Reversal-under-Protest Is Not a Pre-Deposit; IBC Approval Abates CESTAT Appeals and Leaves Tribunal Functus Officio

Introduction

In a set of writ petitions arising out of tax disputes of the erstwhile Bhushan Steel Ltd. (BSL), later Tata Steel BSL Ltd. and now amalgamated into Tata Steel Ltd., the Calcutta High Court (Raja Basu Chowdhury, J.; judgment dated 12 November 2025) addressed two intersecting domains: the supervisory writ jurisdiction of a High Court over a tribunal situated within its territory, and the consequences that the Insolvency and Bankruptcy Code, 2016 (IBC) has for pending indirect tax appeals and monies earlier paid “under protest”.

The petitions challenged a common order of the Customs, Excise and Service Tax Appellate Tribunal, Kolkata, dated 16 April 2024, which disposed of four long-pending excise appeals as having abated due to the corporate insolvency resolution of BSL, and refused to entertain a miscellaneous application seeking refund of large amounts of CENVAT credit reversed “under protest”.

The High Court’s ruling is notable for clarifying that:

• Under the pre-2014 Section 35F of the Central Excise Act, 1944, where the tribunal has expressly waived pre-deposit, a prior reversal of CENVAT credit “under protest” is not a statutory pre-deposit and does not automatically entitle the assessee to refund.
• Upon approval of a resolution plan under Section 31 IBC, pending CESTAT appeals abate under Rule 22 of the CESTAT (Procedure) Rules, 1982, and the tribunal becomes functus officio; in that posture, it cannot adjudicate refund claims on such voluntary reversals.
• While a High Court can exercise Article 227 supervisory jurisdiction over a tribunal within its territory to correct jurisdictional errors, it will not substitute the tribunal’s legal conclusions absent jurisdictional error or violation of natural justice.

Background and Key Issues

BSL ran a large integrated steel plant and had availed CENVAT credit on steel structures, parts, accessories and cement used in plant construction. The department alleged these were “supporting structures”, not “capital goods”, and issued multiple show-cause notices (periods spanning August 2005–July 2009), culminating in four Orders-in-Original (2011 and 2012) disallowing credit and raising demands aggregating approximately Rs. 145.46 crores.

BSL:

• Filed appeals before CESTAT (2011–2012).
• Obtained waiver of pre-deposit and stay of recovery of equivalent penalty (2012–2014).
• Separately, under protest and contemporaneously with appeals, reversed CENVAT credit totaling the disputed amounts.

During pendency of appeals, BSL entered Corporate Insolvency Resolution Process (CIRP) in July 2017. The resolution plan proposed by Tata Steel was approved by the NCLT in May 2018, and affirmed by NCLAT in August 2018. The plan provided that all pre-effective date “operational debts” (including statutory dues, whether claimed or not) stood extinguished, with liquidation value of NIL for such claims. Government authorities did not lodge any claim covering the “reversed” CENVAT amounts.

In 2023, the amalgamated entity sought before CESTAT a recognition that the reversal under protest should be treated as pre-deposit and refunded in view of extinguishment of claims under IBC. The tribunal, relying on Rule 22 and the Supreme Court’s decision in Ghanashyam Mishra (2021), held that appeals had abated on approval of the resolution plan and that it had become functus officio—therefore declining the refund application.

The writ petitions before the Calcutta High Court raised:

1. Whether the High Court, in supervisory jurisdiction under Articles 226/227, could intervene in a CESTAT order even though the original adjudication orders arose from Odisha.
2. Whether CESTAT failed to exercise jurisdiction in refusing to determine refund entitlement of the reversed CENVAT credit, particularly since the government did not claim those amounts in the CIRP and the resolution plan extinguished such claims.

Summary of the Judgment

• Jurisdiction: The High Court affirmed that it possesses supervisory jurisdiction under Article 227 over tribunals located within its territorial limits to keep them within bounds, even when the originating adjudication emanates from another state. However, such jurisdiction is limited to correcting jurisdictional errors or violations of natural justice—not reappreciation of merits.
• On Merits: The Court upheld the CESTAT’s approach:
  • Under the pre-amended Section 35F regime (as applicable to these appeals) pre-deposit was not mandatory and had been expressly waived. Therefore, the reversal of CENVAT credit “under protest” by BSL was a voluntary act and did not constitute a statutory pre-deposit.
  • Upon approval of the resolution plan, claims not forming part of the plan stood extinguished (per Ghanashyam Mishra), and the pending appeals abated under Rule 22 of the CESTAT Rules. Consequently, the tribunal was functus officio and could not adjudicate the refund issue.
  • No jurisdictional error or illegality was shown in the tribunal’s order. In the narrow supervisory writ scope, no interference was warranted.
• Outcome: Writ petitions dismissed; no costs.

