Karnataka High Court
M/S Patanjali Foods Limited vs Commissioner Of Central Excise And ... on 30 September, 2024
Author: S.G.Pandit
Bench: S.G.Pandit
-1-
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
R
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
CEA No.6 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, ADVCOATE FOR
SRI CHANDRASHEKAR REDDY K P, ,ADVOCATE)
AND
COMMISSIONER OF CENTRAL EXCISE AND
SERVICE TAX
7TH FLOOR, TRADE CENTRE,
BUNTS HOSTEL ROAD
MANGALORE-575003
...RESPONDENT
(BY SRI JEEVAN J NEERALGI, ADVOCATE)
THIS CEA / CENTRAL EXCISE APPEAL IS FILED UNDER SECTION
35G OF THE CENTRAL EXCISE ACT 1944, PRAYING TO
-2-
ADMIT AND ALLOW THE PRESENT APPEAL,
FRAME AND CONSIDER THE SUBSTANTIAL QUESTIONS OF LAW AS SET
OUT IN THE PRESENT APPEAL OR ANY OTHER SUBSTANTIAL
QUESTIONS OF LAW THAT ARISES FOR CONSIDERATION OF THIS
HONBLE COURT, SET ASIDE FINAL ORDER NO. 21234/2023 DATED
09.11.2023(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 by the assessee under
Section 35G of the Central Excise Act, 19441 challenging the
Final Order No.21234/2023 dated 9.11.2003 passed in Excise
Appeal No.25387/2013 by the Customs, Excise and Service
Tax Appellate Tribunal, Bangalore2.
Hereinafter referred to as 'Act of 1944'
Hereinafter referred to as 'CESTAT'
2. The facts in brief leading to the present appeal are
that the assessee (originally known as Ruchi Soya Industries
Limited) is engaged in the manufacture of Edible Refined Oils
and having its factory at Baikampady Industrial Area,
Mangaluru. Consequent to the show cause notice dated
26.3.2012 issued by the respondent, Order-in-Original was
passed on 2.11.2012 and issued on 8.11.2012, wherein the
Commissioner of Central Excise and Sale Tax, Mangaluru3,
ordered, inter alia, that an amount of `8,06,44,997/- being
the Central Excise Duty on "RBD Palm Stearin" manufactured
and removed, during the period 14.7.2009 to 26.8.2011 was
confirmed. An amount of `2,97,29,891/- paid by the
assessee was appropriated against the said demand and the
remaining duty of `5,09,15,106/- was demanded. The
assessee preferred an appeal in Excise Appeal
No.25387/2013 challenging the demand of `5,09,15,106/-
passed vide the said order in original before the CESTAT.
Hereinafter referred to as 'Commissioner'
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, 20164 was passed by the
National Company Law Tribunal, Mumbai Bench5 in CP
No.1371-1372/I&BP/NCLT/MAH/2017, whereunder the NCLT
ordered commencement of Corporate Insolvency Resolution
Process6 against Ruchi Soya Industries Ltd.,7 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
Hereinafter referred to as 'IBC'
Hereinafter referred to as 'NCLT'
Hereinafter referred to as 'CIRP'
Hereinafter referred to as 'Ruchi Soya'
Hereinafter referred to as 'IRP'
Hereinafter referred to as 'Patanjali'
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 placing on record the
subsequent events of the CIRP of Ruchi Soya. It was further
contended vide the said Miscellaneous Applications, inter
alia, that the demand for the period July 2007 to August
2011 in relation to the assessee has stood extinguished since
no claim was filed by the revenue before the IRP. The said
application was opposed by the revenue before the CESTAT
contending that consequent to the approval of the resolution
plan by the NCLT, the appeal filed by the assessee has been
abated as per Rule 22 of the CESTAT (Procedure) Rules,
198210 and the Tribunal becomes functus officio. The
CESTAT by its order dated 9.11.2023 held that the appeal of
the assessee has abated as per Rule 22 of the 1982 Rules.
Being aggrieved, the present appeal is filed.
Hereinafter referred to as '1982 Rules'
5. This Court by order dated 2.9.2024 admitted the
above appeal to consider 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?"
