2021 (5) TMI 409 - Tri - GST

Tribunal Orders GST Registration for Corporate Debtor to Ensure IB Code Compliance

The Tribunal granted the application and directed the Respondent to register the Corporate Debtor for GST, emphasizing compliance with the IB Code and ... Fresh GST registration for corporate debtor under CIRP - Corporate debtor undergoing CIRP treated as distinct person - Applicability of Ministry of Finance Circular No. 134/04/2020-GST - Supremacy of insolvency law under Section 238 - Maintaining corporate debtor as going concern and RP's powers - Invalidity of suo-moto cancellation as ground to deny registrationFresh GST registration for corporate debtor under CIRP - Corporate debtor undergoing CIRP treated as distinct person - Applicability of Ministry of Finance Circular No. 134/04/2020-GST - Invalidity of suo-moto cancellation as ground to deny registration - Maintaining corporate debtor as going concern and RP's powers - Supremacy of insolvency law under Section 238 - RP of a corporate debtor undergoing CIRP is entitled to obtain a fresh GST registration notwithstanding a prior suo moto cancellation of the corporate debtor's GST registration. - HELD THAT: - The Tribunal found that during CIRP the RP is operating the corporate debtor as a going concern under the powers conferred by the IB Code and that GST registration is necessary for those commercial transactions (para 6-8). The Ministry of Finance Circular No. 134/04/2020-GST dated 23.03.2020 treats the corporate debtor undergoing CIRP as a distinct person and requires the IRP/RP to obtain a new registration in each State/UT where the corporate debtor was earlier registered, within the stipulated timeline. The Circular therefore precludes the GST authority from treating a prior suo moto cancellation as a bar to grant fresh registration to the corporate debtor under CIRP (paras 10, 13-14). Further, the Tribunal relied on the overriding effect of the insolvency statute under Section 238 to hold that the insolvency regime and the Circular govern the position during CIRP and must be given effect to by the GST authority (para 15). The respondent's rejection of the registration applications without applying the Circular or recognising the RP's role was held to be unsustainable. In view of these conclusions, the respondent was directed to allow fresh GST registration of the corporate debtor so that the RP may continue to run the business as a going concern and comply with applicable GST obligations. [Paras 8, 10, 13, 14, 15]Application allowed; respondent directed to permit fresh GST registration of the corporate debtor.Final Conclusion: The Tribunal allowed the RP's application and directed the Commercial Tax Officer to register the corporate debtor under GST, holding that the Ministry of Finance circular and the overriding effect of the insolvency law require grant of fresh registration notwithstanding an earlier suo moto cancellation. Issues:1. Application for issuance of direction upon the Commercial Tax Officer to register fresh GST number of the Corporate Debtor.2. Rejection of GST registration applications by the Respondent Department.3. Failure of the Respondent to consider circular issued by the Ministry of Finance.4. Non-appearance of the Respondent in the matter.5. Management of business operations of the Corporate Debtor during CIRP.6. Interpretation of provisions of the IB Code regarding GST registration during CIRP.Analysis:1. The application was filed under Section 25(1) r.w. Section 25(2)(b) and Section 60(5) of the IB Code seeking direction for the registration of a fresh GST number for the Corporate Debtor. The Corporate Insolvency Resolution Process (CIRP) had commenced, and the IRP was replaced by the RP to complete the resolution process. The RP aimed to maintain the Corporate Debtor as a going concern by engaging another entity to run the unit/factory and generate revenues, with the intention to continue business operations.2. The Applicant submitted that the Respondent Department had rejected the GST registration applications on the grounds of the previous cancellation of GST registration. The rejection failed to consider Circular No. 134/04/2020-GST issued by the Ministry of Finance, which clarified the registration process for companies under CIRP. The Respondent's rejection was deemed arbitrary, ignoring the legal provisions and guidelines provided under the IB Code.3. Despite the notices and claims lodged by the VAT and GST Departments during CIRP, the Respondent did not appear in the matter. The RP was actively managing the business operations of the Corporate Debtor to ensure its continuity as a going concern, which aligns with the objectives of the IB Code. The Respondent's failure to participate in the proceedings was noted, especially considering the importance of completing the resolution process in a timely manner.4. The Tribunal emphasized the need to treat the Corporate Debtor undergoing CIRP as a distinct entity, requiring a new GST registration as per the Circular issued by the Ministry of Finance. The Circular highlighted that the cancellation of GST registration by the department previously should not hinder the registration process during CIRP. The Tribunal invoked Section 238 of the IB Code, asserting its supremacy over other laws and directing the Respondent to allow the registration of the Corporate Debtor in GST.5. The Tribunal concluded by allowing the application and directing the Respondent to register the Corporate Debtor in GST, emphasizing the importance of adhering to the provisions of the IB Code and the circular issued by the Ministry of Finance. The decision aimed to facilitate the resolution process and ensure the continuation of business operations during CIRP, in line with the objectives of insolvency laws.