Karnataka High Court
M/S Patanjali Foods Limited vs Commissioner Of Customs on 30 September, 2024
Author: S.G.Pandit
Bench: S.G.Pandit
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF SEPTEMBER, 2024
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE C.M. POONACHA
CSTA No.4 OF 2024
BETWEEN
M/S PATANJALI FOODS LIMITED
(FORMERLY KNOWN AS
M/S RUCHI SOYA INDUSTRIES LTD)
HAVING ITS REGISTERED OFFICE
AT RUCHI HOUSE SURVEY NO.169,
ROYAL PALMS, AAREY COLONY
GOREGAON (EAST) MUMBAI-400065
REPRESENTED BY ITS AUTHORISED SIGNATORY
SHRI T GAJENDRA
DEPUTY MANAGER - LEGAL
...APPELLANT
(BY SRI RAJESH RAWAL, ADVOCATE FOR
SRI CHANDRASHEKAR REDDY K P, ADVOCATE)
AND
COMMISSIONER OF CUSTOMS
NEW CUSTOMS HOUSE
PANAMBUR
MANGALORE-575010
...RESPONDENT
(BY SRI JEEVAN J NEERALGI, ADVOCATE)
THIS CSTA / CUSTOMS APPEAL IS FILED UNDER SECTION 130 OF
THE CUSTOMS ACT 1962, PRAYING TO ADMIT AND ALLOW THE
PRESENT APPEAL, FRAME AND CONSIDER THE SUBSTANTIAL
QUESTIONS OF LAW AS SET OUT IN THE PRESENT APPEAL OR ANY
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OTHER SUBSTANTIAL QUESTIONS OF LAW THAT ARISES FOR
CONSIDERATION OF THIS HONBLE COURT, SET ASIDE FINAL ORDER
NO. 21268/2023 DATED 17.11.2023 (ANNEXURE-A) PASSED BY THE
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
BANGALORE AND IT MAY KINDLY BE HELD THAT THE PROCEEDINGS IN
RELATION TO IMPUGNED DEMANDS HAVE BECOME INFRUCTUOUS AND
CONSEQUENTLY STANDS ABATED AND ACCORDINGLY, ANY AND ALL
LIABILITY, IF ANY, OF ANY NATURE WHATSOEVER OF THE APPELLANT
STANDS EXTINGUISHED PERMANENTLY AND THE INSTANT APPEAL MAY
KINDLY BE ALLOWED ACCORDINGLY AND ETC.
THIS APPEAL HAVING BEEN RESERVED FOR JUDGMENT ON
23.09.2024, COMING ON FOR PRONOUNCEMENT THIS DAY,
POONACHA J, DELIVERED THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE S.G.PANDIT
and
HON'BLE MR JUSTICE C.M. POONACHA
CAV JUDGMENT
(PER: HON'BLE MR JUSTICE C.M. POONACHA)
The present appeal is filed under Section 130 of the
Customs Act, 19621 challenging the Final Order No.21268/2023
dated 17.11.2023 passed in Custom Appeal No.2657/2012 by the
Customs, Excise and Service Tax Appellate Tribunal, Bangalore2.
2. The relevant facts leading to the present appeal are
that the assessee - Ruchi Soya Industries Ltd.,3 was carrying on
business of, inter alia¸ import of Crude Palm Oil of Edible grade in
bulk. The said Ruchi Soya imported 8499.980 MTs., first Grade
Hereinafter referred to as 'Customs Act'
Hereinafter referred to as 'CESTAT'
Hereinafter referred to as 'Ruchi Soya'
bulk oil which arrived at the New Mangalore Port on 22.2.2011
and 28 bills of entry dated 21.2.2011 were filed for clearance
claiming duty exemption as per notification dated 1.3.2002. It
was the contention of the revenue that the imported Crude Palm
Oil was not of edible grade and that Ruchi soya was not entitled to
duty exemption as claimed and hence, a show cause notice dated
17.2.2012 was issued. A reply was filed by the assessee to the
said show cause notice. Consequent to the same, Order-in-
Original was passed on 31.7.2012 (Annexure-D) by the
Commissioner of Customs, Mangalore4, whereunder the demand
of customs duty amounting to `19,40,00,646/- was confirmed.
