Service Tax Demand not Part of Approved Resolution Plan fails w/o a Continuance Application: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that a service tax demand that is not part of an approved resolution plan under the Insolvency and Bankruptcy Code (IBC) cannot be sustained. The tribunal emphasized the principle of a "clean slate," where a corporate debtor, upon the approval of a resolution plan, is discharged of all past claims not included in the said plan. In this case, the tax department's demand was not part of the approved plan, and the department had failed to file a continuance application to keep the proceedings alive. The CESTAT held that the finality of the IBC process is paramount, and all creditors, including statutory bodies, are bound by the approved plan. This judgment reinforces the supremacy of the IBC, providing certainty to the resolution process and protecting the revived company from unforeseen historical claims.