appellate Tribunal (Procedure) Rules, 1982, regarding the continuance or abatement of appeals where the appellant company is under liquidation or insolvency proceedings; (e) Whether the appeals should continue or be dismissed/abated in light of the Resolution Plan approval and liquidation proceedings. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Demand of Central Excise Duty on Inputs Cleared Without Payment of Duty Relevant Legal Framework and Precedents: The appellants, being a 100% EOU, were entitled to procure inputs exempted from excise duty under Notification No. 22/2003-CE dated 31.03.2003. The Show Cause Notices alleged duty evasion on clearances of containers without payment of duty for the periods April 2014 to March 2015 and January 2015 to September 2015. Court's Interpretation and Reasoning: The Tribunal noted the factual matrix that the appellants were EOUs and were entitled to exemption on inputs. However, the demand was confirmed by the Commissioner of Central Excise and upheld by the Commissioner (Appeals), leading to the present appeals. The Tribunal did not delve into the substantive merits of the duty demand, as subsequent developments rendered the issue moot. Key Evidence and Findings: The original orders confirmed duty demands of Rs. 8,383 and Rs. 61,146 respectively for the two periods. These demands were challenged in the appeals. Application of Law to Facts: The Tribunal acknowledged the exemption but deferred substantive adjudication due to the insolvency resolution proceedings and the Supreme Court ruling. Treatment of Competing Arguments: The appellants sought closure of appeals based on the Resolution Plan approval, while the Department confirmed the same but did not contest the closure. Conclusions: The Tribunal did not proceed to decide on the excise duty demand merits, as the subsequent legal developments superseded this issue. Issue (b) and (c): Effect of NCLT-Approved Resolution Plan on Recovery Proceedings Relevant Legal Framework and Precedents: The Insolvency and Bankruptcy Code, 2016 governs Corporate Insolvency Resolution Proceedings. The Supreme Court ruling in Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. clarified that once a Resolution Plan is approved by the NCLT under Section 31, all claims not included in the plan stand extinguished and no recovery proceedings can be initiated or continued against the corporate debtor for such claims. Court's Interpretation and Reasoning: The Tribunal relied heavily on the Supreme Court's pronouncement, particularly paragraph 95, which states: "(i) That 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. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;" The Tribunal noted that the Resolution Plan was approved by the NCLT, Chennai on 27.06.2019, and that no evidence was placed on record to show that the Department had registered its claim with the Resolution Professional or Liquidator as required under IBC 2016. Key Evidence and Findings: The Tribunal examined the Final Orders of the Tribunal dated 20.02.2025 and 15.02.2024, which confirmed the insolvency proceedings and approval of the Resolution Plan. The Department's Authorized Representative confirmed the NCLT's approval of the plan. Application of Law to Facts: Since the Resolution Plan was approved and there was no indication that the Department's claims were included therein, the Tribunal held that the demands and recovery proceedings for the disputed periods stood extinguished by operation of law. Treatment of Competing Arguments: The Department did not dispute the Resolution Plan approval or the binding effect of the Supreme Court ruling but did not clarify if claims were registered. The appellants urged closure of appeals based on the extinguishment of claims. Conclusions: The Tribunal concluded that no further proceedings could survive against the appellants for the disputed duty demands post-approval of the Resolution Plan. Issue (d): Applicability of Rule 22 of the CESTAT (Procedure) Rules, 1982 Relevant Legal Framework: Rule 22 provides that if an appellant company is adjudicated insolvent or wound up, the appeal shall abate unless an application for continuance is made by the successor-in-interest, executor, administrator, liquidator, or other legal representative within 60 days of the event. Court's Interpretation and Reasoning: The Tribunal observed that the NCLT had ordered liquidation and approved the Resolution Plan. The Official Liquidator appointed by the NCLT had made the requisite application for continuance of the appeals. Key Evidence and Findings: The Tribunal noted the application made by the Official Liquidator and that the appeals related to periods prior to the insolvency resolution. Application of Law to Facts: Despite the application for continuance, the Tribunal found that the appeals were rendered infructuous due to the extinguishment of claims by the Resolution Plan approval. Treatment of Competing Arguments: No contrary submissions were made on this procedural aspect. Conclusions: The Tribunal held that the appeals abate under Rule 22 and are dismissed as infructuous. Issue (e): Final Disposition of Appeals The Tribunal, after considering the above issues, concluded that the appeals cannot be entertained further since the claims for excise duty were extinguished by the NCLT-approved Resolution Plan under IBC 2016 and the Supreme Court ruling. Furthermore, the appeals abate under Rule 22 of the CESTAT Procedure Rules due to insolvency and liquidation proceedings. 3. SIGNIFICANT HOLDINGS "That 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. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan." Core principles established include:
Final determinations:
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