Being aggrieved, the assessee preferred an appeal before the
CESTAT in Appeal No.2657/2012.
3. During the pendency of the appeal, an order dated
8.12.2017/15.12.2017 under Section 7 of the Insolvency and
Bankruptcy Code, 20165 was passed by the National Company
Law Tribunal, Mumbai Bench6 in CP No.1371-
1372/I&BP/NCLT/MAH/2017, whereunder the NCLT ordered
Hereinafter referred to as 'Commissioner'
Hereinafter referred to as 'IBC'
Hereinafter referred to as 'NCLT'
commencement of Corporate Insolvency Resolution Process7
against Ruchi Soya and an Interim Resolution Professional8 was
appointed to carry out the functions as per the IBC. Pursuant to
the said order dated 8.12.2017, a public announcement was
issued on 21.12.2017. Thereafter, the NCLT, vide order 24.7.2019
passed in MA No.1721/2019 and other connected matters,
accepted the modified resolution plan and approved the same,
consequent to which change in control of the assessee has taken
place and the name of Ruchi Soya was changed to Patanjali Foods
Limited9 as is forthcoming from the Certificate dated 24.6.2022
issued by the office of the Registrar of Companies, Mumbai.
4. The assessee namely, Patanjali filed Miscellaneous
Applications before the CESTAT for changing the name of the
assessee from Ruchi Soya to Patanjali and also to hold that the
liability as stood extinguished. The CESTAT vide Final Order
No.21268/2023 dated 17.11.2023 passed in Custom Appeal
No.2657/2012 held that the appeal abates as per Rule 22 of the
CESTAT (Procedure) Rules, 198210.
Hereinafter referred to as 'CIRP'
Hereinafter referred to as 'IRP'
Hereinafter referred to as 'Patanjali'
Hereinafter referred to as '1982 Rules'
5. Being aggrieved, the present appeal is filed.
6. This Court vide order dated 2.9.2024 admitted the
above appeal and framed the following substantial question of
law:
"A) Whether the Appellate Tribunal erred in law as
well as on facts while not following the law laid
down, amongst others, by the Hon'ble Supreme
Court that with respect to demand(s) for which no
claims were submitted and which were not part of
the approved Resolution Plan, as in present case, all
the dues relating to the same stand extinguished and
no proceedings in respect of such dues can be
continued?"
7. Heard the submissions of learned Counsel Sri Rajesh
Rawal for learned Counsel Sri K.P.Chandrashekar Reddy for the
appellant-assessee and learned Counsel Sri Jeevan J.Neeralgi for
the respondent - revenue.
8. Learned Counsel for the appellant-assessee contends
that admittedly, CIRP proceedings were ordered against the
assessee - Ruchi Soya and consequent to the modified resolution
plan approved by the committee of creditors during the CIRP,
which has been approved by the NCLT, Patanjali has continued the
business of Ruchi Soya. It is further contended that the revenue
did not make a claim before the IRP with regard to the Excise
Duty demanded and having regard to Section 32A of the IBC and
the judgments of the Hon'ble Supreme Court passed in the cases
of Ghanshyam Mishra v. Edelweiss Reconstruction Company
Ltd.,11 as also Ruchi Soya Industries Limited v. Union of
India12, the demand against the assessee has abated and the
liability whatsoever has extinguished. It is further contended that
a Division Bench of the Gujarath High Court in the case of
Commissioner of Customs v. Patanjali Foods Limited
(Formerly Ruchi Soya Industries Limted)13, the case of the
appellant itself, has also followed the dicta laid down by the
Hon'ble Supreme Court in the case of Ghanshyam Mishra11 and
Ruchi Soya Industries Ltd.,12. It is further contended that
reliance placed by the Tribunal on Rule 22 of the 1982 Rules to
hold that the appeal has abated is erroneous and contrary to the
decisions of the Hon'ble Supreme Court as noticed above. Hence,
he seeks for allowing the appeal and granting the reliefs sought
for.
