2022 (3) TMI 191 - HC - Central Excise

Writ application dismissed as infructuous after NCLT approval of resolution plan. Liberty for revenue dept under Insolvency Code.

GARDEN SILK MILLS LTD. Versus UNION OF INDIA

The court concluded that the writ application was rendered infructuous and nonest due to the approval of the resolution plan by the NCLT. The respondent's ... Cases are pending adjudication before the adjudicating authority - Whether the writ application pending adjudication stand infructuous and nonest? - HELD THAT:- The effect of resolution plan once approved by the NCLT vis-a-vis the claims pending adjudication is concerned, is no longer res-integra in view of the recent pronouncement of the Supreme Court in the case of Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. [2021 (4) TMI 613 - SUPREME COURT] wherein the Supreme Court took the view as regards 2019 amendment being incorporated to Section 31 of the Insolvency and Bankruptcy Code, 2016 being treated clarificatory and declaratory in nature and thereby treating it to have come into effect retrospectively. Taking into consideration the provisions of the resolution plan as approved by the National Company Law Tribunal, Ahmedabad Bench, in case of the writ applicant along with all the reliefs, concessions and dispensations as granted in the approval order, it is hereby ordered that the present writ application is rendered infructuous, nonest and is disposed of as abated - the provision itself makes it clear that if in case the revenue is dissatisfied in any manner with the sanctioning of the resolution plan by the National Company Law Tribunal then the liberty is always reserved in favour of the revenue to prefer an appeal under Section 61 of the Code, 2016 before the National Company Law Appellate Tribunal. The present writ application does not survive and is hereby disposed of as abated and infructuous. Issues Involved:1. Time-barred demand and ignorance of previous orders.2. Entitlement to exemption under Notification No. 8/96.3. Validity of show cause notice.4. Impact of insolvency proceedings and resolution plan approval.Issue-wise Detailed Analysis:1. Time-barred Demand and Ignorance of Previous Orders:The writ applicant sought to quash the order dated 18.01.2017 by the Commissioner of Central Excise, Surat-1, which confirmed a demand despite being time-barred and ignoring a previous order dated 05.02.1998 by the Commissioner (Appeals). The earlier order had categorically held that the writ applicant was eligible for exemption from duty under Notification No. 8/96, dated 23.07.1996. The court noted that the adjudicating authority dismissed the findings of the 1998 order as mere observations, which was a fallacious premise.2. Entitlement to Exemption under Notification No. 8/96:The writ applicant argued that they were exempt from duty under Notification No. 8/96. Despite the appellate authority’s orders in 1998 and 2003 favoring the writ applicant, the respondent authority issued a show cause notice on 25.01.1999 demanding duty. The writ applicant had consistently claimed exemption and argued that the demand was time-barred. The court observed that the appellate authority had previously directed the competent authority to decide the case based on the observations made in the 1998 order.3. Validity of Show Cause Notice:The show cause notice issued on 25.01.1999 was contested on the grounds of being time-barred. The writ applicant had responded on 18.06.1999, highlighting their exemption and the time-barred nature of the demand. However, the Deputy Commissioner of Central Excise classified the goods as excisable under Chapter sub-heading 5402.43 of CETA, subjecting them to duty. The appellate authority had allowed the writ applicant’s appeal in 2003, aligning with the 1998 order.4. Impact of Insolvency Proceedings and Resolution Plan Approval:During the pendency of the writ application, the National Company Law Tribunal (NCLT), Ahmedabad Bench, approved a resolution plan on 01.01.2021, declaring the writ applicant company insolvent. The court considered whether the writ application and the respondent’s claim of Rs. 21,41,55,591/- stood extinguished and non-recoverable due to the NCLT’s order. The court referenced Section 31(1) of the Insolvency and Bankruptcy Code, 2016, which binds all stakeholders, including the government, to the approved resolution plan. The Supreme Court’s ruling in *Ghanshyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd.* clarified that claims not part of the resolution plan are extinguished once the plan is approved.Conclusion:The court concluded that the writ application was rendered infructuous and nonest due to the approval of the resolution plan by the NCLT. The respondent’s claims pending adjudication were extinguished. However, liberty was reserved for the revenue department to invoke Section 61 of the Insolvency and Bankruptcy Code, 2016, if necessary. The court disposed of the writ application and the related civil application accordingly, without expressing any opinion on the merits of the case.