Resolution Plan Approval by NCLT Renders Pending Service Tax Refund Appeal Abated, Rules CESTAT Chandigarh

In a recent decision, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chandigarh ruled on the matter of Ballarpur Industries Ltd. vs. CCE & ST, Panchkula. The tribunal held that once a resolution plan has been approved by the National Company Law Tribunal (NCLT), any appeal pending for the refund of Service Tax stands abated.

The case revolved around Ballarpur Industries Ltd., which had filed an appeal seeking a refund of Service Tax. However, during the pendency of the appeal, the NCLT approved a resolution plan submitted by the company. In light of this development, CESTAT Chandigarh deemed the appeal abated, citing the principle that once the NCLT approves a resolution plan, the company undergoes a significant change, rendering the appeal void.

The concept of functus officio, meaning that a tribunal or court’s authority ceases once its purpose has been fulfilled, was invoked by CESTAT Chandigarh. As the NCLT’s approval of the resolution plan fundamentally altered the status of Ballarpur Industries Ltd., the tribunal concluded that CESTAT had become functus officio regarding the pending Service Tax refund appeal.

This ruling underscores the legal consequences of NCLT’s approval of a resolution plan in the context of pending appeals related to taxation matters. It highlights the need for parties involved in such proceedings to be cognizant of the impact of corporate restructuring or resolution processes on ongoing legal disputes, particularly in matters concerning tax refunds.

The decision of CESTAT Chandigarh serves as a reminder of the dynamic nature of corporate insolvency proceedings and their implications on associated legal matters. It emphasizes the importance of timely and comprehensive legal advice to navigate the complex landscape of corporate restructuring and taxation laws effectively.