9. Per contra, learned Counsel for the respondent -
revenue does not dispute the position of law as laid down by the
(2021) 9 SCC 657
(2022) 6 SCC 343
Order dated 25.8.2022 passed in Tax Appeal No.32/2019
Hon'ble Supreme Court in the case of Ghanshyam Mishra11 and
Ruchi Soya Industries Ltd.,12.
10. The submissions of both the leaned counsels have
been considered and the material on record have been perused.
11. The relevant fact situation as noticed above is
undisputed, insofar as issuance of the show cause notice dated
17.2.2012 as also the Order-in-Original. The proceedings initiated
against Ruchi Soya under the IBC are also a matter of record.
Hence, from the aforementioned, it is clear that during the
pendency of the appeal before the CESTAT, the proceedings under
IBC against Ruchi Soya had commenced and also culminated with
the acceptance of the modified resolution plan, consequent to
which Patanjali has continued the business of Ruchi Soya, which is
also forthcoming from the certificate dated 24.6.2022. It is further
undisputed that the revenue has not made any claim before the
IRP during CIRP process under the IBC.
12. The Hon'ble Supreme Court in the case of
Ghanshyam Misha10 was considering the following questions:
"2 (i) As to whether any creditor including the Central
Government, State Government or any local authority is
bound by the resolution plan once it is approved by an
adjudicating authority under sub-section (1) of Section 31
of the Insolvency and Bankruptcy Code, 2016 (hereinafter
referred to as "the I&B Code")?
(ii) As to whether the amendment to Section 31 by Section
7 of Act 26 of 2019 is clarificatory/declaratory or
substantive in nature?
(iii) As to whether after approval of resolution plan by the
adjudicating authority a creditor including the Central
Government, State Government or any local authority is
entitled to initiate any proceedings for recovery of any of
the dues from the corporate debtor, which are not a part of
the resolution plan approved by the adjudicating
authority?"
(emphasis supplied)
12.1 The Hon'ble Supreme Court answered the said
questions as follows:
"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.
102.2. The 2019 Amendment to Section 31 of the I&B Code
is clarificatory and declaratory in nature and therefore will
be effective from the date on which the I&B Code has come
into effect.
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."
(emphasis supplied)
13. The Hon'ble Supreme Court in the case of Ruchi Soya
Industries Ltd.,11 was considering the following questions:
"6. The short point that is involved is as to whether the
claim of the present respondent which was admittedly not
lodged before the resolution professional after public
notices were issued under Sections 13 and 15 IBC could be
considered at this stage."
(emphasis supplied)
13.1 After noticing its earlier judgment in the case of
Ghanshaym Mishra10 it has held as follows:
"11. Admittedly, the claim in respect of the demand which
is the subject-matter of the present proceedings was not
lodged by Respondent 2 after public announcements were
issued under Sections 13 and 15 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.
12. 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."
(emphasis supplied)
14. It is clear from the aforementioned that the revenue
not having made any claim before the IRP during the CIRP process
and the demand not having been part of the resolution plan, has
stood extinguished and cannot be continued.
15. It is relevant to note that a Division Bench of the
Gujarath High Court in the case of The Commissioner of
Customs13, while considering an appeal filed by the revenue in
the case of Patanjali after noticing Section 32A of the IBC as well
as the amended Section 31 of the IBC as also the judgment of the
Hon'ble Supreme Court in the case of Ghanshyam Mishra10 has
held as follows:
"14. Thus taking into consideration the fact of the
completion of the resolution process of the respondent by
the NCLT and undisputed fact that the appellant has not
lodged any claim in the capacity of the Operational Creditor
before the Resolution Professional, this appeal is required
to be disposed of as having become infructuous and abated
with regard to any liability of any nature whatsoever having
extinguished in view of the implementation of the
Resolution Plan and change in management and control of
the C/TAXAP/18/2019 ORDER DATED: 25/08/2022
assessee in view of the provisions of section 31 and section
32A of the IBC as fortified by the above orders passed by
the Apex Court."
