The NCLAT, Principal Bench, New Delhi observed that there is no inconsistency between Section 11B of the Central Excise Act, 1944 and Section 33 of the Insolvency and Bankruptcy Code, 2016 ( hereinafter referred to as “IBC”).
Section 11B enables the Corporate Debtor to make an application for a refund of duty. The purpose of the Moratorium which comes into play after the liquidation order is to protect the Debtor from legal proceedings. In the present case, no such legal proceeding has been initiated against the Debtor. It was noted by the Appellate Tribunal that the present case concerns a refund based on whether an application is required to be made or not.
It was opined by the Appellate Tribunal that Section 11B of the Central Excise Act, 1944 does not provide for an automatic refund. Concerning one refund for which the Application was not filed by the Liquidator, the Bench expounded that for such a refund if there was no claim, the Central Excise Department was not obliged to refund the said amount.
Brief Facts:
The Corporate Insolvency Resolution Process was started against the Corporate Debtor M/s. Apple Industries Limited. During the liquidation proceedings, an application was filed by the Liquidator requesting for releasing/refunding the unlawful payment withheld. The amount was in relation to the amount to be paid by the Corporate Debtor under the Central excise Act of 1944.
The said application of the Liquidator was allowed by the NCLT directing the Respondents (Appellants) to refund the amounts. The NCLT also held that Section 11B of the Central Excise Act, 1944 is inconsistent with Section 33 of the IBC and that provisions of the IBC have an overriding effect.
The present appeal has been preferred against the said order of the NCLT.
Contentions of the Appellants:
It was contended that there is no inconsistency between Section 11B of the Central Excise Act, 1944 and Section 33 of IBC. Section 11B is a mandatory provision and therefore, for every refund an application has to be made. Since no application was made for a certain amount of refund and for another refund the application was made after 1 year, the NCLT ought not to have directed a refund.
Contentions of the Respondent:
It was argued that the amounts became due to the Corporate Debtor to be refunded and therefore, Liquidator was entitled to a refund. Further, because of the pandemic, the period of limitation was extended and hence, the Application seeking a refund was not barred by limitation.
Observations of the Tribunal:
Concerning the inconsistency between Section 11B of the Central Excise Act, 1944 and Section 33 of IBC, the Tribunal observed that there is no inconsistency between the two provisions. Section 11B enables the Corporate Debtor to make an application for a refund of duty. The purpose of the Moratorium which comes into play after the liquidation order is to protect the Debtor from legal proceedings. In the present case, no such legal proceeding has been initiated against the Debtor. It was noted by the Appellate Tribunal that the present case concerns a refund based on whether an application is required to be made or not. It was opined by the Appellate Tribunal that Section 11B of the Central Excise Act, 1944 does not provide for an automatic refund.
Regarding the application being barred by limitation, it was noted that Section 11B is a special statute which provides for a period of limitation for making an application for a refund. Due to the pandemic, the period of limitation was extended for all petitions, applications, appeals and other proceedings. Thus, the period for application under Section 11B was also extended because of which the said Application could not be held to be barred by limitation.
Concerning one refund for which the Application was not filed by the Liquidator, the Bench opined that for such a refund if there was no claim, the Central Excise Department was not obliged to refund the said amount.
The decision of the Tribunal:
Based on the above-mentioned reasons, the NCLAT partly allowed the Appeal. The decision of NCLT to refund the amount was upheld, however for the amount for which no application for refund was made was directed to not be refunded.
Case Title: Office of the Assistant Commissioner of Central Tax & Anr. V. Mr. Rakesh Singala, Liquidator of M/s. Apple Industries Ltd.
Coram: Hon’ble Justice Ashok Bhushan, Dr. Alok Srivastava (Technical Member), Mr. Barun Mitra (Technical Member)
Case No: Comp. App. (AT)(Ins.) No. 1215 of 2022
Advocates for Appellants: Advs. Samiksha Godiyal, Shivalika Rudra Batla, Nakul Rajan
Advocates for Respondent: Advs. Anand Bajpai, Ravi Kaul
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