Detailed Analysis

1) Precedents Cited and How They Informed the Decision

The Court engaged with a wide body of precedent spanning writ jurisdiction, tax appellate structure, and IBC effects on tax claims:

• Writ/Supervisory Jurisdiction:
  • Hari Vishnu Kamath v. Syed Ahmed Ishaque (1954): Re-affirmed that certiorari lies to correct jurisdictional error, illegality, or breach of natural justice; not to reappraise facts. The Court quotes paras 24–25 to anchor the supervisory lens.
  • Waryam Singh (1954); Umaji Meshram (1986); Syed Yakoob (1964); Surya Devi Rai (2003): These decisions collectively delineate the contours of Articles 226 and 227—permitting supervisory correction but restraining appellate-like merits review.
  • Ambica Industries v. CCE (2007): Though addressing appellate forum under Section 35G (and warning against forum shopping), it does not displace a High Court’s supervisory writ control over a tribunal situated within its territory.
• IBC on Government/Statutory Claims:
  • Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss ARC (2021) 9 SCC 657: Cornerstone authority that upon approval of a resolution plan, all claims not part of the plan stand extinguished, binding government authorities as well. CESTAT and the High Court apply this to conclude that departmental claims not lodged are extinguished post-approval.
  • Ruchi Soya Industries Ltd. v. Union of India (2022) 6 SCC 343: Directed refund of amounts deposited at admission of appeals when the underlying claims had extinguished under IBC. The High Court distinguishes Ruchi Soya on the facts here because the amounts were not statutory pre-deposits but voluntary reversals where pre-deposit had been waived.
  • Kotak Mahindra Bank Ltd. v. A. Balakrishnan (2022) 9 SCC 186: Clarifies the interlinked definitions in Section 3 IBC—claim, debt, default—supporting that a “claim” includes disputed rights to payment, whether reduced to judgment or not.
  • ESL Steel Ltd. v. PC CGST & CE, Ranchi (Jharkhand HC): Recognizes that while past liabilities pre-IBC approval are extinguished, the new management also cannot claim transitional input credits of earlier periods—illustrating the “both sides of the coin” effect post-IBC approval.
• Tax/Tri­bunal Procedure and Abatement:
  • Shabina Abraham v. CCE (2015) 322 ELT 372 (SC): Emphasizes strict construction of taxing statutes and disallows stretching statutory text to rope in persons not chargeable; cited to fortify the consequence of abatement and the limits on implied powers.
  • Ultratech Cement Nathdwara Cement Ltd. v. CC Jamnagar (Preventive) (CESTAT): Recognizes CESTAT’s lack of express power under the Excise/Customs Acts to give effect to NCLT proceedings and that such recovery/refund issues post-IBC are for the department, not the tribunal, to resolve absent explicit statutory authority.
• Pre-deposit Jurisprudence:
  • VVF (India) Ltd. v. State of Maharashtra (2022) 13 SCC 644: Under MVAT Section 26(6-A), deposit under protest can satisfy the mandatory pre-deposit—distinguished by the High Court because Excise Section 35F (pre-2014) had no such mandatory scheme and, in this case, pre-deposit was expressly waived.
  • Oswal Chemicals & Fertilizers Ltd. v. CCE, Bolpur (2015) 14 SCC 431, and tribunal decisions such as ACC Ltd.: useful for deposit/refund principles, but again dependent on the statutory context of the applicable pre-deposit regime.

2) The Court’s Legal Reasoning

The Court’s reasoning proceeds in two distinct yet connected steps—jurisdiction and merits.

a) Supervisory jurisdiction under Article 227

The Court acknowledges that it can exercise supervisory jurisdiction over the CESTAT located within the Calcutta High Court’s territory to “keep tribunals within bounds,” even if the original adjudication took place in another state. This accepts the petitioner’s reliance on classic Article 226/227 jurisprudence and reconciles it with the forum-discipline in Ambica Industries. However, supervisory jurisdiction is narrow: it exists to correct jurisdictional excess/abstinence or violations of natural justice—not to replace the tribunal’s legal findings where no such fundamental flaw is shown.

