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.
Impact of NCLT Decision: The key question before the CESTAT Chennai was the effect of the NCLT’s decision on the pending appeal. The learned counsel for the appellant pointed out that the Resolution Plan had been approved by NCLT, making it binding on the Corporate Debtors and other stakeholders involved. This invoked the non-obstante clause of Section 238 of the Code, which gives the Code overriding effect in cases of inconsistency with existing laws. This position was reinforced by a precedent set by the Hon’ble Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd. & Ors.
Conclusion: In light of the NCLT’s approval of the Resolution Plan and the legal precedence cited, the CESTAT Chennai made a decisive ruling. The tribunal held that the appeal filed before them had abated as a result of the NCLT’s decision.
FULL TEXT OF THE CESTAT CHENNAI ORDER
This appeal is filed by M/s. Dhanalakshmi Paper Mills Pvt. Ltd. against Order in Appeal No. 269/2013 dated 18.12.2013 passed by the Commissioner of Central Excise (Appeals), Madurai.
2. Brief facts of the case are that the appellants are engaged in the manufacture of paper and paper products classifiable under Chapter 48 of the TA, 1985. On scrutiny of records, it was found that the appellants had imported machinery during the year 2006 – 07 for which they had paid commission to foreign agency for facilitating the procurement of machinery which comes under the ambit of Business Auxiliary Service. The appellants did not discharge their service tax liability on commission paid to foreign agents. Hence Show Cause Notice was issued to the appellants seeking to demand the service tax amount which was not paid along with interest and penalty. After due process of law, the original authority confirmed the proposals in the Show Cause Notice and demanded an amount of Rs.4,94,606/- being the service tax payable on ‘Business Auxiliary Service’ along with applicable interest. The adjudicating authority also imposed penalties under various provisions of Finance Act, 1994. In appeal, Commissioner (Appeals) affirmed the demand and dismissed the appeal filed by the appellant. Hence assailing the findings and the order, the appellant is before the Tribunal.
3. We have heard learned counsel Shri D. Jaishankar for the appellant and learned AR Shri N. Satyanarayanan, Authorized Representative for the Revenue.
4. The learned counsel for the appellant submitted that the Resolution Professional has approached NCLT against the appellant and the NCLT has approved the Resolution Plan under sub-section (1) of section 31 of the Insolvency and Bankruptcy Code, 2016 (Code). The learned counsel handed over a copy of the Order No. MA/170/IB/2019 in CP/722/IB/2017 dated 26.3.2019 passed by NCLT, Chennai.
5. We find from the copy of the order of the NCLT, Chennai dated 26.3.2019 that in this case NCLT at para 26 has approved the Resolution Plan of the Resolution Professional. The plan is hence binding on the Corporate Debtors and other stakeholders involved. As per the non-obstante clause of Section 238 of the Code ibid the provisions of the Code will have an overriding effect if there are any inconsistencies with any of the provisions of the law for time being in force. This position has also been enumerated by the Hon’ble Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd. Vs. Edelweiss Asset Reconstruction Company Ltd. & Ors. [Civil Appeal No. 8129 of 2019 / (2021) 9 Supreme Court Cases 657]
6. In the light of the above discussions, we hold that the appeal filed before this Tribunal abates. The matter is disposed of accordingly.
(Pronounced in open court on 12.09.2023)
