2022 (12) TMI 17 - AT - Customs

Tribunal Dismisses Appeal After Company Liquidation, Emphasizes Recovery Impact

The tribunal dismissed the appeal as infructuous due to the NCLT order liquidating the appellant company, emphasizing the impact on recovery of dues. It ... Liquidation under IBC - effect of NCLT liquidation on recovery of departmental dues - infructuous appeal - tribunal's competence vis-a -vis insolvency proceedings - departmental duty to determine recoverability in light of NCLT order - liberty to revive appeal - administrative guideline for revenue in IBC-related casesLiquidation under IBC - effect of NCLT liquidation on recovery of departmental dues - infructuous appeal - tribunal's competence vis-a -vis insolvency proceedings - Appeals dismissed as infructuous in view of the NCLT order of liquidation without adjudication on merits. - HELD THAT: - The Tribunal recorded the NCLT order directing liquidation of the corporate debtor and appointed a liquidator, and held that in view of that order the revenue must re-examine recoverability of the adjudged dues. Relying on the approach adopted in Ultratech Nathdwara (as reproduced), the Tribunal observed that where an NCLT order affects the status of liabilities the Tribunal is not the proper forum to finally decide whether dues can be recovered; that determination falls to the department in the context of the insolvency process. Accordingly, since the liquidation order rendered the departmental recovery question to be reconsidered, the Tribunal declined to decide the merits and dismissed the appeals as infructuous while preserving liberty for the parties to seek revival and adjudication on merits if necessary. [Paras 1]Appeals disposed of as infructuous in view of the NCLT liquidation order; merits not decided and liberty granted to revive the appeals if required.Departmental duty to determine recoverability in light of NCLT order - liberty to revive appeal - The Tribunal directed that the revenue should review and determine recoverability of dues in light of the NCLT liquidation, and permitted parties to approach the Tribunal to revive the appeals if no amicable resolution is reached. - HELD THAT: - The Tribunal emphasised that the department must assess whether adjudged dues remain recoverable given the NCLT's liquidation order and the implications of any approved resolution plan; the Tribunal expressly refrained from making a final determination on recoverability. The order preserves the right of aggrieved persons to apply to the Tribunal for revival of the appeals and adjudication on merits should the departmental review not lead to resolution. [Paras 1]Department to determine recoverability in light of NCLT order; parties granted liberty to seek revival of appeals for adjudication on merits.Administrative guideline for revenue in IBC-related cases - tribunal's competence vis-a -vis insolvency proceedings - The Tribunal recommended that the Central Board of Indirect Taxes & Customs consider issuing guidelines for departmental handling of matters where IBC proceedings are pending against parties in appeals before the Tribunal. - HELD THAT: - Noting recurring initiation of IBC proceedings against parties in appeals and observed uncertainty among departmental representatives about the appropriate stance in such matters, the Tribunal suggested that CBIC may issue procedural guidance for dealing with appeals involving companies subject to IBC proceedings. This recommendation is administrative and advisory in nature and does not constitute binding legal adjudication. [Paras 1]Copy of the order to be sent to the Chairman, CBIC recommending issuance of guidelines for handling IBC-related cases before the Tribunal.Final Conclusion: The Tribunal dismissed the appeals as infructuous in view of the NCLT liquidation order, declined to decide the merits or the recoverability of dues (leaving that to the department in the context of insolvency proceedings), granted liberty to revive the appeals for adjudication on merits if required, and recommended that CBIC issue guidelines for handling appeals involving IBC proceedings. Issues:1. Review of decision for recovery of dues in the light of NCLT order dated 06.08.2019 liquidating the appellant company.2. Applicability of Rule 22 of CESTAT Procedure Rules, 1982 in the case of a company under insolvency resolution process.3. Determination of recovery of adjudged dues in the absence of explicit provisions under Customs and Central Excise Act.4. Lack of guidelines for revenue department regarding cases where IBC proceedings are ongoing before NCLT/NCLAT.Issue 1:The judgment discusses the NCLT order dated 06.08.2019 liquidating the appellant company and the implications on the recovery of dues by the revenue department. It highlights that the NCLT order has a significant impact on the recoverability of dues, making it unnecessary to decide the appeal on its merits. The tribunal emphasizes that the department needs to review the recoverability of dues in light of the NCLT order, as seen in a similar case involving Ultratech Nathdwara. The tribunal concludes that the appeal has become infructuous due to the NCLT order, and dismisses it accordingly.Issue 2:The judgment delves into the applicability of Rule 22 of CESTAT Procedure Rules, 1982 in the context of a company under insolvency resolution process. It clarifies that Rule 22 is relevant when a company is wound up, not when it is undergoing insolvency resolution. The tribunal distinguishes the present case from a previous judgment involving a wound-up company, emphasizing that Rule 22 does not apply to an ongoing company like the appellant. The tribunal underscores that the decision on the recovery of dues lies with the department and not the tribunal.Issue 3:Regarding the determination of recovery of adjudged dues in the absence of explicit provisions under the Customs and Central Excise Act, the judgment elucidates that the tribunal lacks the authority to conclusively decide on the recoverability of the amount. It stresses that the department must resolve the issue as there is no provision in the Acts to give effect to NCLT proceedings. The tribunal highlights the need for the department to make a decision on the recoverability of dues based on the NCLT-approved resolution plan.Issue 4:The judgment addresses the lack of guidelines for the revenue department in cases where IBC proceedings are ongoing before NCLT/NCLAT. It notes that many companies involved in appeals before the tribunal are subject to IBC proceedings, creating uncertainty for the revenue department on the appropriate course of action. The tribunal recommends that the Central Board of Indirect Taxes & Customs issue guidelines for dealing with cases where IBC proceedings are underway, to provide clarity to departmental representatives. It emphasizes the importance of having a structured approach in such situations to streamline the process for all parties involved.