VAT/SALES-TAX/SERVICE-TAX JUDGMENT – Cenvat Credit

Rongon Mukhopadhyay and Deepak Roshan, JJ.

Mr. Indrajit Sinha, Advocate Mr. Kumar Vaibhav, Advocate for the Petitioner.
Mr. Amit Kumar, Advocate for the Respondent.

PER DEEPAK ROSHAN, J

Heard learned counsel for the parties.

2. The petitioner has preferred the instant writ application for the following reliefs:

(a) For quashing the order dated 25.04.2023 bearing DIN-20230460XX000000BC3C (Annexure-11 hereto) whereby the refund application made by the Petitioner seeking refund along with interest of a pre-deposit amount of Rs. 50,00,000 & Rs. 1,56,31,698 [totalling to Rs. 2,06,31,698) made in Excise Appeals preferred by the Petitioner before the CESTAT, Kolkata has been rejected;

(b) Upon quashing the aforesaid order dated 25.04.2023, for a direction upon the Respondents to immediately and forthwith refund the aforesaid pre-deposit amount of Rs. 2,06,31,698 to the Petitioner together with applicable statutory interest;

3. The brief facts of the case are that the petitioner has preferred four appeals before the CESTAT against the aforesaid Orders-in-Original. On 10.03.2015, the petitioner made a pre-deposit of Rs. 1,56,31,698/- in CESTAT. Further, the Petitioner also made a pre-deposit of Rs. 50,00,000/- in CESTAT. In the meantime, a petition against the Petitioner under section 7 of the Insolvency & Bankruptcy Code, 2016 was admitted by the NCLT, Kolkata. The resolution professional issued a specific notice to the Respondent No. 1 to file its claims. The resolution plan of Ghanshyam Mishra & Sons Pvt. Ltd. (GMSPL) was approved by the NCLT, Kolkata. Further, the petitioner applied before NCLT Cuttack, praying for the extinguishment of claims/ demands of Revenue against the Petitioner. NCLT Cuttack allowed the said application and passed an order that the claims of Revenue cannot be entertained and further, the typographical errors in this order were corrected vide order dated 11.05.2022. Thereafter, the petitioner filed an application before CESTAT for withdrawal of its pending appeals and the CESTAT dismissed the Petitioner’s appeals as withdrawn. Thereafter, Petitioner preferred another application before Respondent No. 1 seeking a refund of pre-deposit as per section 35-F of the Central Excise Act but Petitioner’s application was rejected vide order passed by Respondent No. 3.

4. Mr. Indrajit Sinha, learned counsel for the petitioner submits that the petitioner was served with the show cause notices by the Revenue, raising a demand alleging wrongful availment of CENVAT credit by the Petitioner. The petitioner replied to the same and thereafter Orders-in-Original were passed demanding tax from the petitioner. Against the Orders-in-Original, the Petitioner preferred appeals before the CESTAT Kolkata. He further submits that in terms of section 35F of the Central Excise Act, 1944, the Petitioner had also made pre-deposits in the aforesaid appeals totalling to an amount of Rs. 2,06,31,608/-.

During the pendency of the aforesaid appeals before the CESTAT, Kolkata, a petition under section 7 of the Insolvency & Bankruptcy Code, 2016 (the “IBC”) was filed against the Petitioner by its financial creditor State Bank of India, before the National Company Law Tribunal, Kolkata (the “NCLT, Kolkata”). The said petition was admitted vide order dated 03.08.2017. He further submits that the resolution professional, vide its letter dated 10.08.2017 specifically informed the Respondent-Revenue of the corporate insolvency resolution process of the Petitioner and also requested the Respondent-Revenue to file its claim against the Petitioner as per the provisions of the IBC. Despite being put to specific notice of the insolvency resolution process of the Petitioner, the Respondent-Revenue did not file any claim against the Petitioner-Company during the corporate insolvency resolution process. Since no claim was filed by the Respondent-Revenue, the same did not form part of the approved resolution plan of the Petitioner-Company and hence the same stood extinguished as per the approved resolution plan.

