Statutory first charge under GST law does not override insolvency priority where the IBC expressly prevails.

A statutory first charge under Section 82 of the CGST Act does not confer secured creditor status in insolvency where the provision is expressly subject to the Insolvency and Bankruptcy Code, 2016. The tax department's dues therefore remained payable only in the manner prescribed under the Code and were correctly treated as operational debt, not secured debt. The Resolution Professional was also justified in rejecting a revised tax claim introduced during the CIRP moratorium, since such a claim could not be entertained in view of the moratorium. The approved resolution plan was held to be consistent with the insolvency framework, and no interference was warranted.

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Issues: (i) Whether Section 82 of the Central Goods and Services Tax Act, 2017 conferred secured creditor status on the State Tax Department despite insolvency proceedings under the Insolvency and Bankruptcy Code, 2016; (ii) Whether the Resolution Professional could reject the revised tax claim raised during the moratorium period.

Issue (i): Whether Section 82 of the Central Goods and Services Tax Act, 2017 conferred secured creditor status on the State Tax Department despite insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

Analysis: Section 82 creates a first charge, but it expressly operates "save as otherwise provided in the Insolvency and Bankruptcy Code, 2016". That saving clause makes the statutory charge subject to the insolvency regime. The distinction from Section 48 of the Gujarat Value Added Tax Act, 2003 was material because Rainbow Papers was confined to a provision that did not contain such subordination. The dues were therefore payable only in the manner provided under the Code and could not elevate the Department to secured creditor status.

Conclusion: The Department was not entitled to be treated as a secured creditor, and its claim was correctly treated as an operational debt.

Issue (ii): Whether the Resolution Professional could reject the revised tax claim raised during the moratorium period.

Analysis: The revised liability was sought to be introduced during the CIRP moratorium. In view of the moratorium under the Code, the Resolution Professional was justified in declining to entertain the updated claim based on such proceedings.

Conclusion: The rejection of the revised claim was upheld.

Final Conclusion: The approved resolution plan was found to be compliant with the insolvency framework, and no interference was warranted.

Ratio Decidendi: A statutory first charge under a taxing statute does not confer secured creditor status in insolvency where the charging provision expressly subordinates itself to the Insolvency and Bankruptcy Code, 2016.

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