6. 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.
7. 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 Mishra10 and Ruchi Soya
Industries Ltd.,11. 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
(2021) 9 SCC 657
(2022) 6 SCC 343
Order dated 25.8.2022 passed in Tax Appeal No.32/2019
decisions of the Hon'ble Supreme Court as noticed above.
Hence, he seeks for allowing the appeal and granting the
reliefs sought for.
8. Per contra, learned Counsel for the respondent -
revenue does not dispute the position of law as laid down by
the Hon'ble Supreme Court in the case of Ghanshyam
Mishra10 and Ruchi Soya Industries Ltd.,11. However, it
is contended by the learned counsel that by virtue of the
Order-in-original and pursuant to the show cause notice
dated 26.3.2012, an Excise Duty of `8,06,44,997/- for the
period 14.7.2009 to 26.8.2011 was confirmed and a sum of
`2,97,29,891/- having been appropriated, a demand of
`5,09,15,106/- was made. It is further contended that even
as per the judgment of the Hon'ble Supreme Court in the
case of Ghanshyam Mishra10 and Ruchi Soya Industries
Ltd.,11, at best, the demand of `5,09,15,106/- would stand
abated/extinguished and not the Excise Duty of
`8,06,44,997/- which was confirmed by the Order-in-
Original. Hence, it is contended that by virtue of the dicta of
the Hon'ble Supreme Court as noticed above, the assessee
will not be entitled to claim any refund from the revenue.
Hence, he seeks for suitable orders in this regard.
9. In response to the contention of the learned
counsel for the revenue that the assessee will not be entitled
to claim refund of a sum of `2,97,29,891/- that has been
appropriated by the revenue, the learned counsel for the
assessee vehemently contends that the demand having
originated by virtue of the show cause notice dated
26.3.2012 and having regard to the dicta of the Hon'ble
Supreme Court, the assessee would be entitled for the
refund of the amount appropriated also.
10. The submissions of both the learned 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 26.3.2012 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. Having regard to the contention of the learned
Counsel for the revenue that the assessee will not be entitled
to claim refund of the sum of `2,97,29,891/-, which has been
appropriated pursuant to the Order-in-Original, it is relevant
to note that pursuant to the Order-in-Original where the
demand of `8,06,44,997/- was confirmed and a sum of
`2,97,29,891/- was appropriated, the revenue raised the
demand of `5,09,15,106/- which was prior to the initiation of
the CIRP proceedings under the IBC. In the appeal filed by
the assessee before the CESTAT, it is forthcoming from
column 9 of the memorandum of appeal that the demand of
duty that was challenged by the assessee was a sum of
`5,09,15,106/- The said demand was the subject matter of
appeal before the CESTAT. It is further relevant to note that
the revenue has not made any claim for the said sum of
`5,09,15,106/- before the IRP, since it had already recovered
a sum of `2,97,29,891/-, which it had appropriated as
noticed in the order in original. The non making of the claim
by the revenue before the IRP has, now by virtue of the
judgment of the Hon'ble Supreme Court in the case of
Ghanshaym Mishra10 and Ruchi Soya Industries Ltd.,11
held to have been extinguished. Hence, there is justification
in the submission made by the learned counsel for the
revenue that the assessee will not be entitled to seek for
refund of the sum of `2,97,29,891/- appropriated by the
revenue by the Order-in-Original. Accordingly, it is made
clear that the assessee will not be entitled to seek for refund
of the sum of `2,97,29,891/- by virtue of the order passed in
the present appeal.
18. 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."
19. 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;
20. 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.
21. 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.
22. In view of the discussion made above, the
substantial question of law is answered in favour of the
assessee and against the revenue.
23. In view of the aforementioned, the following:
ORDER
(i) The appeal is allowed.
(ii) The Final Order No.21234/2023 passed in Excise
Appeal No.25387/2013 dated 9.11.2023 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 `5,09,15,106/- made by the
revenue against the assessee pursuant to the Order-in-
Original passed on 2.11.2012 and issued on 8.11.2012
has abated and has stood extinguished.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(C.M. POONACHA)
JUDGE
Nd/-
