Ramsarup Industries LTD. And Anr vs. Union Of INDIA And Anr

Facts

The appellants, Ramsarup Industries Limited and another, are challenging an order-in-original dated 21.11.2023 passed by the CGST authorities. This order affirmed a demand of service tax amounting to Rs. 20,15,758/-, along with applicable interest and penalty, originally raised in a show cause notice dated 05.11.2019 under Section 73(1) of the Finance Act, 1994, read with Section 174(2) of the CGST Act, 2017. The appellants had previously filed a writ petition challenging this order, but the learned Single Judge dismissed it, directing them to avail the alternate appellate remedy. The proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) for a corporate resolution plan commenced on 08.01.2018, with the resolution plan being approved by the NCLT, Kolkata Bench on 04.09.2019, prior to the issuance of the show cause notice.

Held

The High Court held that the points of law raised by the appellant, particularly concerning the impact of the approved resolution plan under the IBC, required consideration. The Court noted that the IBC proceedings commenced significantly before the issuance of the show cause notice. Citing the Supreme Court's decision in Ruchi Soya Industries Ltd. & Ors. vs. Union of India & ors., the Court emphasized that once a resolution plan is approved, all claims stand frozen, and any claim not part of the plan does not survive. The Court was satisfied that the points of law were substantial enough to warrant a decision on merits, and therefore, the appellant should not be relegated to the alternate appellate remedy, especially when the jurisdiction of the respondent authority was questioned. The Court allowed the intra-Court appeal, setting aside the order of the writ court. The writ petition was admitted for hearing, and the order-in-original dated 21.11.2023 was stayed until the disposal of the writ petition. The respondents were directed to file an affidavit-in-opposition within four weeks.

Key Issues

1. Whether, in light of the approved resolution plan by the NCLT, Kolkata Bench, all debts and liabilities of the appellant/writ petitioner accrued till the approval date were wiped off, rendering the appellant a 'clean slate' in the eyes of the law, as per the Insolvency and Bankruptcy Code, 2016 (IBC)? 2. Whether creditors are estopped from making any claim against a corporate debtor for dues arising prior to the approval of a resolution plan, given that the IBC process commenced before the show cause notice? 3. Does the resolution plan itself preclude the appellant from making any payment to the respondent authorities for alleged claims arising before its approval? 4. Did the second respondent (CGST authorities) have deemed notice of the IBC proceedings against the first appellant, and if so, are they entitled to any amount claimed in the order-in-original? 5. If the resolution plan does not provide for payment to respondent authorities, is the appellant liable to pay? 6. Was the order-in-original passed without jurisdiction by the second respondent? Contentions of the Appellant: The appellant argued that the approved resolution plan absolved them of all pre-existing liabilities. They contended that the NCLT's approval meant all creditors were estopped from claiming dues prior to that date. They also pointed out that the resolution plan did not account for any payment to the respondent authorities, thus absolving them of liability. Furthermore, they argued that the respondent authorities had deemed notice of the IBC proceedings and that the order-in-original was passed without jurisdiction. They relied on the Supreme Court's decision in Ruchi Soya Industries Ltd. & Ors. vs. Union of India & ors. Contentions of the Revenue/State: The judgment does not record specific arguments made by the respondent CGST authorities.