First-charge tax dues do not become secured debt under insolvency law; tax claims remain operational creditor claims in resolution.

Statutory first-charge provisions in Section 11E of the Central Excise Act and Section 82 of the CGST Act do not override the Insolvency and Bankruptcy Code, because they expressly preserve its overriding effect. Tax dues under these regimes therefore do not become secured debt merely by virtue of first charge, unlike the Gujarat VAT provision considered in Rainbow Papers. The tax authority was correctly treated as an operational creditor, and the resolution plan's treatment of its claim had to comply with Section 30(2)(b) of the IBC. No illegality was shown on the ground that the plan offered less than liquidation entitlement under Section 53(1).

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Issues: Whether dues under the Central Excise and GST regime create a secured claim by reason of the first-charge provisions, and whether the approved resolution plan was contrary to the Insolvency and Bankruptcy Code for treating the tax authority as an operational creditor.

Analysis: The first-charge provisions in Section 11E of the Central Excise Act, 1944 and Section 82 of the Central Goods and Services Tax Act, 2017 expressly preserve the overriding effect of the Insolvency and Bankruptcy Code, 2016. Those provisions are materially different from the Gujarat VAT provision considered in Rainbow Papers, and do not convert statutory tax dues into secured debt in the present context. The claim was therefore correctly treated as operational debt, and payment under the resolution plan was required to conform to the treatment of operational creditors under Section 30(2)(b) of the Insolvency and Bankruptcy Code, 2016. No violation was shown on the footing that the amount offered was below liquidation entitlement under Section 53(1) of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The tax authority was not entitled to be treated as a secured creditor, and the approval of the resolution plan required no interference.

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