Tribunal sets aside Impugned Order, admits section 9 application for Corporate Insolvency Resolution Process.

The Tribunal set aside the Impugned Order, admitting the section 9 application to initiate Corporate Insolvency Resolution Process against the Corporate Debtor. The matter was remanded to the Adjudicating Authority for further orders within 15 days, with no costs awarded. The Tribunal found the dispute raised by the Corporate Debtor regarding defective goods and debit notes to be fabricated and hypothetical, based on non-compliance with legal provisions and lack of material evidence.

---

---

Issues Involved:
1. Pre-existing dispute regarding the quality of supplied goods.
2. Validity and authenticity of the debit note issued by the corporate debtor.
3. Compliance with the Central Goods and Services Tax Act, 2017 and Rules.
4. Non-appearance and non-response of the corporate debtor.
5. Adjudicating Authority's conclusion based on the pre-existing dispute.

Issue-wise Detailed Analysis:

1. Pre-existing dispute regarding the quality of supplied goods:
The Appellant, an operational creditor, claimed an outstanding amount of Rs. 4,76,154 due since 28.6.2018, along with interest and applicable taxes, from the Corporate Debtor. The Corporate Debtor denied the demand, citing a defect in the quality of supplied goods for the first time in their reply to the Section 8 notice. The Appellant contested this claim, stating that the issue of defective goods was fabricated and raised as an afterthought to evade payment.

2. Validity and authenticity of the debit note issued by the corporate debtor:
The Corporate Debtor mentioned a debit note in their reply to the Section 8 notice. The Appellant argued that the debit note was fabricated, lacking necessary particulars such as date, PAN, GSTIN, and signature. The Appellant provided a sample debit note issued to another party, highlighting the required details under Section 34 of the Central Goods and Services Act, 2017, and Rule 53(1A) of the Central Goods and Services Tax Rules, 2017. The Appellant argued that the purported debit note was issued two years after the sale, without any goods being returned, indicating it was fabricated to avoid liability.

3. Compliance with the Central Goods and Services Tax Act, 2017 and Rules:
The Tribunal examined the compliance of the debit note with Section 34 of the Central Goods and Services Tax Act, 2017, and Rule 53(1A) of the Central Goods and Services Tax Rules, 2017. The debit note issued by the Corporate Debtor lacked essential details such as date, PAN, GSTIN, UIN, and signature, making it non-compliant with the legal provisions. The Tribunal concluded that there was no material evidence to suggest that the goods were returned due to defects, and the debit note was raised only to avoid payment.

4. Non-appearance and non-response of the corporate debtor:
The Corporate Debtor was served notice but did not appear before the Appellate Tribunal or file a reply to the appeal memo. Despite multiple opportunities, the Corporate Debtor failed to present oral arguments or any supporting documents, leading the Tribunal to proceed in their absence.

5. Adjudicating Authority's conclusion based on the pre-existing dispute:
The Adjudicating Authority, in its Impugned Order, concluded that there was a pre-existing dispute based on the Corporate Debtor's claim of defective goods and the issuance of various debit notes. However, the Tribunal found that the emails presented by the Corporate Debtor were internal and not sent to the Operational Creditor, and the purported debit note did not meet the legal requirements. The Tribunal referred to the Supreme Court's judgment in Mobilox Innovative Private Limited vs. Kirusa Software Private Limited, which stated that the dispute should not be spurious, hypothetical, or illusory. The Tribunal concluded that the dispute raised by the Corporate Debtor was fabricated and hypothetical.

Conclusion:
The Tribunal set aside the Impugned Order, finding it erroneous. The section 9 application was admitted for initiating Corporate Insolvency Resolution Process against the Corporate Debtor. The matter was sent back to the Adjudicating Authority for issuing necessary orders within 15 days of the judgment. There was no order as to costs.

---