2019 (12) TMI 649 - Tri - Insolvency and Bankruptcy

Tribunal permits access to GST Portal Account during Corporate Insolvency Resolution Process

The Tribunal allowed the Corporate Debtor access to its GST Portal Account during the Corporate Insolvency Resolution Process (CIRP) to file GST Returns ... Continuation of going concern during corporate insolvency resolution process (CIRP) - access to statutory electronic tax portal to file post-admission returns - payment of current tax liabilities during CIRP despite pre-admission arrears - treatment of pre-admission tax dues as claims of operational creditors - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - adjustment of net GST liability after availing eligible input tax credit (ITC)Access to statutory electronic tax portal to file post-admission returns - continuation of going concern during corporate insolvency resolution process (CIRP) - Permission to enable the Corporate Debtor to access its GST portal and to file GST returns for transactions arising after commencement of CIRP. - HELD THAT: - The Tribunal held that where a corporate debtor is undergoing CIRP and is to be run as a going concern, blocking access to its GST portal impedes the debtor's ability to generate GST-compliant invoices and to carry on business post-initiation. The order recognises the practical necessity for the resolution professional to file returns relating to supplies made after the commencement of CIRP so that the corporate debtor can transact in the market during the resolution period. Consequently, respondents were directed to permit access to the GST Net Portal for filing returns generated after initiation of CIRP.The Corporate Debtor is permitted access to its GST portal and to file GST returns for supplies made after commencement of CIRP.Payment of current tax liabilities during CIRP despite pre-admission arrears - adjustment of net GST liability after availing eligible input tax credit (ITC) - Authority to pay net GST liabilities arising during the CIRP period without requirement to first discharge pre-admission GST arrears. - HELD THAT: - The Tribunal accepted the Resolution Professional's contention that the corporate debtor should be allowed to pay GST liabilities that arise after the commencement of CIRP without being compelled to clear pre-admission tax arrears. It directed that the applicant may pay the net GST liability for the CIRP period after availing eligible ITC, and that such payment be accepted and adjusted towards GST liabilities of the CIRP period. The decision focuses on enabling the ongoing business and ensuring tax compliance for post-admission transactions while distinguishing these liabilities from pre-admission claims.The Resolution Professional may pay net GST liabilities arising during CIRP (after availing eligible ITC) without first settling pre-admission GST arrears; such payments shall be accepted and adjusted for the CIRP period.Treatment of pre-admission tax dues as claims of operational creditors - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - Pre-admission GST claims remain claims of operational creditors to be submitted to the Resolution Professional and cannot be a condition precedent for allowing payment of post-admission GST liabilities; IBC's overriding effect displaces contrary administrative practice under the GST regime. - HELD THAT: - The Tribunal reiterated that tax authorities are operational creditors insofar as pre-admission tax dues are concerned and are entitled to make claims before the Resolution Professional under the Insolvency and Bankruptcy Code. Relying on the statutory scheme, and observing that Section 238 gives the IBC overriding effect over inconsistent laws, the Tribunal rejected the contention that absence of a specific mechanism in the GST law or its software to accept post-admission payments absent clearance of past dues should prevent the corporate debtor from discharging current GST liabilities. The order thus prevents tax authorities from insisting on payment of pre-admission dues as a condition for accepting post-admission GST payments or enabling filing of returns.Pre-admission GST dues must be pursued as claims before the Resolution Professional; they do not preclude acceptance of post-admission GST returns/payments in view of the IBC's overriding effect.Final Conclusion: The application was allowed: respondents were directed to enable the corporate debtor's access to its GST portal, permit filing of returns and payment of net GST liabilities arising after commencement of CIRP (after availing eligible ITC), and to treat pre-admission GST dues as operational creditor claims to be lodged with the Resolution Professional rather than as a condition for accepting post-admission tax compliance. Issues: Permission to access GST Portal Account during CIRP, Payment of net GST liability, Treatment of pre-admission GST duesPermission to access GST Portal Account during CIRP:The judgment addresses the issue of whether the Corporate Debtor should be allowed access to its GST Portal Account to file GST Returns during the period of Corporate Insolvency Resolution Process (CIRP). The Resolution Professional sought permission for the Corporate Debtor to access the account and pay the net GST liability from the date of commencement of CIRP. The 1st Respondent argued that current dues cannot be accepted before clearing past dues as per the GST Act. The Tribunal observed that if the Corporate Debtor is to be run as a going concern during CIRP, it can be obligated to pay taxes from the initiation of CIRP. The creditors, including Tax authorities, can claim against the Corporate Debtor for pre-admission period dues under the Insolvency and Bankruptcy Code.Payment of net GST liability:The Tribunal highlighted that if the Corporate Debtor's GST Portal is blocked, it would face challenges in generating bills falling under GST and paying taxes for the post-admission period. The judgment emphasized that Tax authorities fall under the Operational Creditor category, and they can make claims before the Resolution Professional instead of demanding payment of pre-admission dues before accepting tax liabilities arising during CIRP. The Tribunal referenced Section 238 of the Insolvency and Bankruptcy Code, stating that the IBC supersedes other laws in case of contradictions. It directed all Respondents to allow the Corporate Debtor access to its GST Net Portal Account, file GST Returns without insisting on past GST dues payment, and adjust net GST liability from the commencement of CIRP.Treatment of pre-admission GST dues:Regarding the treatment of pre-admission GST dues, the judgment clarified that Tax authorities can claim against the Corporate Debtor for pre-admission period dues under the Insolvency and Bankruptcy Code. The Tribunal emphasized that the Resolution Professional should not be compelled to pay pre-admission dues before accepting tax liabilities arising during CIRP. It highlighted that the IBC's overriding effect on other laws ensures that business operations during CIRP are not disrupted due to lack of specific provisions in the GST Act. The judgment ultimately disposed of the application, allowing the Corporate Debtor to file GST Returns and pay net GST liability from the commencement of CIRP without clearing past dues.