The Chennai Bench of National Company Law Appellate Tribunal (NCLAT) has held that Central Excise Authority is not a Secured Creditor under IBC.
The Appellant, Central Excise Authority challenged the approval of the Resolution Plan on the ground that the Corporate Debtor owes Rs. 22,60,32,948/- towards default in payment of Central Excise Duty, interest and penalty as per Central Excise Returns filed with the Appellant Department.
As per the Resolution Plan, only 0.13% has been earmarked towards Government dues, and the Financial Creditor is getting 44.5% of the Claim amounts and the other Operational Creditors are getting 0.51% of their Claim amounts, which is stated to be unfair.
The Appellant that in view of the attachment on the Property of the Corporate Debtor, the Appellant could fall within the definition of ‘Secured Creditor’.
The Respondent/department submitted that the Appellant is challenging the approval of the Plan dated 13/08/2021 which was already implemented on 08/02/2022 and that an amount of Rs. 68,98,00,000/- was spent by the Successful Resolution Applicant, pursuant to the approval of the Plan. It is the case of the Respondent that there was no objection made by the Appellant when the Claim amount was intimated.
The tribunal noted that From the usage of the words ‘save as provided in’ in Section 11E is in the nature of an exception intended to exclude the class of cases, mentioned in Companies Act, 1956, ‘The Recovery of Debts due to Banks and the Financial Institutions Act, 1993’, ‘SARFAESI Act, 2002’ and ‘I & B Code, 2016’. The ‘Secured Interest’ as defined under the Code excludes charges created by Operation of law. Section 11E of the Central Excise Act, 1944 is distinct from the provisions of the ‘Gujarat VAT Act, 2003’ and therefore, the decision in the matter of ‘State Tax Officer Vs. Rainbow Papers Limited’, (Supra) cannot be made applicable to the facts of this case. It is also pertinent to mention that the Master Circular No.1053/02/2017-CX, issued by the Ministry of Finance, Department of Revenue, Central Board of Excise and Customs specifies that dues under ‘Central Excise Act, 1944’ would have first charge only after the dues under the Provisions of the Code are recovered.
Case Title: The Assistant Commissioner of Central Tax v/s Mr. Sreenivasa Rao Ravinuthala & Anr.