2024 (4) TMI 944 - HC - GST

Tax Appeal Succeeds: CGST Challenge Upheld with Complex Resolution Plan and Creditor Claim Considerations Resolved

HC allowed appellant's appeal challenging tax demand under CGST Act, setting aside previous order and admitting writ petition. The court recognized ... Alternate appellate remedy - Validity Of order-in-original - Recovery of demand of service tax - CIRP Proceedings under IBC - The effect of the approved resolution plan on the liabilities of the appellant - HELD THAT:- In the instant case, the proceedings before the NCLT, Kolkata Bench for approval of a corporate resolution plan was initiated in the year 2018, to be precise, on 08.01.2018 and the show cause notice was said to have been issued on the erstwhile company dated 05.11.2019. The resolution plan was approved by the NCLT, Kolkata Bench on 04.09.2019 and affirmed by the NCLT, New Delhi on 04.03.2021 and a special leave petition filed against the said order before the Hon'ble Supreme Court was dismissed on 04.05.2021. Thus, it is seen that the process under the Insolvency and Bankruptcy Code, 2016 had commenced much prior to the issuance of the show cause notice. Therefore, the above points of law are required to be considered, more particularly, the law laid down by the Hon'ble Supreme Court in several decisions of which we may refer to the decisions in the case of Ruchi Soya Industries Ltd. & Ors. vs. Union of India & ors. [2022 (3) TMI 60 - SUPREME COURT] wherein the Hon'ble Supreme Court held that the claim in respect of the demand having not lodged before the appropriate authority after public announcements were issued under Sections 13 and 15 of the I.B.C., as such, on the date on which the resolution plan was approved by the NCLT, all claims stood frozen and no claim, which is not part of the resolution plan, would survive. We are satisfied that points of law are required to be decided in the writ petition and, therefore, the appellant need not be relegated to avail the alternate appellate remedy under the Act, more so, when the jurisdiction of the second respondent has been questioned. Therefore, we are of the view that the writ petition should be heard after an affidavit-in-opposition is filed by the respondents and a decision should be taken on merits and in accordance with law. In the result, the appeal and its connected application stand allowed and the order passed in the writ petition is set aside. The writ petition is admitted for hearing. The order-in original dated 21.11.2023 impugned in the writ petition shall remain stayed till the disposal of the writ petition. Issues Involved:The judgment involves issues related to challenging an order under the CGST Act, 2017, in the context of a resolution plan approved by the NCLT, Kolkata Bench, and the applicability of the Insolvency and Bankruptcy Code, 2016.Details of the Judgment:Issue 1: Challenge to Order under CGST ActThe appellant challenged an order-in-original dated 21.11.2023 passed by the respondents under the provisions of the CGST Act, 2017. The order affirmed a demand of service tax and imposed a penalty equal to the tax amount. The appellant raised questions regarding the legality of the demand and the liability to pay the tax amount.Issue 2: Applicability of Resolution Plan Approved by NCLTThe appellant questioned whether the approved resolution plan by the NCLT, Kolkata Bench, absolved the appellant of all debts and liabilities accrued till the date of approval. The appellant argued that creditors are estopped from making claims post-approval of the resolution plan. The resolution plan was approved in 2019, and subsequent legal proceedings raised concerns about the liabilities of the appellant.Issue 3: Jurisdiction under Insolvency and Bankruptcy CodeThe judgment highlighted the commencement of proceedings under the Insolvency and Bankruptcy Code, 2016 before the issuance of the show cause notice related to the service tax demand. The court referred to precedents, emphasizing that all claims stood frozen upon approval of the resolution plan by the NCLT, barring claims included in the plan.The court acknowledged the need to address the legal points raised by the appellant regarding the resolution plan, creditor claims, and the jurisdiction of the respondents. Given the complexity of the issues and the challenge to the jurisdiction of the second respondent, the court allowed the appeal, set aside the previous order, and admitted the writ petition for further hearing. The respondents were directed to file an affidavit-in-opposition, and the case was listed for a future hearing before the appropriate Bench.