GST REGISTRATION BY A LIQUIDATOR

[Mr. M. GOVINDARAJAN]

Registration

Section 22 of the Goods and Services Tax Act, 2017(‘Act’ for short) provides for registration of a supplier whose aggregate turnover exceeds ₹ 20 lakhs in a financial year.  Section 24 provides the list of supplier who is compulsorily required to be registered under the Act irrespective of the turnover.  Section 25 provides the procedure of registration under the Act.  Section 25 provides that every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration.

Insolvency Process

The Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) provides for the insolvency resolution process of the corporate debtors.  According to this Code a financial creditor or an operational creditor or a corporate applicant itself file an application against a corporate debtor to initiate corporate insolvency resolution process before the Adjudicating Authority.  If the Adjudicating Authority is satisfied that the application is in order it shall admit the application.  The corporate insolvency resolution process commences on the date of order issued by the Adjudicating Authority.  The Adjudicating Authority, for the purpose of resolution process, appoints an interim resolution professional (‘IRP’ for short) , who may be confirmed as Resolution Professional (‘RP’ for short) or replaced by some other Insolvency Professional.  The said process is time bound and to be completed within 180 days from the commencement date.  The said period may be further extended by 90 days by the Adjudicating Authority for a reasonable cause.

Liquidation

If the corporate insolvency resolution process could not be completed within the time line the Adjudicating Authority, on the file of application by the RP, on the approval of the Committee of Creditors, ordered for the liquidation of the corporate debtor.  The Adjudicating Authority may appoint the RP as the Liquidator or appoint any other Insolvency Professional as Liquidator.  The liquidation proceeding is to be completed within one year from the liquidation commencement date. 

Registration for the purpose of Code

In the corporate insolvency resolution process or liquidation process the corporate debtor may be a going concern.  As such the business is continuing.   Since the management of the corporate debtor is changed to the IRP/RP the erstwhile registration could not be continued.  The IRP/RP is considered as distinct person under the Act.  Therefore a fresh registration is required to be taken by the IRP/RP.

The Government, vide Notification No. 11/2020-Central Tax, dated 21.03.2020, as amended, considered IRP/RP as the class of persons  who shall follow the following special procedure, from the date of the appointment of the IRP/RP till the period they undergo the corporate insolvency resolution process.  The said class of persons shall, with effect from the date of appointment of IRP / RP, be treated as a distinct person of the corporate debtor, and shall be liable to take a new registration in each of the States or Union territories where the corporate debtor was registered earlier, within thirty days of the appointment of the IRP/RP or by 30.06.2020, whichever is later:.

Registration by liquidator

In SHRI NIRAV TARKAS LIQUIDATOR OF M/S STRATUS FOODS PRIVATE LIMITED VERSUS OFFICE OF THE CHIEF COMMISSIONER [2022 (3) TMI 869 - GUJARAT HIGH COURT], an operational creditor namely, Umiya Trading filed Insolvency Application being Company Petition (I.B.) No. 03 of 2017 under Section 9 of the Code to initiate the Corporate Insolvency Resolution process against the corporate debtors before the Adjudicating Authority which admitted the application vide order dated 10.04.2017 and Corporate Insolvency Resolution Process commenced against the Stratus Foods Private Limited, Vadodora.  The petitioner was appointed as IRP and later confirmed as RP. 

The petitioner filed I.A. No. 489 of 2018 in Company Petition (I.B.) No. 03 of 2017 before the Adjudicating Authority as required under Section 33(1)(a) of the Code with a prayer to initiate liquidation proceedings against the Stratus Foods Private Limited since no resolution plan has been received in the corporate insolvency resolution process.  The Adjudicating Authority passed an order directing to go for in liquidation against the corporate debtor.  The petitioner was appointed as Liquidator by the Adjudicating Authority.  This order was passed on 14.02.2019 and the certified copy was received on the same date.  Therefore the petitioner is to complete the liquidation proceedings within one year from 14.02.2019, which is the liquidation commencement date.  Since the liquidation could not be completed within one year the petitioner got extension for further one year.

On 02.12.2020, an application had been made being Application No. 242000217737TRN before the respondent for grant of registration under the GST Act to enable him to collect GST on sale of assets. The respondent sought various clarifications about the details of authorized signatory and principal place of business on 03.12.2020.    The petitioner complied with the notice and supplied the additional information, however, vide communication dated 11.12.2020, the respondent rejected the application for grant of GST registration on the ground that he did not apply in accordance with the Notification No. 11/2020 - Central Tax, dated 21.03.2020.  The ground for rejection is that the notification No.11/2020-Central Tax, do not obligate the liquidator of the company undergoing liquidation process to make an application for registration within one month or before 30.06.2020.

