TaxTMI 
TaxTMI 
2025 (10) TMI 117
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....ing the said demand, pursuant to an ex-parte assessment order, again under the Central Sales Tax Act. 3. Facts, in brief, germane are as follows: - The petitioner is a Company incorporated and registered under the Companies Act, 1956. It is engaged in the business of manufacturing consumer products such as I-Coffee, I-Pulse and I-Charge, on which Central Sales Tax and Central Excise Duty was payable and was being paid. In Writ Petition No. 15951 of 2021, the petitioner effects inter-state sales under the provisions of the Central Sales Tax Act (hereinafter referred to as 'the Act' for short). Likewise, the petitioner also effects export sales under the provisions of the Act which are subject to production of two different forms - C-form for the inter-state and H-form for export. During the course of assessment, the 3rd respondent confirms a tax demand of Rs. 88,61,606/- being the differential tax liability on account of non-production of both forms in terms of the provisions of the Act. 4. Likewise, in Writ Petition No. 15459 of 2021, the excise duty had been paid by the petitioner in terms of a notification issued under the Act. The petitioner intimated the 3rd respondent....
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....tted his claim as per the show cause notice dated 16-03-2018, to the resolution professional on 21-03-2018. 7. The CIRP process continued and on 06-06-2018, one Ms. Juie Hilal, a resolution applicant presented a resolution plan under Section 30 of the Code to revive the Company. The resolution plan comes to be approved by the Committee of Creditors on 09-06-2018. The resolution plan so approved provided for financial settlement of dues of financial creditors, operational creditors and statutory/Government dues up to the date of commencement of CIRP. On the score that the petitioner had to pay certain amounts, a show cause notice dated 14-06-2018 is issued by the 2nd respondent in Writ Petition No. 15951 of 2021 for the assessment year 2015-16. However, it is pertinent to note that the revenue had not presented its claim for the subject matter in this petition. In so far as the show cause notice dated 16-03-2018 is concerned, the resolution professional, as the authorized representative of the Company, issued a reply notice dated 12-03-2019 contending that the Revenue Authorities are prohibited from initiating any proceedings against the petitioner in light of the moratorium unde....
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....ourt which would all bear consideration in the course of the order. 11. The respondent/revenue has filed its statement of objections and would contend that approval of the resolution plan by the Tribunal in terms of its order dated 09-07-2019 does not prohibit or restrict revenue authorities from the determination of duty involved and efforts to be taken to recover the amount thereon. When the amounts are found to be due after determination of excise duty, the revenue authorities are bound to issue show cause notice before proceeding to determine any duty payable. There were no proceedings instituted in furtherance of the show cause notice. The order in original was made on 15-06-2021, after the moratorium ceased to have effect in terms of the order dated 09-07-2019, as the Tribunal on that date approved the resolution plan. The learned counsel would seek to place reliance on Section 31 of the Code to contend that moratorium under Section 14 of the Code will cease to have effect after the resolution plan under Section 30 is approved by the Tribunal. The dues cannot be treated as dues for the period of insolvency. Therefore, defends action of notice and consequential demands made....
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..... Declaration of moratorium and public announcement.-(1) The Adjudicating Authority, after admission of the application under Section 7 or Section 9 or Section 10, shall, by an order- (a) declare a moratorium for the purposes referred to in Section 14; (b) cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims under Section 15; and (c) appoint an interim resolution professional in the manner as laid down in Section 16. (2) The public announcement referred to in clause (b) of sub-section (1) shall be made immediately after the appointment of the interim resolution professional. ... ... ... 14. Moratorium.-(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring,....
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....m shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under Section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. 30. Submission of resolution plan.-(1) A resolution applicant may submit a resolution plan along with an affidavit stating that he is eligible under Section 29-A to the resolution professional prepared on the basis of the information memorandum. (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which shall not b....
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....n professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section (2). (4) The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, after considering its feasibility and viability the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53,including the priority and value of the security interest of a secured creditor, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (Ord. 7 of 2017), where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of Section 29....
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.... order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority under Section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority under sub-section (1) or within such period as provided for in such law, whichever is later: Provided that where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors." (Emphasis supplied) The ailing Comp....
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....etails of security against the loan of the corporate applicant is fully and partially secured along with details of the date of creation and estimated value etc., The Corporate Applicant has also provided the copies of audited financial statement for the year 2017, list of assets and liabilities, details of financial and operational creditors. The Corporate Applicant disclosed the names and addresses of members with details of their shareholdings and affidavit in support of the petition. We have heard the counsel for Petitioner. This Petition is filed under Section 10 of Insolvency and Bankruptcy Code, 2016. The Petitioner is Corporate Applicant. The contention of counsel of the Petitioner Company is that, the company has committed default and that the petition is to initiate a corporate insolvency resolution process. We considered to issue notices to the financial creditors of the Petitioner Company. Counsel for Petitioner was directed to issue notices. The Counsel for HDFC Bank and Axis Bank reported that the banks have no objection if the petition is admitted and for initiating Insolvency Resolution Process by the corporate applicant. The Corporate App....
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.... at 463, 10th Main, 13th Cross, Wilson Garden, Bangalore-560027, Email: Email:[email protected] as Interim Resolution Professional to carry the functions as mentioned under the Insolvency & Bankruptcy Code. Accordingly, this Petition is admitted." (Emphasis added) The moment the application is admitted, an interim resolution professional is appointed. In the case at hand, one Mr. Gigi Joseph was appointed as the interim resolution professional. The interim resolution professional then makes a public announcement dated 26-09-2017 to all creditors of the petitioner in all leading newspapers in consonance with Section 15 of the Code read with Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The public announcement notices are appended to the petitions. In the interregnum, one Mr. Anand Ramachandra Bhat is appointed as the resolution professional. The resolution professional then serves a notice dated 16-02-2018 on the revenue authorities seeking statement of their claim by the petitioner Company upto the date of CIRP. The communication reads as follows: "NOTICE FOR THE ATTENTION OF CREDI....