(emphasis supplied)
16. Having regard to the position of law as noticed above,
the demand of the revenue against the assessee cannot be
continued.
17. It is relevant to note that the CESTAT while referring
to Rule 22 of the 1982 Rules has held that the appeal has abated.
In this context, it is relevant to note Rule 22 of the 1982 Rules,
which reads as follows:
"RULE 22. Continuance of proceedings after death
or adjudication as an insolvent of a party to the
appeal or application. --
Where in any proceedings the appellant or applicant or
respondent dies or is adjudicated as an insolvent or in the
case of a company, is being wound up, the appeal or
application shall abate, unless an application is made for
continuance of such proceedings by or against the
successor-in-interest, the executor, administrator,
receiver, liquidator or other legal representative of the
appellant or applicant or respondent, as the case may be:
Provided that every such application shall be made
within a period of sixty days of the occurrence of the
event :
Provided further that the Tribunal may, if it is
satisfied that the applicant was prevented by sufficient
cause from presenting the application within the period so
specified, allow it to be presented within such further
period as it may deem fit."
18. It is clear from a reading of the same that in the event
a party to the appeal dies or is adjudicated as an insolvent or in
the case of a company, is being wound up, the appeal would
abate. However, in the present case, it is relevant to note the
following provisions of the IBC.
"(5) Definitions:
5(12) "insolvency commencement date" means the
date of admission of an application for initiating corporate
insolvency resolution process by the Adjudicating Authority
under sections 7, 9 or section 10, as the case may be;
5(17) "liquidation commencement date" means the
date on which proceedings for liquidation commence in
accordance with section 33 or section 59, as the case
may be;
5(26) "resolution plan" means a plan proposed by
[resolution applicant] for insolvency resolution of the
corporate debtor as a going concern in accordance with
Part II;
Explanation.- For removal of doubts, it is hereby clarified
that a resolution plan may include provisions for the
restructuring of the corporate debtor, including by way of
merger, amalgamation and demerger;
19. It is clear from Section 5(26) of the IBC as noticed
above that the resolution plan is proposed by the applicant for
continuing the business of the company as "a going concern". It is
forthcoming that under the Scheme of the IBC, Part II
contemplates Insolvency Resolution and Liquidation for Corporate
Persons. Chapter II in Part II contemplates Corporate Insolvency
Resolution Process and Section 6 to Section 32A deals with the
same. Chapter III in Part contemplates Liquidation Process and
Section 33 to Section 54 deals with the same. Hence, it is clear
that by a resolution process the company continues its business
and only by a liquidation process, the business of the company
would be wound up.
20. In the present case, the resolution plan in respect of
the assessee having been accepted by the Tribunal, the question
of the assessee being wound up does not arise. Hence, it is clear
that Rule 22 of the 1982 Rules would not be attracted in a case
where the resolution plan has been approved by the IBC. Hence,
the Tribunal ex facie erred in holding that by virtue of Rule 22 of
the 1982 Rules, the appeal would abate.
21. In view of the discussion made above, the substantial
question of law is answered in favour of the assessee and against
the revenue.
22. In view of the aforementioned, the following:
ORDER
(i) The appeal is allowed.
(ii) The Final Order No.21268/2023 passed in Excise
Appeal No.2657/2012 dated 17.11.2023 by the
Customs, Excise and Service Tax Appellate Tribunal,
Bangalore, is set aside.
(iii) The Miscellaneous Applications filed by the assessee
before the CESTAT are allowed and it is held that the
demand of `19,40,00,646/- made by the revenue
against the assessee pursuant to the Order-in-Original
dated 31.7.2012 has abated and has stood
extinguished.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(C.M. POONACHA)
JUDGE
nd/-
