2023 (1) TMI 193 - AT - Insolvency and Bankruptcy

Tribunal Partially Upholds Appeal, Sets Aside Refund Direction, Parties to Bear Own Costs

Office of the Assistant Commissioner of Central Tax & Anr. Versus Mr. Rakesh Singala, Liquidator of M/s. Apple Industries Ltd.

The Tribunal partially allowed the appeal, upholding the refund direction of Rs. 25,46,588/- but setting aside the refund direction of Rs. 1,08,797/-. ... Seeking refunds of amount to the liquidation account of the Corporate Debtor - time limitation for filing refund claim - whether provisions of Section 11B of the Central Excise Act, 1944 are inconsistent with Section 33 of the IBC, 2016 and by virtue of Section 238 of the IBC, the provisions of IBC will have overriding effect? - HELD THAT:- Section 33(5) of the IBC on which reliance has been placed by the Learned Counsel for the Liquidator provides that when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor, provided that a suit or other legal proceeding may be instituted by the liquidator, on behalf of the corporate debtor, with the prior approval of the Adjudicating Authority. There are no conflict with Section 33 (5) and Section 11B. Section 11B is enabling provision which entitles the Corporate Debtor to make an Application for refund of duty. The Moratorium which becomes operative after liquidation order has been passed is for the purpose for protecting the Corporate Debtor from any legal proceeding. Present is not a case where any legal proceeding has been initiated against the Corporate Debtor under the Central Excise Act, 1944. Present is a case where for refund, to which the Corporate Debtor is entitled, whether the Application is required to be made by the Corporate Debtor in accordance with the Central Excise Act, 1944 or not. The statutory provision of the Central Excise Act, 1944 does not contemplate automatic refund of any duty to which company may be entitled - thus, there are no inconsistent or irreconcilable provision in Section 33 of the IBC in reference to Section 11B of the Central Excise Act, 1944. Whether the Application filed by the Liquidator for refund of the amount of Rs.25,46,588/- was filed beyond time? - HELD THAT:- When we look into the provisions of Section 11B (1), the period of one year has been provided for filing Application for refund. Section 11B of the Central Excise Act, 1944 is a special statute which provides a particular period of limitation for making an Application for refund. The order passed by the Hon’ble Supreme Court was passed in exercise of jurisdiction under Article 142 of the Constitution of India and the order specifically covered petitions /applications /suits /appeals /all other proceedings. The submission of the Counsel for the Appellant is that the expression “all other proceedings” should be interpreted ejusdem generis and application under Section 11B is “not other proceeding” - there are no substance in the submission when the order clearly mentions that “Application” for which limitation is prescribed in special statute the present case shall be obviously covered by the Hon’ble Supreme Court’s order. We, thus, are satisfied that the order of the Hon’ble Supreme Court dated 23.03.2020 read with subsequent orders extend the benefit of limitation for liquidator to file an Application under Section 11B. Hence, the Application dated 31.12.2020 has to be treated within time. We, thus, are of the view that the Company was fully entitled for refund of the amount of Rs.25,46,588/- and for the above reason, we uphold the direction issued by the Adjudicating Authority for refund of the amount of Rs.25,46,588/-. Direction with regard to Rs.1,08,797/- - HELD THAT:- Admittedly, no Application has been filed by the Liquidator for refund of the said amount. There being no claim for the refund in accordance with law, the Central Excise department is not obliged to refund the said amount and the direction of the Adjudicating Authority to direct for refund of the said amount cannot be upheld. The direction of the Adjudicating Authority to the Respondent of the Application (Appellant herein) to refund the amount of Rs.25,46,588/- is upheld whereas the direction for payment of Rs.1,08,797/- is set aside - Appeal allowed in part. Issues Involved:1. Whether the provisions of Section 11B of the Central Excise Act, 1944 are inconsistent with Section 33 of the IBC, 2016.2. Whether the Liquidator's application for refund of Rs. 25,46,588/- was filed within the permissible time limit.3. Whether the Liquidator is entitled to the refund of Rs. 1,08,797/- without filing an application.Detailed Analysis:Issue 1: Inconsistency between Section 11B of the Central Excise Act, 1944 and Section 33 of the IBC, 2016The Adjudicating Authority had directed the refund of Rs. 25,46,588/- and Rs. 1,08,797/- to the liquidation account of the Corporate Debtor, concluding that Section 11B of the Central Excise Act, 1944 is inconsistent with Section 33 of the IBC, 2016. The Tribunal observed that Section 238 of the IBC gives it an overriding effect over other laws. However, the Tribunal found no inconsistency between Section 11B and Section 33(5) of the IBC. Section 11B provides a procedure for availing refunds, which does not conflict with the moratorium under Section 33(5) of the IBC that protects the Corporate Debtor from legal proceedings. The Tribunal cited the principle laid down by the Supreme Court in 'M. Karunanidhi vs. Union of India and Another' to conclude that both statutes can operate without conflict. Therefore, the Tribunal did not approve the Adjudicating Authority's view that Section 11B is inconsistent with Section 33 of the IBC.Issue 2: Timeliness of the Liquidator's Application for Refund of Rs. 25,46,588/-The Liquidator's application for refund of Rs. 25,46,588/- was filed on 31.12.2020, beyond the one-year period from the order dated 06.11.2019. The Tribunal considered the Supreme Court's order in Suo Motu Writ Petition (Civil) No. 03 of 2020, which extended the limitation period due to COVID-19. The Supreme Court's order extended the limitation from 15th March 2020 till further notice, which was applicable to all petitions, applications, suits, appeals, and other proceedings. The Tribunal concluded that this extension applied to the Liquidator's application under Section 11B, making the application timely. Consequently, the Tribunal upheld the direction for the refund of Rs. 25,46,588/-.Issue 3: Entitlement to Refund of Rs. 1,08,797/- without Filing an ApplicationThe Tribunal noted that no application had been filed by the Liquidator for the refund of Rs. 1,08,797/-. Since the Central Excise department was not obligated to refund the amount without a proper application, the Tribunal set aside the Adjudicating Authority's direction to refund this amount.Conclusion:The Tribunal partly allowed the appeal. It upheld the direction for the refund of Rs. 25,46,588/- but set aside the direction for the refund of Rs. 1,08,797/-. Each party was directed to bear its own costs.