He further submits that vide order dated 22.06.2018, the NCLT, Kolkata approved the resolution plan filed by Ghanashyam Misra & Sons Pvt Ltd (“GMSPL”) and others under Section 31 (1) of IBC.

Learned counsel further submits that the Petitioner and GMSPL filed an interlocutory application being I.A. (IB) 81/2021 before the NCLT Cuttack, to the application filed by GMSPL and OMML before NCLT, Cuttack praying for extinguishment claims/demands of Respondent-Revenue against the Petitioner. The NCLT Cuttack, vide order dated 22.04.2022 allowed the aforesaid application and passed order to the effect that claims of the Respondent-Revenue cannot be entertained. Certain typographical errors in the said order dated 22.04.2022 were corrected vide order dated 11.05.2022.

Mr. Sinha further submits that pursuant to the aforesaid order, the petitioner filed Excise Miscellaneous Applications before the CESTAT, Kolkata in the pending appeals. Vide order dated 22.03.2023 passed by the CESTAT, Kolkata, the appeals preferred by the Petitioner against the Orders-in-Original were dismissed as withdrawn. Thereafter, Petitioner has also filed a representation before the Commissioner, CGST & CX, Jamshedpur, seeking a refund of duty paid (pre-deposit amount) for filing appeal U/s 35F of the Central Excise Act, 1944. However, the Respondent No. 2 rejected the refund application made by the Petitioner seeking a refund along with interest on the pre-deposit amount.

Mr. Sinha contended that the aforesaid order dated 25.04.2023 indicates that Respondent No. 2 has misconstrued the entire matter and also the ambit and scope of the proceedings under the IBC. Respondent No. 2 has misconstrued the order passed by the NCLT and has failed to appreciate that the extinguishment of claim is that of the Revenue against the Petitioner, and the same will not be a bar to claim of refund of the pre-deposit made by the Petitioner in the appeals, since now the demanded amounts do not survive as the same were not claimed by the Revenue in the corporate insolvency resolution process of the Petitioner.

5. Mr. Amit Kumar, learned counsel for the respondent submits that the refund application of appellant was examined in the light of conditions stipulated in Circular No. 984/08/2014-CX dated 16.09.2014 issued by Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise & Customs for refund of Pre-deposit. He further submits that where the appeal is decided in favour of the party/assesse, he shall be entitled to refund of the amount deposited along with the interest at the prescribed rate from the date of making the deposit to the date of refund in terms of Section 35FF of the Central Excise Act, 1944 or Section 129EE of the Customs Act, 1962. However, in the instant case the learned CESTAT, Kolkata vide its order dated 22.03.2023 dismissed the appeals as “withdrawn”. The CESTAT has not decided the appeal filed by M/s OMML in favour of them. He further submits that Pre-deposit for filing appeal is not payment of duty. Hence, refund of pre-deposit need not be subjected to the process of refund of duty under Section 11B of the Central Excise Act, 1944 or Section 27 of the Customs Act, 1962. Therefore, in all cases where the appellate authority has decided the matter in favour of the appellant, refund with interest should be paid to the appellant. Since the appellate authority not decided the appeals of M/s OMML in their favour; hence Refund claim of M/s OMML cannot be entertained and liable for rejection.

6. Having heard learned counsel for the parties, it appears that in the instant case three Orders-in-Original, dated 25.07.2013, 11.11.2013 and 29.09.2014 were passed against the Petitioner, against which, the Petitioner had preferred three appeals before the Ld. Central Excise and Service Tax Appellate Tribunal, Kolkata (“CESTAT”) in the year 2014. In the said appeals, pre-deposits of Rs. 1,56,31,698/- on 10.03.2015 and of Rs. 50,00,000/- on 22.01.2016 were made by the Petitioner. During the pendency of the said appeals, the Petitioner went into insolvency, which finally culminated in approval of the resolution plan of Ghanashyam Mishra & Sons Pvt. Ltd. (“GMSPL”) on 22.06.2018 and the Revenue did not lodge its claims against the Petitioner in the resolution process, and hence, upon the approval of the resolution plan, the Revenue’s claims against the Petitioner (under the aforementioned three Orders-in-Original) stood extinguished.