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....vt Ltd Reg. No.-IBBI/IPA-001/IP-P00467/2017-18/10810" (Emphasis added) What comes back is a show cause notice on 16-03-2018 seeking to project certain demand against the company for the period from 2014 to 2017. The reason for imposition of demand is as follows: ".... .... .... The assessee has suppressed the information about the true nature of the said products from the department by mis-classifying with an intention to pay duty at lesser rate instead of full rate of duty, proving their intention to evade payment of duty. Had the department not initiated the verification on the issue the fact of mis-classification and payment at concessional rate of duty would have gone un-noticed. Despite knowing the facts that the said products are in health promoter drinks, the assessee has classified under Fruit juice based drinks and coffee premix which attract lesser rate of duty, with a intent of evading payment of central excise duty. Hence, it appears that during the period specified above, the assessees has misclassified the said three excisable goods resulting in short payment of duty. Therefore, the aforementioned Central Excise duty of Rs.....
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....014 to 30.6.2017, should not be demanded and recovered from them under Section 11A(4) of the Central Excise Act, 1944; c) an amount of Rs. 1,50,06,172 /- paid on the said goods cleared during the period from 01.3.2014 to 30.6.2017 should not be appropriated against the amount demanded at sl no. b) above; d) Interest should not be demanded and recovered on the duty demanded at sl no. (b) above from them under Section 11AA of the Central Excise Act, 1944; e) Penalty should not be imposed on them under Section 11AC (1)(c) of Central Excise Act, 1944; f) Penalty should not be imposed on them under Rule 25 of Central Excise Rules, 2002." (sic) (Emphasis added) Similar demand is also made by the 2nd respondent vide show cause notice dated 14-06-2018 in Writ Petition No. 15951 of 2021. During the pendency of these demands, the Tribunal passes an order approving the resolution plan submitted by one Mrs. Juie Hilal. The relevant portion of the order dated 09-07-2019 reads as follows: ".... .... .... 8. In the result, by exercising the powers U/s 31(1) IBC, 2016, I.A No. 116 of 2019 & C.P.(IB)No.63/BB/2017 are dispose....
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....pect of excisable goods viz., I-Coffee under chapter subheading 21011200, 1-Pulse under chapter subheading 22029020 and I-Charge under chapter subheading 22029020, is hereby rejected. I also hold that the said goods have to be classified under chapter subheading 21069099 of the Central Excise Tariff Act, 1985; (ii) I confirm the demand of Rs. 11,06,20,310/- (Rupees eleven crores, six lakhs, twenty six thousand, three hundred and ten only) from them, being the differential central excise duty payable by them on the manufacture and clearance of the said excisable goods during the period from 01.03.2014 to 30.06.2017, in terms of Section 11A(4) of the Central Excise Act, 1944; (iii) I reject the proposal to appropriate an amount of Rs. 1,50,06,172/- made in the show cause notice dated 16.03.2018, as discussed in Para 32 above; iv) I confirm the demand of interest form them on the amount of duty confirmed at (ii) above, in terms of Section 11AA of the Central Excise Act, 1944; v) I impose a penalty of Rs. 11,06,20,310/- (Rupees eleven crores, six lakhs, twenty six thousand, three hundred and ten only), on them in terms of Section 11AC(1)(c) of the Ce....
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....ices including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;" 97. "Creditor" therefore has been defined to mean "any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder". "Operational creditor" has been defined to mean a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. "Operational debt" has been defined to mean a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. 98. It is a cardinal principle of law that a statute has to be read as a whole. Harmonious construction of clause (10) of Section 3 of the I&B Code read with clauses (20) and (21) of Section 5 thereof would reveal that even a claim in respect of dues arising under any law for the time being....
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....d as follows: ".... .... .... 77. The provisions of section 238 of the IBC states that the provisions of the IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Further, it is noted that crown debts do not take precedence even over secured creditors, who are private persons. This is clear on a reading of section 238 of the IBC which provides for the overriding effect of the IBC notwithstanding anything inconsistent contained in other law for the time being in force or effect by any such law. Therefore, if the Departments of Central or State Governments do not file an application or participate in the resolution process, their claims automatically get extinguished having regard to the judgment of the honourable Supreme Court in the case of Ghanashyam Mishra [2021] 91 GSTR 28 (SC); [2021] 227 Comp Cas 251 (SC); [2021] SCC OnLine SC 313." (Emphasis supplied) In terms of the aforesaid judgments what would emerge is, that the claims of the sales tax authorities would stand extinguished since they had not taken part in the resolution....
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....nt of the Apex Court is that the assessment of duties and other levies by the revenue authorities after the declaration of moratorium is restricted to the statement of claims required to be submitted to the resolution professional. It is apposite to refer to the judgment of the Apex Court in the case of ESSAR STEEL INDIA LIMITED COMMITTEE OF CREDITORS v. SATISH KUMAR GUPTA (2020) 8 SCC 531, wherein it is held as follows: ".... .... .... 105. Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. In SBI v. V. Ramakrishnan [SBI v. V. Ramakrishnan, (2018) 17 SCC 394: (2019) 2 SCC (Civ) 458], this Court relying upon Section 31 of the Code has held: (SCC p. 411, para 25) "25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as approved by the Committee of Creditors, takes effect, it shall be bin....