2025 (4) TMI 826 - AT - Service Tax

Abatement or continuation of proceedings initiated against M/s. St. John Freight Systems Pvt. Ltd. - HELD THAT - As the NCLT Chennai has ordered for Liquidation of the Respondent and as no application as per Rule 22 has been made by the Official Liquidator appointed by the NCLT for continuance of the appeal the appeal should abate in terms of Rule 22 of the Customs Excise and Service Tax Appellate Tribunal (Procedure) Rules 1982. As such the appeal gets abated in terms of Rule 22 of the CESTAT (Procedure) Rules 1982 and also gets dismissed as being infructuous.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment is whether the proceedings initiated against M/s. St. John Freight Systems Pvt. Ltd., which is under liquidation, should continue or be abated. This involves examining the implications of the liquidation order from the National Company Law Tribunal (NCLT) and the application of relevant legal provisions concerning the continuation of proceedings against a company under liquidation.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework primarily involves Section 31 of the Insolvency and Bankruptcy Code, 2016, which deals with the approval of resolution plans by the Adjudicating Authority and the consequences thereof. The precedent set by the Hon'ble Apex Court in the case of Ghanshyam Mishra is pivotal, where it was determined that once a resolution plan is approved by the Adjudicating Authority, claims not included in the resolution plan are extinguished, and no proceedings can be initiated or continued against the corporate debtor concerning such claims.

Additionally, Rule 22 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982, is relevant, as it dictates that proceedings abate if a company is wound up unless an application for continuation is made by the successor-in-interest.

Court's Interpretation and Reasoning

The Tribunal interpreted the provisions of Section 31 of the Insolvency and Bankruptcy Code, 2016, and the precedent set by the Apex Court in Ghanshyam Mishra to mean that once a resolution plan is approved, any claims not included in the plan are extinguished. The Tribunal also considered Rule 22 of the CESTAT (Procedure) Rules, 1982, which provides for the abatement of proceedings if a company is wound up, unless a continuation application is filed by the successor-in-interest.

Key Evidence and Findings

The Tribunal noted the completion of liquidation proceedings for the appellant company, M/s. St. John Freight Systems Pvt. Ltd., as per the NCLT order dated 19.01.2023. Additionally, the Tribunal acknowledged that no application for the continuation of proceedings was filed by the Official Liquidator or any successor-in-interest, as required under Rule 22.

Application of Law to Facts

The Tribunal applied the legal principles established in Ghanshyam Mishra and the provisions of Rule 22 to the facts of the case. It concluded that since the liquidation proceedings were completed and no application for continuation was filed, the appeal should abate.

Treatment of Competing Arguments

The Tribunal considered the arguments presented by the Authorized Representative of the Department, which detailed the service tax demands and the appellant's payment history. However, these arguments were rendered moot due to the overriding legal effect of the liquidation proceedings and the absence of a continuation application.

Conclusions

The Tribunal concluded that the appeal should abate in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982, and be dismissed as infructuous due to the completion of liquidation proceedings and the lack of a continuation application by the successor-in-interest.

SIGNIFICANT HOLDINGS

The Tribunal held that:

"Once a resolution plan is duly approved by the Adjudicating Authority under subsection (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."

This principle was pivotal in determining that the appeal should abate and be dismissed as infructuous.

The Tribunal's final determination was that the appeal abates under Rule 22 of the CESTAT (Procedure) Rules, 1982, due to the completion of the liquidation process and the absence of a continuation application, leading to the dismissal of the appeal as infructuous.