2022 (9) TMI 425 - HC - VAT and Sales Tax

High Court orders refund of pre-deposit amounts exceeding Rs. 61.05 Crores approved under resolution plan.

The Rajasthan High Court held that the Tax Board's decision to reject the refund of pre-deposit amounts was unfounded. The court ruled that the department ... Refund of amount paid as pre-deposit with the appeals (along with interest) - Approval of resolution plan under IBC - ex parte assessment orders - Section 82 (3) of the Rajasthan Value Added Tax Act, 2003 - HELD THAT:- Pre-deposit of a percentage of the assessed amounts was paid with the appeals by way of mandatory statutory obligation as per Section 82 (3) of the Act of 2003 - Section 82(3) of the Act of 2003 imposes a mandatory statutory obligation of making a pre-deposit for entertaining an appeal. In appeals against ex parte assessment orders, the mandatory statutory pre-deposit would be 5% of the Value Added Tax and 10% of the Value Added Tax amount in other cases. On going through the provisions of the Act of 2003 and the Rules of 2006, it becomes clear that mandatory statutory obligation pre-deposit with the appeal comprises of a proportion of VAT liability imposed upon the assessee by the assessing authority. It is not in dispute that the respondent Department had submitted a claim for an outstanding amount of Rs. 479,73,13,819/- before the NCLAT in the resolution proceedings in the capacity of an operational creditor. The amount so claimed would relate to Value Added Tax and nothing else. The NCLAT disposed of the demands raised by all corporate/operational creditors including the respondent Department while accepting its claim only for a sum of Rs. 61.05 crores - the liability of the petitioner towards the respondent Department was fixed at Rs. 61.05 crores. Any demand made or amount retained by the Department beyond the said sum of Rs. 61.05 crores either from the sick unit or from the petitioner would, thus, be invalid as being contrary to the Resolution Plan approved by the NCLAT. Once the tax liability raised by the Department had been fixed by effect of acceptance of Resolution Plan, manifestly, the Department could not hold on to any payment made by the assessee in excess of what has been approved under the Resolution Plan, i.e. Rs. 61.05 crores - The Resolution Plan having been approved and the claim of the Department having been finally decided by the NCLAT, if at all the Department was desirous of claiming that the pre-deposit amounts were exclusive and beyond the claim filed by the Department before the NCLAT, then the burden would be on the Department to prove the same. The assessee discharged the burden put upon it by Section 53 (5) of the Act of 2003 by virtue of the Resolution Plan finalized by the NCLAT. Thus, the finding recorded by the Tax Board that the amount of pre-deposits were distinct and were not covered under the claim filed by the Department before the NCLAT has no foundation whatsoever. As the original assessee, i.e. M/s. Binani Cement Ltd., was compelled to file the appeals with pre-deposits of a percentage of the tax liability by way of mandatory statutory obligation as per the assessment orders issued by the Commercial Taxes Department, the consequential relief pursuant to extinguishment of the demands under the assessment order would definitely require a direction for refund of the amount to the successful Resolution Applicant, i.e. the petitioner herein, who took over the assets and liabilities of the sick unit according to the Resolution Plan approved by the NCLAT. The consolidated impugned order dated 28.12.2020 passed by the Rajasthan Tax Board, Ajmer in the appeals filed by the petitioner is set aside to the extent the applications filed by the petitioner for refund of pre-deposit amounts with interest were rejected - revision allowed. Issues Involved:1. Jurisdiction and material irregularity by the Rajasthan Tax Board.2. Contradiction in the Tax Board's decision regarding the amount recoverable and refund of pre-deposit.3. Refund of mandatory statutory obligation pre-deposit with interest.4. Application of the Insolvency and Bankruptcy Code (IBC) and the approved Resolution Plan.Issue-wise Detailed Analysis:1. Jurisdiction and Material Irregularity by the Rajasthan Tax Board:The petitioner, M/s. UltraTech Nathdwara Cement Limited, challenged the Rajasthan Tax Board's order dated 28.12.2020, which rejected their applications for a refund of mandatory statutory obligation pre-deposit with interest. The petitioner argued that the Tax Board ignored the order dated 14.11.2018 by NCLAT, New Delhi, and the orders by the Hon'ble Supreme Court, as well as the judgment dated 07.04.2020 by the Division Bench of the Rajasthan High Court. The Tax Board's decision was seen as excessive and materially irregular for not adhering to these higher authorities' orders and the true spirit of the law.2. Contradiction in the Tax Board's Decision:The Tax Board held that the maximum amount recoverable from the petitioner was Rs. 61.05 Crores, as per the NCLAT's order and the Supreme Court's judgments. However, it simultaneously rejected the refund of the pre-deposit amount lying with the respondent department in excess of Rs. 61.05 Crores. This contradiction was challenged by the petitioner, arguing that the Tax Board's decision was materially irregular and inconsistent.3. Refund of Mandatory Statutory Obligation Pre-deposit with Interest:The petitioner argued that the pre-deposit amounts made as a mandatory statutory obligation should be refunded with interest. The pre-deposit was a proportion of the VAT liability imposed by the assessing authority. The petitioner contended that if the appeals had been accepted on merits, the pre-deposit amounts would have been reimbursed. Since the Tax Board did not decide the appeals on merits due to the Department's decision to dispose of all liabilities as per the NCLAT's resolution plan, the appeals became infructuous. Therefore, the petitioner argued that the pre-deposit amounts should be refunded.4. Application of the Insolvency and Bankruptcy Code (IBC) and the Approved Resolution Plan:M/s. Binani Cement Limited became sick, leading to insolvency proceedings under the IBC, 2016. The NCLAT approved the petitioner's resolution plan, fixing the liability towards the respondent department at Rs. 61.05 Crores. The petitioner argued that any demand or amount retained by the department beyond this sum would be invalid. The Tax Board's reasoning that the pre-deposit amounts were not part of the resolution plan was challenged, as the entire tax liability was comprehensively decided by the NCLAT. The petitioner contended that the department could not hold on to any payment made in excess of Rs. 61.05 Crores, and the pre-deposit amounts should be refunded as per Section 53 (3A) of the Act of 2003 and Rule 27 of the Rules of 2006.Conclusion:The Rajasthan High Court concluded that the Tax Board's decision to reject the refund of pre-deposit amounts was without foundation. The court held that the department could not retain any amount beyond the Rs. 61.05 Crores approved under the resolution plan. The appeals became infructuous with the acceptance of the resolution plan, and the petitioner was entitled to a refund of the pre-deposit amounts with interest. The court set aside the Tax Board's order dated 28.12.2020 to the extent it rejected the refund applications and directed the reimbursement of the pre-deposit amounts within three months with applicable interest. The revisions were allowed in these terms.