Calcutta HC dismisses Petitions Challenging CESTAT Order on CENVAT Credit Reversal in Tata Steel Insolvency Case [Read Order]

The Calcutta High Court has dismissed multiple writ petitions filed by Tata Steel Limited (formerly Tata Steel BSL Limited) challenging a common order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) that had held appeals to have abated following the corporate insolvency of the petitioner's erstwhile entity, Bhusan Steel Ltd. (BSL).

The petitions concerned CENVAT credit issues where BSL had taken credit on steel structures, parts, accessories, and cement, which were later disputed by tax authorities through several show-cause notices issued between 2005-2009. These led to orders disallowing CENVAT credit to the extent of approximately Rs. 145.5 crore.

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Tata Steel, represented by senior counsel, contended that despite the original proceedings emanating from outside West Bengal, the High Court has jurisdiction under Articles 226/227 to review the tribunal’s order since it was exercised within its territorial jurisdiction. They argued that the tribunal failed to consider whether the payments made could be valid claims post-resolution.

During the pendency of appeals before CESTAT, insolvency proceedings were initiated against BSL under the Insolvency and Bankruptcy Code, 2016. Tata Steel submitted a resolution plan to take over BSL, which was approved by the National Company Law Tribunal in May 2018. BSL was subsequently renamed and later merged with Tata Steel Limited.

The primary legal issue was whether CESTAT erred in holding that the appeals had abated and whether the CENVAT credit reversed under protest should be refunded to the petitioner. Tata Steel argued that CESTAT failed to exercise jurisdiction by not examining whether the payments made could constitute a claim and whether such claims were extinguished under the approved resolution plan.

A division bench comprising Justice Raja Basu Chowdhury examined whether the High Court could exercise supervisory jurisdiction under Article 227 of the Constitution to correct jurisdictional errors of CESTAT, even though the original proceedings emanated from Orissa.

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The court found that CESTAT did not commit a jurisdictional error. It observed that the CENVAT credit reversal was voluntary and not a mandatory pre-deposit within the meaning of Section 35F of the Central Excise Act. The court noted that CESTAT, being a creature of statute, was bound by its rules and could not adjudicate on matters beyond its statutory mandate, especially when the appeals had abated by operation of law.

It was viewed that since the respondent had not included the reversal amount in their claim as per the resolution plan, and considering the provisions of the Insolvency and Bankruptcy Code, the claims stood extinguished. However, it held that CESTAT was correct in dismissing the appeals as abated.

The court also examined whether the High Court can correct jurisdictional errors under Articles 226/227 despite not being the jurisdictional High Court, citing relevant judgments. It recognized the inherent supervisory power of a High Court to ensure tribunals act within their jurisdiction, especially when principles of natural justice are violated.

The court noted that the original proceedings originated outside West Bengal but were heard within its jurisdiction. The petitioner relied on case law confirming the High Court’s supervisory jurisdiction to review orders passed within its territorial limits, even if originating elsewhere.

It discusses the scope of certiorari, emphasizing that it corrects errors of jurisdiction or illegal acts of tribunals acting without jurisdiction, but does not re-examine factual findings. The court acknowledged that the tribunal’s order was within its legal authority and that no jurisdictional error is apparent.

The respondent’s counsel argued that the order was from Orissa and thus outside the high court’s jurisdiction, and that the order was appealable under Section 35G of the relevant act. The court clarified that the High Court’s supervisory jurisdiction can be invoked to review orders within its territory, regardless of the originating jurisdiction.

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The bench concluded that the tribunal did not act beyond its jurisdiction and that the petitioner’s challenge is essentially to the tribunal’s interpretation of procedural rules, which the court cannot re-examine under its supervisory jurisdiction.

The court noted that the respondent had not included claims arising from earlier assessments in their insolvency claims, and that the claims in dispute had already been extinguished or were not part of the insolvency proceedings.