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2024 (5) TMI 884 - HC - VAT and Sales TaxDemand of KGST when the resolution plan was approved - provisions of the IB Code have overriding effect on other laws as provided under Section 230 of the IB Code or not - resolution plan does not take into consideration the statutory liability under the KGST Act - whether the assessment order in Ext. P11 is issued in violation of the provision of the IB Code, and therefore without jurisdiction? - HELD THAT - In view of the provision under Section 238 of IB Code, the provisions of the Code will have an overriding effect, if there is any inconsistency with any of the provisions of the law for the time being enforced or any instrument having effect by virtue of any law. The Supreme Court in Ghanasyam Mishra 2021 (4) TMI 613 - SUPREME COURT considered the amendment brought under Section 31 of the IB Code with effect from 16.08.2019 and held that after 16.08.2019 any debt in respect of the payment of dues arising under any law for the time being in force including the statutory dues owned of the Central Government, any State Government or any other local authority which does not formed part of the approved resolution shall stand extinguished. However, in respect of the dues for the period prior to 16.08.2018, wherein Section 7 states that, petition shall be admitted and it has been held that the amendment is clarificatory in nature. Once such a resolution plan is approved by the adjudicating authority, all such claims and dues owned to Central Government, State Government or any other local authorities, including the tax authorities which were not part of the resolution plan shall stand extinguished. The Supreme court, however, in the case of the State Tax Officer 2022 (9) TMI 317 - SUPREME COURT while taking note of the judgment in case of Ganshyam misra while interpreting the provisions of Section 30 (3) and 31 (3) and another provisions of Sections 30 and 31 held that if the resolution plan is not in conformity with the statutory provisions of Section 31 (2) of the IB Code, the said plan cannot be accepted under Section 30 (2) (b) of the IB Code. There is an obligation on the resolution professional to examine each resolution plan received by him and confirm that such resolution plan provides the payment of dues of operational creditors as specified by the board, which shall not be less than the amount to be paid to such creditors. In the present case, the moratorium under Section 14 of IB Code was issued by the NCLT on 01.11.2018 and resolution plan got approved on 20.01.2020. The appeal against the said order, approving the resolution plan got dismissed by the NCLT on 27.08.2020. The Supreme court dismissed the appeal only on 26.11.2020. The assessment order involved in the present writ petition is in the assessment year 2018-2019. The NCLT had passed Ext. P1 order under Section 14 of the IB Code on 01.11.2018 - In absence of crystallization of demand of turn over tax under KGST Act, such a demand could not have been the part of the resolution plan. The assessment proceedings had been completed by the impugned order dated 12.12.2023 in Ext. P11. The period for which the tax and liability had been determined under Section 173 of the KGST Act which is from 01.04.2018 31.03.2019. Whether the resolution plan which does not take into consideration the statutory liability under the KGST Act for the period from 01.04.2018 31.03.2019, does it meet the requirement of Section 30 (2), and if it is does not meet the requirement of Section 30 (2). Whether it would be binding on the Central Government, State Government, or any statutory authority? - HELD THAT - In the present case, the resolution plan has ignored the statutory demand as no demand of KGST when the resolution plan was approved on 20.1.2020. Whether resolution plan is in accordance with the provision of Section 30 (2) of the Code or not is required to be examined the assessing authority. There is no such finding recorded by the assessing authority in the impugned assessment order. The matter is remitted back to the file of the State Tax Officer to examine whether the resolution plan is in accordance with the provision of Section 30 (2) of the Code and then pass a fresh order in accordance with the law - the impugned assessment order in Ext. P11 is set aside - Petition allowed by way of remand.
Issues Involved:
1. Validity of the assessment order in light of the approved resolution plan under the Insolvency and Bankruptcy Code (IB Code). 2. Jurisdiction of the State Tax Officer to issue the assessment order post-approval of the resolution plan. 3. Whether the statutory dues under the KGST Act for the period prior to the approval of the resolution plan are extinguished. Summary: Validity of the Assessment Order: The petitioner, a company under the Companies Act, 1956 and registered under the Kerala General Sales Tax Act, 1963, faced an assessment order dated 12.09.2023 for the turnover tax for the year 2018-2019. The petitioner contended that the resolution plan approved by the NCLT on 20.01.2020 extinguished all claims, including statutory dues, for the period prior to the approval date. The Supreme Court's judgment in Ghanasyam Mishra and Sons Private Limited vs. Edelweiss Asset Reconstruction Company Ltd. [(2021) 9 SCC 657] was cited, which held that once a resolution plan is approved, all claims not part of the plan are extinguished. Jurisdiction of the State Tax Officer: The petitioner argued that the assessment order was issued without jurisdiction, as the claims were barred by the resolution plan approved by the NCLT. The petitioner emphasized that the provisions of the IB Code have an overriding effect on other laws, as per Section 238 of the IB Code. The respondent, however, maintained that the assessment was valid as the petitioner failed to produce the required documents despite multiple notices. The respondent also argued that the assessment for the year 2018-2019 was not barred by Section 238 of the IB Code. Extinguishment of Statutory Dues: The court considered whether the statutory dues under the KGST Act for the period from 01.04.2018 to 31.03.2019 were extinguished by the resolution plan. The Supreme Court in State Tax Officer v. Rainbow Papers Limited [(2023) 9 SCC 545] held that a resolution plan not conforming to Section 30(2) of the IB Code, which includes payment of statutory dues, is invalid. The court noted that the resolution plan approved on 20.01.2020 did not account for the assessment proceedings under the KGST Act for the year 2018-2019. Conclusion: The impugned assessment order in Ext. P11 was set aside. The matter was remitted back to the State Tax Officer to examine whether the resolution plan met the requirements of Section 30(2) of the IB Code and to pass a fresh order in accordance with the law. The petitioner was directed to appear before the State Tax Officer with all relevant documents on 05.03.2024.
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