7. It further transpires that the Petitioner and the said GMSPL thereafter filed an application before the Ld. NCLT, Cuttack, under section 60(5) read with section 74(3) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT Rules, 2016 inter alia seeking quashing of the aforementioned three Orders-in-Original and the said application was allowed by the Ld. NCLT, Cuttack, which passed the following order on 22.04.2022 extracted as under:

“IA (IB) No. 81/CB/2021

Both sides counsel present. This petition is pertaining to quashing of claims of the respondent herein, statutory authorities, which pertains to a period prior to initiation of CIRP against the Corporate Debtor in CP (IB) No. 81 of 2021, wherein the Resolution Plan has already been approved by the Kolkata Bench of this Tribunal on 22.06.2018. Once the Resolution Plan is approved by Adjudicating Authority under Sub-Section (i) of Section 31 of IBC, 2016 all claims which are not part of the Resolution Plan shall stand extinguished and no persons will claim any dues including the statutory dues owed to Central, State Government or any local authority. This Tribunal is of the view that pursuant to approval of the Resolution Plan such claims cannot be entertained.

Accordingly, this Petition is ALLOWED.”

8. It further appears that since the very tax liability under the aforementioned Orders-in-Original stood extinguished which was also confirmed by the aforesaid order dated 22.04.2022 passed by the Ld. NCLT, the Petitioner filed miscellaneous applications before the Ld. CESTAT in the pending appeals narrating all the facts qua the proceedings before the NCLT and seeking orders disposing the appeal in terms of the orders of the NCLT and consequential reliefs. Thereafter, vide order dated 22.02.2023 passed by the Ld. CESTAT, the Petitioner`s appeals were dismissed as withdrawn. The Petitioner thereafter vide its representation dated 10.04.2023 requested the Revenue for a refund of the pre-deposit amount along with interest. The said application was dismissed by the Revenue vide order dated 25.04.2023, which is under challenge in the instant writ petition.

9. It further appears that after an insolvency petition against the Petitioner was admitted on 03.08.2017 by the Ld. NCLT, Kolkata. The appointed Resolution Professional vide its letter dated 10.08.2017 issued a specific notice to the Respondent No. 1 intimating him about the NCLT proceedings and also requesting him to act as per the applicable provisions of the Insolvency and Bankruptcy Code, 2016 as regards its claims, however, the Revenue did not file any claim before the Resolution Professional.

Thereafter, vide order dated 22.06.2018 passed by the Ld. NCLT, Kolkata, the resolution plan of the resolution applicant-Ghanshyam Mishra & Sons Pvt. Ltd. was approved. Thus, the Revenue’s claims/dues, which pertained to a period prior to even initiation of the insolvency proceedings against the Petitioner, did not form part of the approved resolution plan, and hence stood extinguished, and on this score alone, the instant writ petition is fit to be allowed, inasmuch as, it has been held by the Hon’ble Apex Court in the case of Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. & Ors. reported in (2021) 9 SCC 657] as under:

“102. In the result, we answer the questions framed by us as under:

102.1 That once a resolution plan is duly approved by the Adjudicating Authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan;

………………………………..

102.3 Consequently 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.”

The aforesaid judgment in the case of Ghanashyam Mishra (supra) was followed by the Hon’ble Supreme Court in the case of M/s Ruchi Soya Industries v. Union of India reported in (2022) 6 SCC 343, wherein it was again reiterated by the Hon’ble Apex Court as under: –

“10. We find that the present appeals are squarely covered by the law laid down by this Court in the case of Ghanashyam Mishra (supra)…….

11. 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.

