2023 (7) TMI 1122 - AT - Service Tax

Telecom tower credit approved; CIRP extinguishes govt claims; NCLT plan binding.

M/s Reliance Infratel Limited Versus Commissioner of Service Tax-VII, Mumbai

The Tribunal held that the appellants' availing of CENVAT credit for erecting telecommunication towers was eligible, rejecting the department's claim of ... Recovery of CENVAT Credit - credit availed on inputs/capital goods and input services to erect telecom towers - Department claims as immovable property and that it is neither excisable goods nor leviable to service tax - appellant gone into CIRP during the pendency of these appeals - HELD THAT:- The matter is no more res integra, as the Hon’ble Supreme Court 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] has held that all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. Appellants have also claimed that the refund of pre-deposit paid by them at the time of filing the captioned appeals should be paid back to them. In this regard, we find that the matter has already been decided by the Hon’ble Supreme Court in the case of M/S. RUCHI SOYA INDUSTRIES LTD. VERSUS UNION OF INDIA & ORS. [2022 (3) TMI 60 - SUPREME COURT] where it was held that Admittedly, the claim in respect of the demand which is the subject matter of the present proceedings was not lodged by the respondent No. 2 after public announcements were issued under Sections 13 and 15 of the IBC. As such, on the date on which the Resolution Plan was approved by the Learned NCLT, all claims stood frozen, and no claim, which is not a part of the Resolution Plan, would survive. From the above decisions of the Hon’ble Supreme Court, it is clear that from the date of approval of the resolution plan approved by the NCLT, the appeals filed by the applicant has abated and CESTAT has become functus officio in the matters relating to this appeal. Taking note of the fact that the NCLT has approved the resolution plan in the insolvency proceedings in regard to the corporate debtor, it is concluded that the appeals before this Tribunal are abated. Issues Involved:The issues involved in the legal judgment are the eligibility of CENVAT credit on inputs/capital goods and input services for erecting telecommunication towers, the confirmation of service tax demands by the Commissioner of Service Tax-VII, Mumbai, the completion of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC), and the binding nature of the NCLT approved Resolution Plan on government claims and demands.Issue 1: Eligibility of CENVAT creditThe appellants, engaged in setting up telecommunication towers and leasing them to Telecom Service providers, availed CENVAT credit on inputs/capital goods and input services. The department claimed the availed credit as ineligible due to the interpretation that the towers were immovable property not subject to excise duty or service tax. This led to the issuance of Show Cause Notices culminating in impugned orders confirming the demands with penalties under Sections 77 and 78 of the Finance Act, 1994.Issue 2: Corporate Insolvency Resolution Process (CIRP) under IBCDuring the pendency of the appeals, the appellants underwent CIRP under the IBC, which was completed with the approval of a Resolution Plan by the NCLT. The Resolution Plan extinguished all claims or demands by the government authorities, including the service tax demands prior to the effective date of the plan. The Resolution Plan was binding on the government claims as per the decision of the Hon'ble Supreme Court in the case of Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors.Issue 3: Legal position post Resolution Plan approvalThe judgment of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited & Ors. clarified that once a Resolution Plan is approved by the Adjudicating Authority, all claims not part of the plan stand extinguished and no further recovery proceedings can be initiated. The CBIC's Standard Operating Procedure for NCLT cases reiterated that no demands can be raised on the Resolution Applicant post-plan approval.Issue 4: Abatement of appeals and disposalBased on the legal precedents and the approval of the Resolution Plan by the NCLT, the appeals before the Tribunal were considered abated. Consequently, both appeals filed by the appellants were disposed of, and the Tribunal became functus officio in the matters related to the appeal.(Order pronounced in the open court on 24.07.2023)