Approval Of Resolution Plan By NCLAT Bars Continuation Of Revenue’s Service Tax Appeal: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, has held that a Service Tax Appellant by the Revenue cannot continue after the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. The Tribunal ruled that such an appeal would stand abatement and would be infructuous.

The dispute has arisen as a result of an Order-in-Original passed by the Commissioner of Central Excise, Puducherry, confirming the demand raised under service tax by the Hindustan National Glass & Industries Ltd for the relevant period. The Revenue, being aggrieved by the adjudication order, has filed an appeal before CESTAT.

The Corporate Insolvency Resolution Process (CIRP) of the assessee-company under the Insolvency and Bankruptcy Code was undergone by the company during the pendency of the appeal. First, the liquidation of the corporate debtor was ordered by the NCLT, followed by the approval of the Resolution Plan by the NCLT, leading to the revival of the corporate debtor.When the case was presented at the hearing in front of the Tribunal, the respondent participated by presenting the order of the NCLT on the approval of the Resolution Plan and contended that the appeal of the Revenue could not be entertained in light of the settled positions of the law.

The respondent contended that once the Resolution Plan is approved, all claims which have not formed a part of such plan would stand extinguished, unless otherwise specifically preserved. It was thus contended that continuation of departmental appeals would defeat the object of finality for which the IBC framework has been enacted.The Revenue did not dispute the approval of the Resolution Plan but sought continuation of the appeal on merits, contending that statutory dues should be adjudged.

The CESTAT rejected the Revenue’s submission and mainly relied on the Supreme Court’s judgment in the landmark case of Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited, where the Supreme Court clearly stated that “all claims stand frozen and extinguished if the resolution plan is approved by the NCLT.”

Moreover, it is pertinent to refer to decisions of coordinate benches of this Tribunal holding categorically that pending tax appeals abate automatically upon approval of Resolution Plans. Given this precedent and admission by way of approval of the Resolution Plan, CESTAT held that Revenue’s service tax appeal had become infructuous.

Accordingly, the case was disposed of as abated without considering the merits of the service tax liability.