13. In that view of the matter, the appeals deserve to be allowed only on this ground. It is held that the claim of the respondent, which is not part of the Resolution Plan, does not survive. The amount deposited by the appellant at the time of admission of the appeals along with interest accrued thereon is directed to be refunded to the appellant ”

Further, the Hon’ble Court in the case of M/s ESL Steel Limited v. Principal Commissioner, CGST & CX [WPT No. 1995/2023, judgment dated 11.07.2023] has also considered the legal position as enunciated by the Hon’ble Apex Court in the case of Ghanashyam Mishra (supra), and has inter-alia held:

“5……. It also emerges that as per the judgment of Hon’ble Apex Court in the case of Ghanshyam Mishra and Sons Private Ltd. (supra), no recovery and or proceeding can be continued against the Petitioner, for any dues prior to 17.04.2018 (Annexure-1) i.e., the date on which the National Company Law Tribunal has approved the resolution plan of the Petitioner. From perusal of the aforesaid Judgment, it is crystal clear that it is only the past obligation of the past period gets extinguished once the new management has taken over the Company as part of the Resolution Plan.”

It further transpires that the Revenue has not challenged the orders passed by the NCLT and hence the same have attained finality and are binding on the Revenue.

10. Having regards to the aforesaid discussion and the settled proposition of law, we are having no hesitation in holding that the Revenue in the impugned order has completely misdirected itself in law and has completely misconstrued the orders passed by the Ld. NCLT. The purport of the order dated 22.04.2022 passed by the Ld. NCLT which has been relied by the Revenue to reject the claim of the Petitioner that “…..no persons will claim any dues including the statutory dues owed to Central, State Government or any local authority…” is rather applicable qua the claims of the Revenue against the Petitioner, and does not in any manner imply that the pre-deposit made by the Petitioner is not to be refunded; more so, when the very tax liability has stood extinguished.

Further, if at all the Revenue retains the pre-deposits made by the Petitioner; the same would amount to unjust enrichment since the very tax liability which was subject matter of appeals, stood extinguished.

11. As per the provisions of law, during filing of appeal against the Orders-in-Original before the CESTAT, pre-deposit is to be made as per section 35F of the Central Excise Act, 1944 and section 35FF of the said Act contains provision for interest on delayed refund of pre-deposit. So far as stand of the Revenue that Refund application of Petitioner was examined as per Circular No. 984/08/2014-CX dated 16.09.2014; in this regard, it is observed that the said circular is inapplicable to the facts of the instant case and it is of a period prior to the enactment of the Insolvency & Bankruptcy Code, 2016. Moreover, there is no reference to the said circular in the impugned order.

The Revenue has placed reliance on judgments of the Hon’ble Supreme Court in the cases of:

(i) State Tax Officer v. Rainbow Papers Ltd. [reported in (2023) 9 SCC 545]

(ii) Sanjay Kumar Agarwal v. State Tax Officer [reported in 2023 SCC OnLine SC 1406]

The said judgments are on completely different facts and are inapplicable in the facts of the instant case. In the case of Rainbow Papers, the Revenue not only filed its claims before the resolution professional (refer para 10 of SCC) and also had challenged the resolution plan before the NCLT (refer para 15 of the SCC). However, in the instant case, there was neither any claim filed by the Revenue before the resolution professional nor there was any challenge by the Revenue to the resolution plan or any other orders passed by the NCLT. In the case of Sanjay Kumar Agarwal (supra), a review was filed against the judgment in Rainbow Papers and the same was dismissed.

12. In view of the aforesaid facts and circumstances of case and the judicial pronouncements, the order dated 25.04.2023 bearing DIN-20230460XX000000BC3C (Annexure-11), is hereby, quashed and set aside. The Respondent-Revenue is directed to refund the aforesaid pre-deposit amount of Rs. 2,06,31,698/- to the Petitioner along with applicable statutory interest. It goes without saying that the entire exercise shall be completed within a period of six weeks from the date of receipt/production of copy of this order.

13. As a result, the instant writ application is allowed and pending I.A., if any, is also closed.