2025 (2) TMI 1170 - AT - Central Excise

Statutory Dues Dismissed: Resolution Plan Upholds Extinguishment of Claims Under Insolvency Code Section 31

M/s. Orchid Chemicals & Pharmaceuticals Ltd. Versus Commissioner of GST & Central Excise

CESTAT dismissed appeals challenging statutory dues after NCLT's Resolution Plan approval. Following SC precedent in Ghanashyam Mishra case, the Tribunal ... Dismissal/abatement of appeals filed before the Tribunal, in view of the approval of the Resolution Plan by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016 - HELD THAT:- This Tribunal lacks the jurisdiction to render an opinion on a matter relating to the settling of pending claims which are not an issue pending before this Tribunal. The Customs Act 1962 and the Insolvency & Bankruptcy Code, 2016 operate in their own spheres, leaving little room for this Tribunal to render an opinion on the matter. The CESTAT Benches including that at Chennai, have been consistently ordering the abatement of appeals, wherever the Resolution Plan is shown to have accepted by the Adjudicating Authority, as seen from Order of Mumbai Bench of CESTAT, in the case of M/s. Jet Airways (India) Ltd. Vs. Commissioner of Service Tax, Mumbai & Anr., [2023 (5) TMI 767 - CESTAT MUMBAI]. It is a well-accepted norm of judicial discipline that a Bench of lesser quorum / strength should follow the view taken by Bench of larger quorum / strength, in a case whose ratio covers the legal issue involved in the impugned matter, more so when it is based on the precedence of earlier judgments on the matter. Conclusion - i) The approval of a Resolution Plan by the NCLT under the IBC extinguishes statutory dues. ii) The appeals should be abated or dismissed in view of the Resolution Plan's approval. Appeal abated. 1. ISSUES PRESENTED and CONSIDERED Whether the approval of a resolution plan by the National Company Law Tribunal (NCLT) under the Insolvency & Bankruptcy Code (IBC), 2016, results in the extinguishment of statutory dues and pending appeals related to Central Excise demands prior to the approval date. Whether the Appellate Tribunal (CESTAT) has jurisdiction to adjudicate on the effect of an approved resolution plan on pending claims and appeals concerning statutory dues. The applicability and binding nature of precedents, including the Supreme Court decision in Ghanashyam Mishra & Sons Pvt. Ltd. Vs Edelweiss Asset Reconstruction Company Ltd., on the treatment of statutory dues and appeals post-IBC resolution plan approval. The principle of judicial discipline regarding adherence by smaller Benches to decisions of larger Benches or Division Benches on identical legal issues. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Effect of NCLT-approved Resolution Plan on Statutory Dues and Pending Appeals - Legal Framework and Precedents: The Insolvency & Bankruptcy Code, 2016, empowers the NCLT to approve resolution plans for corporate debtors. The Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. Vs Edelweiss Asset Reconstruction Company Ltd. held that all dues, including statutory dues owed to government authorities, if not part of the resolution plan, stand extinguished upon approval by the adjudicating authority under Section 31 of IBC. Consequently, no proceedings for such dues prior to the approval date can continue. - Court's Interpretation and Reasoning: The Tribunal noted that the NCLT Chennai had approved the resolution plan in the earlier related case, which attained finality. The Tribunal's Division Bench had dismissed the appeals on the ground that statutory dues not included in the resolution plan were extinguished, and no claims were made by the Department during the Corporate Insolvency Resolution Process. The resolution plan's clause providing for irrevocable and unconditional settlement of all claims was also highlighted. - Application of Law to Facts: The present appeals involved the same appellant and similar issues relating to statutory dues prior to the resolution plan approval. The Tribunal considered whether the appeals should be dismissed or abated in light of the earlier order and the Supreme Court's binding precedent. - Treatment of Competing Arguments: While the appellant relied on the earlier dismissal order, the Tribunal expressed reservations about adopting the reasoning that all claims are irrevocably extinguished, noting that the Customs Act, 1962, and the IBC operate in separate legal spheres. The Tribunal stated it lacks jurisdiction to opine on the settling of claims not directly before it. - Conclusions: Despite jurisdictional concerns, the Tribunal acknowledged consistent practice by various CESTAT Benches to abate appeals where resolution plans are approved by the NCLT, following the Apex Court's ruling. The appeals were accordingly abated, recognizing the extinguishment of claims post-resolution plan approval. Issue 2: Jurisdiction of the CESTAT to Adjudicate on Matters Relating to Resolution Plans and Pending Claims - Legal Framework and Precedents: The Customs Act, 1962, and the Insolvency & Bankruptcy Code, 2016, govern distinct domains: customs and excise matters and insolvency resolution respectively. The Tribunal's jurisdiction is limited to adjudicating appeals under the Customs Act and Central Excise laws. - Court's Interpretation and Reasoning: The Tribunal expressed inability to pass orders on the unconditional settlement and extinguishment of claims as per the resolution plan, as such matters pertain to insolvency proceedings under the IBC and are outside the Tribunal's statutory remit. - Application of Law to Facts: The Tribunal distinguished between the legal effect of the resolution plan's approval (which extinguishes claims) and its own jurisdiction to decide on such extinguishment. It refrained from rendering an opinion on the settlement of claims not expressly before it. - Treatment of Competing Arguments: The appellant's reliance on the resolution plan's provisions was acknowledged but not accepted as a basis for the Tribunal to decide on extinguishment of claims. The Tribunal emphasized the separate jurisdictional spheres of the Customs Act and IBC. - Conclusions: The Tribunal concluded that while the extinguishment of claims follows from the resolution plan approval, it lacks jurisdiction to adjudicate on such extinguishment. Hence, it abated the appeals rather than dismissing them on merits. Issue 3: Binding Nature of Precedents and Judicial Discipline in Following Larger Bench Decisions - Legal Framework and Precedents: It is a well-established principle of judicial discipline that Benches of lesser strength follow the decisions of larger or Division Benches on identical legal issues. This ensures consistency and predictability in judicial outcomes. - Court's Interpretation and Reasoning: The Tribunal referred to earlier Division Bench decisions of the CESTAT Chennai and Mumbai Benches, which had abated appeals following approval of resolution plans by the NCLT, based on the Supreme Court's ruling. The Tribunal recognized these as binding precedents. - Application of Law to Facts: The present Bench, being of lesser strength, followed the Division Bench's ratio in abating the appeals, despite some reservations about jurisdictional issues, to maintain judicial consistency. - Treatment of Competing Arguments: No competing argument was advanced challenging the binding nature of the Division Bench's decision. The Tribunal adhered to the norm of judicial discipline. - Conclusions: The Tribunal held that the appeals stand abated in line with the Division Bench's precedent and the Supreme Court's authoritative ruling, underscoring the importance of following binding precedents.