CESTAT Becomes ‘Functus Officio’ in Appeal Matters Where Resolution Plan is Approved by the NCLT

CESTAT Becomes ‘Functus Officio’ in Appeal Matters Where Resolution Plan is Approved by the NCLT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Mumbai Bench, has held that from the date of approval of the resolution plan by the National Company Law Appellate Tribunal (NCLT), the appeal filed by the applicant- M/s Jet Airways (India) Limited has abated, and CESTAT has become functus officio in the matters relating to the appeal filed by Jet Airways.

The division member bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) while noting that the resolution plan being approved by the NCLT in the insolvency proceedings with regard to the corporate debtor of the appellant-assessee company, and the appeals before CESTAT are abated.

The factual matrix of the case is that proceedings were initiated under Section 73(1A) of the Finance Act (hereinafter referred to as ‘the Act’) for the recovery of service tax on codeshare charges and interline service charges. The Commissioner of Service Tax-V, Mumbai, adjudged the case, confirming the demands for Rs. 20,28,56,543 along with applicable interest, besides the imposition of a penalty under Section 78 of the said Act.

However, during the pendency of the appeals, the appellant-assessee faced financial difficulties, and an application was filed by one of the financial creditors under Section 7 of the Insolvency and Bankruptcy Code, 2016 for recovering debts owned by the appellant-assessee company.

Following this, the National Company Law Tribunal, Hyderabad Bench (NCLT) issued an order dated June 20, 2019 for initiating the Corporate Insolvency Resolution Process (CIRP) in regard to the appellant-assessed company under Section 13 of the Insolvency & Bankruptcy Code, 2016 (IBC).

A resolution plan was formulated by the resolution professional for approval by the Committee of Creditors. The resolution plan submitted before NCLT was approved by NCLT vide order dated 22 June, 2021, and the resolution plan is effective from this date, i.e., the NCLT Approval Date.

In this regard, the CESTAT referred the decision passed by the Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. & Ors., noting that the fact that the NCLT has approved the resolution plan in the insolvency proceedings with regard to the corporate debtor of the appellant-assessee company, the appeals before CESTAT are abated.

It further observed, “CBIC has vide Instruction No.1083/04/2022-CX9 dated 23.05.2022 has laid down the guidelines in the form of Standard Operating Procedure (SOP) for handling the NCLT cases by the department, and reiterated the legal position that as operational creditors, GST and Customs authorities are required to submit their claims against the corporate debtors when the corporate insolvency and resolution process has been initiated.”

Therefore, the CESTAT held that, once the Resolution plan is approved by NCLT, no demands could be raised on the Resolution Applicant.

Accordingly, it dismissed the appeals.