An appeal was preferred before the Appellate Authority on 15.12.2020. On various occasions, the petitioner visited the office of the respondent to resolve the issue and obtain the GST registration to carry out the work of liquidation which is a time bound process as the period of liquidation was coming to an end.  The petitioner on 27.01.2021 while visiting the office of the respondent produced the IBBI Circular which categorically states that the IRP/RP/Liquidator is an officer of the Court. He was asked to once again apply for the registration.

Therefore the petitioner filed the present writ petition seeking the following prayers-

• To direct Respondent Authority to grant registration under Goods and Services Tax Act, 2016 and allot GSTIN number qua  Stratus Foods Private Limited (under liquidation) forthwith;
• Pending hearing and final disposal of this petition, to direct Respondent Authority to grant temporary registration under the Act and allot temporary GSTIN number qua Stratus Foods Private Limited (under liquidation) forthwith;
• Any other and further relief, which is just and proper, may kindly be granted as may be deemed expedient by the  Court in the facts and circumstances of the case;
• Award cost of the present petition.

The respondent department submitted the following-

• Since there is an alternative remedy available in the Act the writ petition is not maintainable.
• There is an appeal provided and hence, when the time limit prescribed for the application for registration has not been followed, he is not entitled.
• The petitioner had not uploaded the compete order of Adjudicating Authority dated 31.01.2019 to support the status, but, he only had uploaded the first page of Adjudicating Authority order where his name and designation as a liquidator was mentioned.
• The application for registration was not filed within the stipulated time period as provided under the Notification No. 11/2020.
• The address of the liquidator has also not been furnished.
•  He has not properly responded to the query raised by the department and chose to ignore the same.
• Non-furnishing of the requisite documents is the reason and the respondent has acted as per the notification as the application has been filed belatedly.

The petitioner filed reply to the contentions raised by the Department.

The High Court considered the contentions put forth by the parties to the present writ petition.  The High Court observed that-

• The applicability of the GST arises when the liquidator is unable to sell the business of company-in-liquidation as a going concern or on slump sale basis.
• Thus, it is necessitated for the liquidator to obtain the registration under the GST Act when the assets of the company-in-liquidation are to be sold on a standalone basis after attempting to sell the business as a going concern or on slump sale basis.
• The proper officer has been given discretion to register such person in such a manner as prescribed, in the event of any delay in obtaining the registration on its own.
• The petitioner is an appointee of National Company Law Tribunal and is not required to run from the post to pillar for the grant of registration under the GST Act.
•  The petitioner already had approached the concerned officer and therefore, when he was denied the same on the ground of issue of limitation, he had preferred an appeal, however, the respondent authority when conveyed him to apply afresh, he has chosen to approach the High Court.
•  Once an application was moved for obtaining the registration under GST before the respondent authority, the denial of registration under the GST is completely on an ill conceive ground. 
•  Since the appointment of the IRP/RP was much earlier and there was no requirement for him to approach the authority concerned and it is only after his appointment as a liquidator on 31.01.2019 and when he could not complete the process of liquidation on 14.02.2020, he approached the concerned authority after getting extended the liquidation period up to 31.01.2021 enabling him to continue the said process.
• Even if the liquidator is bracketed in the class of persons where he is not explicitly mentioned, then also, his not having approached by 30.06.2020 would not debar him from making a request for registration.
• All contentions raised by the respondent authority are absolutely technical and having no substance what so ever.
• To deny merely on the ground of his not having specified of his being a liquidator or for that matter, a very negligible and minor aspect, deserves the disapproval of the Court. 
• The registration under the GST Act is a must for the liquidator to operate and fulfill the obligations in his capacity as a liquidator as required under the statute.
• It is the Adjudicating Authority which has appointed the liquidator who could not have been asked to run from the post to pillar and approached this Court by adopting highly technical and deprecated complexity in awarding the GST Registration Number.
• In case of any delay in obtaining the registration, Section 25(8) obligates the proper officer to proceed to register such person. He may impose a penalty in accordance with Section 122 of the GST Act.
• The liquidator could have approached the concerned authority well in time, however, if he has not done it because of the various details that he needed to gather and collate, he could not have been sent from the post to pillar.

The High Court allowed the petition directing the respondent authority to grant registration under the Goods and Services Tax Act, 2016 and allow the GST Number qua Stratus Foods Private Limited within two weeks from the date of receipt of writ of this order. He shall also enjoy immunity so far as the action of approaching the authority beyond the period of six months is concerned.