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

The Tribunal held that the appellants' availing of CENVAT credit for erecting telecommunication towers was eligible, rejecting the department's claim of ineligibility. The completion of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code extinguished government claims, with the NCLT-approved Resolution Plan binding on such claims. Post-approval of the Resolution Plan, all claims not included were extinguished, preventing further recovery proceedings. Consequently, the appeals were abated, and the Tribunal became functus officio in the matter.

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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 credit
The 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 IBC
During 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 approval
The 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 disposal
Based 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)

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