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2022 (3) TMI 397 - HC - VAT and Sales TaxRealization of the amount of VAT and CST - resolution plan was approved - Section 30 of Insolvency and Bankruptcy Code, 2016 - HELD THAT - Similar issue relating to realization of Jharkhand Value Added Tax Act and CST for the period 2011-12 and 2012-14 of the petitioner s company were under challenge in the writ petition in ELECTROSTEEL STEELS LIMITED VERSUS THE STATE OF JHARKHAND, RANCHI JOINT COMMISSIONER OF STATE TAX (ADMN.) , DEPUTY COMMISSIONER OF STATE TAX, ASSISTANT COMMISSIONER OF STATE TAX, 2020 (5) TMI 39 - JHARKHAND HIGH COURT and analogous writ petitions for the respective period. The petitioner having lost before this Court went in Special Leave Petition before the Apex Court. The Apex Court in a batch of appeals along with Civil Appeals of the petitioners led by appeal in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. 2021 (4) TMI 613 - SUPREME COURT considered the issue and held that all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the Adjudicating Authority grants its approval under Section 31 could be continued. The impugned demand notice based on the assessment order dated 28.03.2018 (Annexure-3) cannot be realized from the petitioners - Petition allowed.
Issues Involved:
Realization of VAT and CST for the Assessment Period 2014-15 from the petitioner's company, validity of demand notices, applicability of Insolvency and Bankruptcy Code, 2016 on tax recovery, binding effect of resolution plan on creditors, extinguishment of claims not part of resolution plan. Analysis: 1. The writ petitions sought relief from the High Court to quash demand notices issued by the Deputy Commissioner of State Tax for payment of assessed amounts of VAT and CST for the year 2014-15. The petitioner's company had a resolution plan approved under Section 30 of the Insolvency and Bankruptcy Code, 2016 (IB Code), which was binding on the corporate debtor and its stakeholders. 2. The Apex Court, in a related case, addressed crucial questions regarding the binding nature of a resolution plan on creditors, the effect of amendments to Section 31 of the IB Code, and the entitlement of creditors to initiate recovery proceedings post-approval of a resolution plan. The Court clarified that claims not included in the resolution plan would be extinguished upon approval, preventing any further recovery actions on such claims. 3. The High Court acknowledged that the respondent department had not lodged its claims for tax dues before the resolution professional appointed by NCLT. Consequently, the Court held that the respondents were not entitled to recover any claims accruing before the transfer date. The judgment of the High Court, which allowed the recovery of tax dues, was quashed based on the Apex Court's decision. 4. Both parties agreed that the tax dues for the assessment period 2014-15 were not lodged before the resolution professional, leading to the extinguishment of such claims as per the Apex Court's ruling. Therefore, the demand notices issued by the respondent department for these tax dues were deemed unenforceable based on the settled legal position and undisputed facts. 5. The High Court, considering the settled law and facts, allowed the writ petitions, concluding that the demand notices dated 28.11.2019 for VAT and CST based on the assessment order dated 28.03.2018 could not be enforced against the petitioners. The Court upheld the extinguishment of claims not part of the resolution plan, in line with the Apex Court's decision and the principles of the IB Code. 6. In light of the above analysis, the High Court granted the requested reliefs, emphasizing the binding effect of the resolution plan on creditors, the extinguishment of claims not part of the plan, and the inapplicability of recovery actions for such claims post-approval of the resolution plan.
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