TaxTMI 
TaxTMI 
2023 (8) TMI 663
X X X X Extracts X X X X
X X X X Extracts X X X X
....Corporate Insolvency Resolution Process (in short "CIRP") of the corporate debtor. The Appellant is a suspended Director of the Corporate Debtor ZTE Telecom India Private Limited. 2. In brief, the facts of the case, as stated by the Appellant, is that a Master Service Agreement ("MSA") was signed between the corporate debtor and the operational creditor on 17.9.2015 with the validity of five years upto 16.9.2020. In accordance with the MSA, the Respondent as "Sub-Contractor" or "Service Contractor" was expected to execute the Works as stated in the MSA, which included Site Construction, Network Planning and Optimization, Telecom Implementation, and Final Acceptance, as covered in the "Scope of Works" in the MSA. Subsequently, supplementary agreements were executed between the corporate debtor and operational creditor/respondent in continuation of the MSA which covered various aspects of the Works and certain other provisions. 3. The Appellant has further stated that in accordance with the work completed by the respondent, invoices were raised by the respondent from time to time and due payments were made by the corporate debtor to the operational creditor. He has added that four ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be admitted since the said operational debt is disputed. 5. We heard the arguments advanced by the Learned Senior Counsels for both the parties and perused the record with their able assistance. 6. The Learned Senior Counsel for Appellant has argued that four invoices were issued incorporating the service tax, which were not acceptable to the corporate debtor, and therefore, these invoices were rejected by the payment system, and after mutual discussion between the corporate debtor and operational creditor, four fresh invoices incorporating GST were issued, which were fully honoured and paid by the corporate debtor. He has further argued that with regard to 15% service tax paid by the operational creditor, he (operational creditor) could seek refund from the tax authorities, but instead of doing so the operational creditor is insisting that the corporate debtor makes good the amount of extra service tax paid by the operational creditor by giving him a set-off. He has referred to a series of e-mails exchanged between the corporate debtor and operational debtor, starting with e-mail dated 25.9.2017 wherein the fact that four vouchers dated 26.12.2016, 28.12.2016, 28.12.2016 and 25....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llant has also pointed out that the corporate debtor is a solvent company and going concern with a sizeable number of employees and has discharged its liabilities, including other liabilities owed to the operational creditor, and it is not a fit case for resolution of insolvency merely on a disputed claim of non-payment of certain amount made by the operational creditor without considering the presence of a pre-existing dispute. 9. The Learned Counsel for Respondent No. 1 has argued that the Adjudicating Authority has duly noted the e-mail communication between the two parties in paragraph 7 of the Impugned Order and has given its findings in paragraph 11 by considering at the clauses of MSA and Supplementary Agreements and the liability of the corporate debtor. He has further argued that the reason that the corporate debtor is a healthy and solvent company cannot be the sufficient reason for not admitting section 9 petition, which should be admitted if the requirements under section 9 is fulfilled. He has further argued that the existence of a dispute relating to non-payment of service tax amount by the corporate debtor is a hypothetical and illusory dispute, which has been raise....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e corporate debtor had rejected the demand of the operational creditor raising the false dispute of incorrect invoices and refused to make the payment of the Operational Debt against the pending invoices." 12. It is noted that a demand notice dated 14.2.2019 under section 8 of the IBC (attached at pp.246-319 of appeal paperbook, Vol.II), was sent by the operational creditor to the corporate debtor. The demand notice notes in Sr. No. 7 of the "Particulars of the Operational Debt" as follows:- "7. The Operational Creditor, vide an email dated November 20, 2017, informed the Corporate Debtor that the Operational Creditor has already deposited the Service Tax amount with the tax authorities for the invoices raised by the Operational Creditor, on or before June 30, 2017. Hereto annexed and marked as Annexure "A3" is a print of email dated November 20, 2017 addressed by the Operational Creditor to the Corporate Debtor." 13. The demand notice further notes that vide e-mail dated 9.8.2018, the corporate debtor admitted its liability to bear the service tax amount of Rs.30.01 lakhs. Sr. Nos. 9, 10 and 11 of the 'Particulars of Operational Debt' given in the demand notice under sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd and penalty as defined in "Contract Metrics" mentioned in the Supplementary TI/RF/MS/TSP/OFC and all other Service Agreement of this MSA. In addition, and without limiting the generality of the foregoing itis expressly stated that the said price is fully inclusive of all Works described according to "Scope of Works" and "Responsibility. Matrix," and elsewhere in this Agreement and comprises all costs and expenses incurred in the provision of the Works such as all personnel, costs, overheads, profit ,supervision, social costs, Products, personal and work-related transport, communication costs, duties, freight, insurance, packing, storage, unpacking and removal of waste, positioning, installation, commissioning, testing and preparatory work as well as all other charges, expenses whether direct or indirect and whether they are expressly defined or specified in this Agreement as discrete tasks and/or items as well as any and all taxes with the exception of applicable value added tax or other such similar tax which will be added at the rate in force at the time such tax.is chargeable. xx xx xx xx 5.5 It is expressly agreed and understood that the Subcontractor shall be liable for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 26.5.2017 that the system was in maintenance and will take one more week to be set right (both these e-mails are attached at pgs.964-966 of the appeal paperbook, vol.II). We find that later vide e-mail dated 25.9.2017 (attached at pg.175 of the appeal paperbook, vol.I) and thereafter, by e-mail dated 20.11.2017, the operational creditor raised the issue of his having paid service tax once and, therefore, not being liable to take hit of another 18% service tax. 18. It is noted that by e-mail dated 27.11.2017 addressed by the operational creditor to the corporate debtor, the operational creditor communicated his Tax Consultant PWC's opinion regarding taking credit for the service tax already deposited by the operational creditor, which stated that the credit note cannot be claimed by the operational creditor, since the time for filing revised service tax return has already lapsed. The e-mail further stated that the operational creditor may have to, however, consider the option of including tax cost in the value of service and raise invoice accordingly. (e-mail attached at pp. 242-243 of appeal paperbook, vol.I). In response, the corporate debtor vide e-mail dated 20.12.2017 (at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....creditor and the corporate debtor regarding how credit or refund service tax amount could be claimed and by whom. We are, therefore, of the view that this dispute existed before the issue of statutory demand notice under section 8 and the corporate debtor had clearly mentioned this dispute in its reply dated 1.4.2019 to the section 8 demand notice. 22. Regarding the necessary condition for examining the presence of a pre-existing dispute in relation to an operational debt, we refer to the judgment of Hon'ble Supreme Court in the matter of Mobilox Innovations Private Ltd. v. Kirusa Software Private Ltd., [(2018) 1 SCC 353], wherein it is held as follows:- "40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the pa....