Gujarat High Court
The Commissioner Of Customs vs Patanjali Foods Limited ( Formerly ... on 25 August, 2022
Author: Bhargav D. Karia
Bench: N.V.Anjaria, Bhargav D. Karia
C/TAXAP/32/2019 ORDER DATED: 25/08/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 32 of 2019
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THE COMMISSIONER OF CUSTOMS
Versus
PATANJALI FOODS LIMITED (FORMERLY RUCHI SOYA INDUSTRIES
LIMITED)
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Appearance:
MR DHAVAL D VYAS(3225) for the Appellant(s) No. 1
MR DIPEN DESAI(2481) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 25/08/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1.Draft amendment is allowed in terms of the draft. To be carried out forthwith.
2.The Commissioner of Customs has filed this appeal under section 130 of the Customs Act, 1962 challenging the order dated 25.04.2018 passed by the Customs, Excise and Service Tax Tribunal, (For short "the CESTAT") in Appeal No.C/384/2009-DB and C/CO/64/2010-DB. The Page 1 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 respondent which was erstwhile known as Ruchi Soya Industries Limited preferred the aforesaid appeal being aggrieved by order dated 29.06.2009 passed by the Commissioner of Customs, Jamnagar in Order-in-Original i.e. OIA-23/Commr.(A)/JMN/2009.
3.The appellant has proposed the following substantial questions of law :
"(i) Whether in the facts and circumstances of the case, the CESTAT was correct in extending the benefit of concessional rate of duty exemption under sr. no. 34 of Notification no.21/2002-Cus dated 1.03.2002 as amended?
(ii) Whether in the facts and circumstances of the case, the CESTAT was correct in ignoring the report of the Government institution, in absence of the same being demonstrated to be erroneous, relying only on a private report?
(iii)Whether in the facts and circumstances of the case, the CESTAT was correct in holding that carotene value in crude palm oil decreases due to passage of time relying upon the test report which no where provides that carotene value in crude palm oil Page 2 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 decreases with passage of time?"
4.At the outset learned advocate Mr. Rajesh Raval with learned advocate Mr. Dipen Desai appearing for the respondent relying upon the averments made in additional affidavit submitted that M/s. Ruchi Soya Industries Limited was subjected to insolvency proceedings before the National Company Law Tribunal (For short "NCLT") under the provisions of Insolvency and Bankruptcy Code, 2016 (here-in-after referred to as "IBC") due to the proceedings initiated by the Standard Chartered Bank during the pendency of the proceedings before the Customs authority and the Tribunal.
4.1) The application of the Standard Chartered Bank under section 7 of the IBC for initiation of Corporate Insolvency Resolution Process (For short "CIRP") came to be Page 3 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 admitted by the adjudicating authority on 15.12.2017. It was submitted that after the proceedings as required under the various provisions of the IBC was completed and application under section 30(6) of the IBC was filed by the Resolution Professional for grant of approval of the Resolution Plan of the successful Resolution Applicant. By order dated 24.07.2019 followed by order dated 4.09.2019, the application of the Resolution Professional was allowed by NCLT approving the Resolution Plan and accordingly, the management of M/s. Ruchi Soya Industries Limited came to be vested in the successful Resolution Applicant i.e. M/s. Patanjali Foods Limited.
4.2) It was submitted that the appellant Commissioner of Customs admittedly did not lodge any claim before the Resolution Professional after public notices were issued Page 4 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 under sections 13 and 15 of the IBC and as such, the present appeal is required to be dismissed only on that ground without going into the merits.
4.3) In support of his submissions, learned advocate Mr. Raval referred to and relied upon the order passed by the Apex Court in case of M/s. Ruchi Soya Industries Ltd. in Civil Appeal Nos. 447-448 of 2013, wherein the Apex Court while considering the issue of not lodging any claim under sections 13 and 15 of the IBC by the Customs department held that as on the date on which the Resolution Plan was approved by NCLT, all claims stood frozen and no claim which is not a part of the Resolution Plan would survive. 4.4) Reliance was also placed upon section 32A of the IBC, in which it is clarified that upon completion of corporate Page 5 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 insolvency resolution process, liability of corporate debtor shall cease by providing a non-obstante clause to the effect that notwithstanding anything to the contrary contained in any law for the time being in force, the liability of a corporate debtor shall cease for an offence committed prior to the commencement of the corporate insolvency resolution process and the corporate debtor shall not be prosecuted for such an offence from the date the Resolution Plan has been approved by the NCLT under section 31 of the IBC.
4.5) It was submitted that the present proceedings and subject demand against the respondent relates to import made by the respondent in the year 2004 and hence the liability, if any, in respect of such proceedings pertains to the period prior to the commencement of the corporate insolvency Page 6 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 resolution process and therefore, the same would stand extinguished.
4.6) Reliance was placed on the decision of Apex Court in case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & ors. reported in (2020) 8 SCC 531, wherein it is held that all claims must be submitted to and decided by the Resolution Professional so that a prospective Resolution Applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor.
