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2020 (12) TMI 886 - HC - VAT and Sales TaxRecovery of Tax Arrears - benefit of Section 31 of the IBC 2016 - before the annual return could be filed by M/s Bhushan Steel Limited it appears that certain claim under Section 7 of Insolvency and Bankruptcy Code 2016 was filed by the State Bank of India before the National Company Law Tribunal New Delhi - HELD THAT - The petitioner is not entitled to the benefit of Section 31 which was amended prospectively w.e.f. 16.08.2019 in so far as the tax arrears arising from the impugned assessment orders are concerned. Put up in the additional cause list on 07.01.2021 at 2 P.M. for further hearing along with records of Writ Tax No.1085 of 2018 Writ Tax No.697 of 2019 Writ Tax No.843 of 2019 and Writ Tax No.609 of 2020 - Before the next date fixed the parties may also exchange affidavits.
Issues Involved:
1. Validity of the impugned assessment orders and demands against the petitioner. 2. Applicability of Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016. 3. Priority of tax dues under U.P. VAT Act, 2008. 4. Impact of the Resolution Plan approved by the NCLT on tax dues. 5. Applicability of amendments to Section 31 of the IBC, 2016. Issue-wise Detailed Analysis: 1. Validity of the Impugned Assessment Orders and Demands Against the Petitioner: The petitioner challenged the assessment orders dated 29.10.2020 for the Assessment Year 2016-17 issued under the U.P. VAT Act, Central Sales Tax Act, and the U.P. Tax on Entry of Goods into Local Areas Act, 2007. The petitioner argued that these orders and the subsequent demands were invalid as they were contrary to the provisions of the IBC, 2016. 2. Applicability of Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016: The petitioner contended that under Section 31 of the IBC, 2016, no demand could be recovered from them for dues against M/s Bhushan Limited for the Assessment Year 2016-17. The petitioner cited precedents from the Rajasthan High Court and the Supreme Court to support their argument that the demands formed part of the tax included in the Resolution Plan and thus could not be recovered. 3. Priority of Tax Dues Under U.P. VAT Act, 2008: The respondent argued that Section 30(2)(e) of the IBC requires that a resolution plan must not contravene any existing laws. Section 77 of the U.P. VAT Act establishes that any amount payable under the Act is the first charge on the property of the dealer. Therefore, the tax dues were lawfully recoverable from the petitioner. 4. Impact of the Resolution Plan Approved by the NCLT on Tax Dues: The Resolution Plan for M/s Bhushan Steel Limited, approved by the NCLT on 15.05.2018, included claims of statutory creditors. The petitioner argued that the demands created under the impugned assessment orders were part of the Resolution Plan and thus could not be enforced against them. The respondent countered that the liability created under the assessment order was subsequent to the effective date of the Resolution Plan and thus not covered by it. 5. Applicability of Amendments to Section 31 of the IBC, 2016: The petitioner asserted that the amendment to Section 31 of the IBC by Act 26 of 2019, which clarified the inclusion of statutory dues, was clarificatory in nature and applicable to their case. The respondent argued that the amendment was prospective, effective from 16.08.2019, and did not apply to the tax arrears arising from the impugned assessment orders. Conclusion: The court scheduled further hearings and allowed the parties to exchange affidavits. The court also noted that interim orders were operating in similar pending writ petitions and expected the State-respondents not to press the recovery of the amount arising from the impugned assessment orders until the next hearing date.
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