2022 (10) TMI 936 - AT - Customs

Appeal Dismissed Due to Company Insolvency: Implications for Dues Recovery

M/s. Ultratech Nathdwara Cement Limited Versus C.C. -JAMNAGAR (PREV)

The tribunal dismissed the appeal as infructuous due to the company's insolvency and the discharge of liabilities post NCLT approval. It clarified that ... Recovery of adjudged dues - as per resolution plan approved by NCLT, no dues exists against the applicant - continuance of proceeding as per Rule 22 of the CESTAT Procedure Rules, 1982 - HELD THAT:- The NCLT has passed an order by approving resolution plan of the company M/s. Binani Cement Limited in favor of M/s. Ultratech Nathdwara Cement Limited, who is the resolution applicant. As regard the submission made by learned AR that the applicant has not filed an application for continuance of the proceeding in terms of Rule 22 of the CESTAT Procedure Rules, 1982, after careful reading of the said rule, it is held that Rule 22 is applicable only in case when the assessee is adjudicated as insolvent or in the case of a company when it is wound up - In the present case, the applicant being a company has not been wound up whereas, the same was revived under Insolvency Resolution process as per NCLT order. Moreover, in the present case, there is only change of name of the company from M/s. Binani Cement Limited to M/s. Ultratech Nathdwara Cement Limited in terms of certificate of incorporation pursuant to change of name issued by RoC therefore, the company has not been wound up and it is on going company, hence, rule 22 is not applicable. As per the resolution plan approved by the NCLT and in the light of Hon’ble Supreme Court judgment in the case of GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. [2021 (4) TMI 613 - SUPREME COURT], it prima facie appears that the adjudged dues cannot be recovered by the department however, this issue has to be decided by the department and not by this tribunal - This tribunal being creature under the Customs Act, even though the Insolvency and Bankruptcy Code have over riding effect over all the other acts in absence of any explicit provision under the Customs/Central Excise Act, this tribunal cannot decide finally whether the adjudged amount can be recovered by the department or otherwise. This issue has to be resolved by the respondent. The appeal is dismissed as infructuous. Issues:1. Appeal infructuous due to insolvency of the company.2. Application for continuance of proceedings not filed within stipulated time.3. Competency of tribunal in deciding recovery of dues post NCLT order approval.4. Applicability of Rule 22 of CESTAT Procedure Rules, 1982 in case of insolvency.5. Lack of provision in Customs and Central Excise Act regarding NCLT proceedings.6. Need for guidelines on handling cases with IBC proceedings.Analysis:1. The appellant filed a miscellaneous application post NCLT order approving the resolution plan of the company, which discharged all liabilities. The department argued the appeal should be abated due to insolvency, but the tribunal found the company was not wound up, and Rule 22 did not apply. The tribunal noted it couldn't decide on recovery of dues, directing the department to determine the same.2. The tribunal clarified that Rule 22 of CESTAT Procedure Rules, 1982 applies to natural persons, not companies. The case cited by the department was distinguished, emphasizing the need for a clear distinction between insolvency and winding up. The tribunal stressed that the department must resolve the issue of dues recovery.3. The tribunal highlighted the lack of provisions in the Customs and Central Excise Act regarding NCLT proceedings. While acknowledging the overriding effect of the Insolvency and Bankruptcy Code, the tribunal stated it couldn't conclusively decide on the recoverability of dues, urging the department to address the matter.4. Considering the lack of clarity in handling cases with IBC proceedings, the tribunal urged the Central Board of Indirect Taxes & Customs to issue guidelines for such situations. The tribunal emphasized the importance of providing directions to departmental representatives on how to proceed in cases where IBC proceedings are ongoing.5. Ultimately, the tribunal deemed the appeal infructuous, dismissing it. Both parties were granted liberty to revive the appeal if an amicable resolution was not reached. The tribunal also highlighted the need for guidelines from the CBIC in cases involving IBC proceedings, stressing the importance of clarity in such matters.