b) Abatement under Rule 22 and functus officio

The Court accepts the CESTAT’s application of Rule 22 of the CESTAT (Procedure) Rules, 1982: on the approval of the resolution plan, the appeals abated. In practical and legal terms, this rendered the tribunal functus officio in relation to the pending appeals and collateral requests. Without an express statutory grant in the Excise/Customs framework enabling the tribunal to decide the refundability of sums voluntarily paid prior to appeal (and separate from the statutory pre-deposit mechanism), the tribunal could not adjudicate the refund plea.

c) Reversal “under protest” is not a pre-deposit in a waived pre-deposit regime

The decision’s core doctrinal contribution is to delineate the status of amounts paid “under protest” outside the statutory confines of Section 35F pre-deposit:

• Pre-2014 Section 35F permitted the tribunal to waive pre-deposit. Here, CESTAT had in fact waived pre-deposit and stayed recovery.
• Given that statutory pre-deposit was waived, the payments via reversal of CENVAT credit—though made “under protest”—were not made under any statutory compulsion to maintain the appeal. They cannot later be re-characterized as pre-deposit.
• Accordingly, post-approval of the resolution plan (when claims not forming part of the plan stand extinguished), the existence of a voluntary payment does not convert the tribunal into a forum to order refund, particularly after abatement. The ratio in Ruchi Soya—ordering refund of deposit made “at admission of the appeals”—turns on the presence of a statutory pre-deposit; it does not extend to a scenario where pre-deposit was waived and the payment predated and sat outside that scheme.

d) IBC extinguishment of claims does not translate into tribunal-ordered refunds of voluntary pre-appeal payments

The plan clauses (notably 8.2.6 and 8.6.10) were carefully set out, showing:

• All pre-effective date claims of operational creditors (including governmental dues, whether or not lodged) are operational debts with NIL liquidation value and stand extinguished upon plan approval.
• All proceedings and enforcement actions also abate or stand withdrawn.

The Court accepts this regime to conclude that the department’s “claims” for the disputed period had extinguished because they were not part of the plan and were not lodged. However, the extinguishment of the department’s claim does not by itself empower CESTAT to direct refund of amounts voluntarily paid outside the pre-deposit framework once the appeals have abated and the tribunal is functus officio. The tribunal’s refusal to proceed was, in the High Court’s view, a correct recognition of its statutory limits.

e) Scope of writ review and refusal to interfere

In the supervisory setting, the High Court restricts itself to whether the tribunal exceeded or failed to exercise its jurisdiction. Finding that CESTAT correctly applied Rule 22 and Ghanashyam Mishra, and recognizing its lack of authority to order refunds post-abatement, the Court held that no jurisdictional or natural justice error existed. As such, intervention was declined and the writ petitions were dismissed.

3) Practical Impact and Prospective Significance

The ruling has several forward-looking consequences for insolvency-era tax disputes and appellate practice:

• Payments “under protest” are not fungible with statutory pre-deposits, especially in pre-2014 appeals where pre-deposit was waived. If assessees intend to preserve refund rights akin to pre-deposit, they should consider making and recording payments within the statutory pre-deposit architecture where applicable.
• After IBC plan approval, mere existence of a past voluntary payment does not confer jurisdiction on CESTAT to order refund. With appeals abated, claimants must evaluate other legal routes, including administrative claims/refund mechanisms or civil remedies, consistent with plan terms and statutory frameworks.
• Government departments must be vigilant in lodging all conceivable pre-effective date claims in CIRP, as unlodged claims are extinguished. However, extinguishment of claims does not equate to an automatic duty on tribunals to issue restitution orders for voluntary payments made outside statutory pre-deposit schemes.
• Supervisory writs remain available to police tribunal jurisdiction, but are not substitutes for statutory appeals. High Courts will not, in Article 227, embark on merits reassessment or create jurisdiction where the tribunal has none.
• Resolution plans with detailed treatment of receivables and past payments remain critical. Acquirers should expressly capture refund entitlements, procedural pathways, and representations/warranties within the plan or ancillary documentation.

