2019 (12) TMI 649 - Tri - Insolvency and Bankruptcy

Non-payment of arrears dues of GST for the period prior to commencement of CIRP - net GST liability from the date of commencement of CIRP - Corporate Debtor to have access to its GST Portal Account to file GST Returns during the period of CIRP - HELD THAT - If the Corporate Debtor's GST Portal is blocked, it is difficult to the Corporate Debtor to generate bills falling within the ambit of GST and pay the taxes for the post-admission period. Since law is clear that Tax authorities fall within the ambit of the Operational Creditor, as to the pre-admission claims are concerned, they are at liberty to make their claims before the Resolution Professional instead of insisting upon the Resolution Professional to pay the pre-admission dues before accepting the tax liabilities arising during the CIRP period. As to provisions of GST Act, since Section 238 of the Insolvency and Bankruptcy Code having categorically mentioned that IBC will have over riding effect on all other laws which are in contravention to the provisions of the IBC, RI cannot raise an objection saying since no provision has been made in GST or in its software to accept such accounts, the business happening in the market after initiation of CIRP through debtor company will come to stand still and in such situation no company under CIRP can function as a going concern. We hereby direct all the Respondents including the 13 th Respondent to allow the Corporate Debtor to have access to its GST Net Portal Account, permit the applicant to file GST Returns of the Corporate Debtor generated after commencement of CIRP without insisting upon payment of past dues of GST during the pre-admission period and accept net GST liability after availing eligible ITC from the date of commencement of CIRP and adjust such GST payment so remitted by the Corporate Debtor towards discharge of GST during the CIRP period.

Summary

Issues: Permission to access GST Portal Account during CIRP, Payment of net GST liability, Treatment of pre-admission GST dues

Permission to access GST Portal Account during CIRP:
The judgment addresses the issue of whether the Corporate Debtor should be allowed access to its GST Portal Account to file GST Returns during the period of Corporate Insolvency Resolution Process (CIRP). The Resolution Professional sought permission for the Corporate Debtor to access the account and pay the net GST liability from the date of commencement of CIRP. The 1st Respondent argued that current dues cannot be accepted before clearing past dues as per the GST Act. The Tribunal observed that if the Corporate Debtor is to be run as a going concern during CIRP, it can be obligated to pay taxes from the initiation of CIRP. The creditors, including Tax authorities, can claim against the Corporate Debtor for pre-admission period dues under the Insolvency and Bankruptcy Code.

Payment of net GST liability:
The Tribunal highlighted that if the Corporate Debtor's GST Portal is blocked, it would face challenges in generating bills falling under GST and paying taxes for the post-admission period. The judgment emphasized that Tax authorities fall under the Operational Creditor category, and they can make claims before the Resolution Professional instead of demanding payment of pre-admission dues before accepting tax liabilities arising during CIRP. The Tribunal referenced Section 238 of the Insolvency and Bankruptcy Code, stating that the IBC supersedes other laws in case of contradictions. It directed all Respondents to allow the Corporate Debtor access to its GST Net Portal Account, file GST Returns without insisting on past GST dues payment, and adjust net GST liability from the commencement of CIRP.

Treatment of pre-admission GST dues:
Regarding the treatment of pre-admission GST dues, the judgment clarified that Tax authorities can claim against the Corporate Debtor for pre-admission period dues under the Insolvency and Bankruptcy Code. The Tribunal emphasized that the Resolution Professional should not be compelled to pay pre-admission dues before accepting tax liabilities arising during CIRP. It highlighted that the IBC's overriding effect on other laws ensures that business operations during CIRP are not disrupted due to lack of specific provisions in the GST Act. The judgment ultimately disposed of the application, allowing the Corporate Debtor to file GST Returns and pay net GST liability from the commencement of CIRP without clearing past dues.