4.7) Learned advocate Mr. Raval also referred to and relied upon the decision of Rajasthan High Court in case of Ultra Tech Nathdwara Cement Ltd. (formerly known as Binani Cements Ltd.) v. Union of India and others reported in 2020 SCC OnLine Raj 1097 Page 7 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 reiterating the same principle that as per the amended section 31 of the IBC, the Central Government, State Government or any other local authority to whom a debt in respect of payment of dues arising under any law for the time being in force are owed, have been brought under the umbrella of the Resolution Plan approved by the adjudicating authority which has been made binding on such Governments and local authorities and once the offer of the Resolution Applicant is accepted and the Resolution Plan is approved by the appropriate authority, the same is binding on all concerned to whom the industry concerned may be having statutory dues. 4.8) Reference was also made by learned advocate Mr. Raval upon the provisions of section 238 of IBC to submit that the provisions of IBC will have overriding effect that if there is any inconsistency with any Page 8 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 of the provisions of the law for the time being in force or any instrument having effect by virtue of any such law, provisions of the IBC would prevail.
4.9) It was therefore, submitted that with successful implementation of the Resolution Plan and change in the management and control and keeping in view the beneficial provisions of sections 32A and 31 of the IBC, the entire appeal has become infructuous and consequently, stands abated as any and all liability of any nature whatsoever of the appellant stands extinguished permanently.
5.On the other hand, learned advocate Mr. Dhaval Vyas for the appellant Commissioner of Customs submitted para-wise comments received by him on the additional affidavit filed by the respondent received from the office of Page 9 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 the appellant and submitted that the Corporate Debtor's present status is a running concern with a different name after the liquidation process i.e. Ruchi Soya Industries Limited to Patanjali Foods Limited with effect from the date of incorporation in the Certificate issued by the Ministry of Corporate Affairs, Government of India. 5.1) It was pointed out that this Court vide order dated 22.06.2022 passed in Civil Application (For Fixing Date of Hearing) No. 1 of 2022 has not accepted the request and has deferred the consideration to final hearing of Tax Appeal in the matter. 5.2) It was submitted that NCLT, Mumbai by order dated 15.12.2017 has put moratorium on any recovery etc, till completion of Resolution Plan as per the provisions of IBC. Thereafter, it appears from the record that Page 10 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 no proof of claims was filed by the appellant Revenue in the capacity of Operational Creditor before the Resolution Professional within the specified time limit till finalisation and approval of the Resolution Plan.
5.3) It was submitted that the substantial question involved in appeal pertains to demand of duty for the year 2004 onwards which is prior to initiation of IRP process.
5.4) It was fairly submitted by learned advocate Mr. Vyas relying upon the para-wise comments received by him from the appellant that in view of order dated 17.02.2022 of the Apex Court in I.A. No.85939/2021 in Civil Appeal No.447-448 of 2013 and the provisions of sections 32A and 31 of the IBC, Tax Appeal may be decided on merits.
Page 11 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022
6.In view of the above submissions, it is not in dispute that the appellant Commissioner of Customs has not lodged any claim before the Resolution Professional within specified time limit as per the provisions of IBC and the Resolution Plan is approved by NCLT in the year 2019. The issues involved in this appeal pertains to demand for period prior to the approval of the Resolution Plan by the NCLT.
7.The Apex Court in case of respondent in Civil Appeal No. 447-448 of 2013, after recording the facts held as under :
"Admittedly, the claim in respect of the demand which is the subject matter of the present proceedings was not lodged by the respondent no. 2 after public announcements were issued under Sections 13 and 15 of the 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.Page 12 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022
C/TAXAP/32/2019 ORDER DATED: 25/08/2022 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."
8.In the facts of the present case also, no claim was filed by the appellant-Commissioner of Customs with regard to demand after the issuance of the notice under IBC for initiation of the resolution process before the Resolution Professional.
9.In terms of the provisions of the IBC, Resolution Plan was approved by the Committee of Creditors on 20.04.2019 and thereafter the same was approved by NCLT and the corporate insolvency resolution process was completed on 6.09.2019. It is also not in dispute that plan has been successfully implemented and Page 13 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 consequently change in control and ownership of the respondent has taken place with effect from 18.12.2019 and there is no involvement of any erstwhile promoters and erstwhile directors on the Board of Directors of respondent.
10. Section 32A of the IBC insofar as it is relevant for the present, reads as under :
"(1) Notwithstanding anything to the contrary in this Code or any other law for the time being in force, the liability of a corporate debtor for an offence committed prior to the commencement of the corporate insolvency resolution process shall cease, and the corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has been approved by the Adjudicating Authority under section 31, if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not -
(a) a promoter or in the management or control of the corporate debtor or a related party of such a person; or
(b) a person with regard to whom the relevant investigating authority has, Page 14 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 on the basis of material in its possession, reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court:
Provided that if a prosecution had been instituted during the corporate insolvency resolution process against such corporate debtor, it shall stand discharged from the date of approval of the resolution plan 'subject to requirements of this sub-section having fulfilled."
11. In view of above provisions which clarifies that upon completion of corporate insolvency resolution process, even liability of corporate debtor for an offence committed earlier would cease and hence the appellant department cannot proceed further with the present appeal in absence of any claim lodged with the Resolution Professional during the insolvency resolution process before the NCLT.
12. Section 31 of the IBC is also amended Page 15 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 with effect from 16.08.2019 and reads as under:
"1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed....."
13. The Hon'ble Apex Court in case of Ghanashyam Mishra and Sons v.Edelweiss Asset Reconstruction reported in (2021) 9 SCC 657, while dealing with such issues and provisions of the IBC held as under :
"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, Page 16 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 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. 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 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. "
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 Page 17 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022 C/TAXAP/32/2019 ORDER DATED: 25/08/2022 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 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.
15. The appeal accordingly stands disposed of as abated and the proposed questions are accordingly not answered.
(N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 18 of 18 Downloaded on : Sun Dec 25 00:15:00 IST 2022