Setback to Aircel Ltd: CESTAT Rules Refund Appeals Non-Maintainable After IBC Resolution Plan Approval [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that refund appeals filed by Aircel Ltd. could not be continued once the Resolution Plan was approved under the Insolvency and Bankruptcy Code (IBC).

Aircel Ltd., the appellant, had filed multiple appeals challenging service tax demands and one appeal seeking a refund. While these appeals were pending, the appellant underwent insolvency proceedings. The National Company Law Tribunal (NCLT) approved a Resolution Plan on June 9, 2020, placing the company under the management of a Monitoring Committee.

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The appellant's counsel argued that the refund appeal should not abate because it sought to recover dues in favour of the corporate debtor, which would enhance the value of its assets. The counsel referred to the decision in Swiss Ribbons Pvt. Ltd. v. Union of India to support the argument that one of the core objectives of the IBC is maximization of the value of the corporate debtor's assets.

The revenue counsel argued that the Supreme Court had clearly held in Ghanashyam Mishra that no proceedings, including refund claims, could continue after approval of a Resolution Plan if such claims were not included in the plan. They argued even refund appeals stood extinguished under the law.

The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that even claims that might enhance the assets of the corporate debtor could not be pursued if they were not part of the approved Resolution Plan.

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The tribunal explained that after the approval of the Resolution Plan, the original identity of the corporate debtor ceases to exist, and it cannot continue litigation merely to recover earlier claims. The tribunal held that the IBC provides a clean break for the corporate debtor and its successor, and such refund claims cannot survive unless explicitly preserved in the Resolution Plan.

The tribunal ruled that the status of the corporate debtor does not change based on whether the appeal relates to a demand or a refund. Once the Resolution Plan is approved, all pending proceedings, including refund-related appeals, are barred. Accordingly, all appeals filed by Aircel Ltd., including the refund appeal, were dismissed.

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