Case Law Details
Dhanalakshmi Paper Mills Pvt. Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Background of the Case: Dhanalakshmi Paper Mills Pvt. Ltd. is engaged in the manufacture of paper and paper products. The controversy arose when it was discovered that the company had imported machinery during the fiscal year 2006 – 07. This machinery procurement involved the payment of a commission to a foreign agency, falling under the purview of Business Auxiliary Service. However, the company had not fulfilled its service tax liability related to this commission payment.
Show Cause Notice and Original Authority’s Decision: In response to this discrepancy, a Show Cause Notice was issued to Dhanalakshmi Paper Mills Pvt. Ltd. The notice sought to demand the outstanding service tax amount, along with interest and penalties. Subsequently, the original authority confirmed the proposals in the Show Cause Notice, resulting in a demand for an amount of Rs. 4,94,606/-. Furthermore, penalties were imposed under various provisions of the Finance Act, 1994. Unsatisfied with this decision, the appellant appealed the case.
Appeal to the Commissioner (Appeals): The case proceeded to the Commissioner (Appeals), where the appellant’s appeal was dismissed, and the demand was affirmed. This marked a crucial juncture in the dispute, prompting the appellant to seek recourse before the Tribunal.
Resolution Plan and NCLT Approval: At this juncture, a game-changing development took place. The Resolution Professional representing Dhanalakshmi Paper Mills Pvt. Ltd. approached the National Company Law Tribunal (NCLT) against the appellant. To everyone’s surprise, the NCLT approved the Resolution Plan, invoking the provisions of the Insolvency and Bankruptcy Code, 2016 (Code). This decision by the NCLT had significant implications for the ongoing dispute.
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