Complex Concepts Simplified

• Abatement: Legal termination of a proceeding because of a supervening event (e.g., death, insolvency). Under Rule 22 of the CESTAT Rules, appeals may abate, and unless steps are taken to continue them, the tribunal loses seisin.
• Functus Officio: Once a tribunal disposes of or loses competence over a matter (e.g., due to abatement), it cannot take further substantive decisions in that matter.
• Pre-deposit (Section 35F): A statutory condition for entertaining an appeal. Before the Finance (No. 2) Act, 2014, pre-deposit could be waived; post-2014, fixed percentages are mandated. A voluntary payment “under protest” is not a statutory pre-deposit where the tribunal has already waived pre-deposit.
• “Under protest” payment: A payment made while reserving rights to contest liability. It preserves contest but does not itself grant the payer procedural rights that belong to a statutory pre-deposit unless the statute so provides.
• IBC extinguishment of claims: Once a resolution plan is approved under Section 31 IBC, all claims not part of the plan are extinguished. This binds all stakeholders, including government authorities. It does not, by itself, create an entitlement to refunds beyond the statutory competence of the forum being approached.
• Article 226 vs Article 227:
  • Article 226: Writ jurisdiction to enforce fundamental and legal rights; is broader but generally avoided where efficacious alternative remedies exist.
  • Article 227: Supervisory jurisdiction over subordinate courts/tribunals within the High Court’s territory to keep them within jurisdiction. Narrower: aimed at jurisdictional control, not merits review.

Case Timeline

• 2005–2009: CENVAT credit availed on steel structures, parts, accessories, cement.
• 2011–2012: Four orders-in-original disallowing credit; aggregate disputed credit about Rs. 145.46 crores.
• 2011–2014: Appeals filed before CESTAT; pre-deposit waived; recovery stayed.
• March 2011: BSL reverses CENVAT credit “under protest.”
• 26 July 2017: CIRP initiated; IRP invites claims; department files claim only for 2014–2017 period, not for the reversed credit covered by OIOs.
• 15 May 2018: NCLT approves resolution plan; 10 August 2018: NCLAT affirms.
• 2018–2021: Name change to Tata Steel BSL Ltd.; later merged into Tata Steel Ltd. (effective 11 November 2021).
• 26 September 2023: CESTAT allows bringing merger on record; MA 75784/2023 filed to seek refund of reversed credit post-IBC plan approval.
• 16 April 2024: CESTAT holds appeals abated under Rule 22; tribunal functus officio; refund application disposed.
• 12 November 2025: Calcutta High Court dismisses writ petitions; no interference in supervisory jurisdiction.

Conclusion

This judgment sets a clear and practical marker at the intersection of indirect tax appellate procedure and insolvency law. It establishes that, in the pre-2014 Section 35F regime, an “under protest” reversal does not metamorphose into a statutory pre-deposit where the tribunal has already waived pre-deposit. Once a resolution plan is approved and appeals abate under Rule 22, the tribunal is functus officio and cannot pronounce on the refundability of such voluntary payments.

While the High Court reaffirms its supervisory reach over tribunals situated within its territory, it equally reaffirms the discipline of that jurisdiction: absent a jurisdictional misstep or breach of natural justice, writ courts will not substitute their views for those of the tribunal or create jurisdiction where none exists.

For practitioners, the decision underscores the importance of:

• Structuring payments within statutory pre-deposit frameworks when seeking appellate relief and potential refunds.
• Meticulously capturing receivables/refund entitlements and procedural pathways within resolution plans.
• Understanding that IBC extinguishment of claims binds the sovereign but does not itself endow tribunals with powers they do not possess.

In sum, Tata Steel v. Union of India harmonizes IBC’s claim-extinguishment doctrine with the statutory limits of the CESTAT’s jurisdiction and the High Court’s supervisory function, delivering a pragmatic precedent for future insolvency-tinged tax disputes.

Key Citations

• Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss ARC, (2021) 9 SCC 657
• Ruchi Soya Industries Ltd. v. Union of India, (2022) 6 SCC 343
• Kotak Mahindra Bank Ltd. v. A. Balakrishnan, (2022) 9 SCC 186
• Hari Vishnu Kamath v. Syed Ahmed Ishaque, (1954) 2 SCC 881
• Ambica Industries v. CCE, (2007) 6 SCC 769
• Shabina Abraham v. CCE & Customs, 2015 (322) ELT 372 (SC)
• VVF (India) Ltd. v. State of Maharashtra, (2022) 13 SCC 644
• Oswal Chemicals & Fertilizers Ltd. v. CCE, Bolpur, (2015) 14 SCC 431
• ESL Steel Ltd. v. PC CGST & CE, Ranchi (Jharkhand HC)
• Ultratech Cement Nathdwara Cement Ltd. v. CC Jamnagar (Preventive) (CESTAT)