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2024 (12) TMI 294 - AT - IBCPreferential Transaction under Section 43 of the Insolvency and Bankruptcy Code (IBC) - deposit of VAT by VE Commercial Vehicles Limited - violation of Moratorium imposed under Section 14 of the IBC. Whether the transaction in question was a Preferential Transaction under Section 43 of the Insolvency and Bankruptcy Code? - HELD THAT - The condition precedent for attracting Section 43(1) is whether the Corporate Debtor has at any relevant time given a preference in transaction. The present is a case where no transaction was made by the Corporate Debtor which was questioned in Application filed by the RP. Transaction in question was act of depositing of Rs.17,12,094/- by M/s. VE Commercial Vehicles Limited before the Commercial Tax Department in consequence of the Notice dated 03.07.2019. Thus, clearly Section 43 was not attracted and Application under Section 43 was wholly misconceived. Whether the deposit of the VAT Tax by M/s. VE Commercial Vehicles Limited can be treated to be in violation of Moratorium imposed under Section 14 against the Corporate Debtor? - HELD THAT - Present is a case where no recovery has been affected by Commercial Tax Department from the Corporate Debtor, the GST Tax Liability of the Corporate Debtor which was not satisfied by the Corporate Debtor was directed to be discharged by M/s. VE Commercial Vehicles Limited which has taken benefit of input tax without GST dues being deposited by the Corporate Debtor. As noted above, under Section 28 of the MP VAT Act, 2002, the recovery can be from any person who holds any money for on account of such dealer or person. M/s. VE Commercial Vehicles Limited has contended before the Adjudicating Authority that it has reversed input tax benefit taken by it by depositing the amount of Rs.17,12,094/-, since the Corporate Debtor did not deposit the GST amount - The transaction which was questioned by the RP before the Adjudicating Authority of M/s. VE Commercial Vehicles Limited depositing the amount of Rs.17,12,094/- before the Commercial Tax Department to reverse the input tax availed by it cannot be in any manner said to be violate provisions of Section 14 of the IBC. Commercial Tax Department did not recover any amount from the Corporate Debtor or form its assets, the amount was recovered from an entity, M/s. VE Commercial Vehicles Limited which had taken the benefit of input tax where GST had not been deposited, hence M/s. VE Commercial Vehicles Limited reversed it benefits of input tax taken from Commercial Tax Department - there was no applicability of Section 14, the transaction in question under which the M/s. VE Commercial Vehicles Limited deposited the amount of Rs.17,12,094/- before the Commercial Tax Department in response of statutory Notice dated 03.07.2019 cannot be said to be in violation of Section 14 of the IBC. The Adjudicating Authority committed error in directing the Appellant to refund the amount of Rs.17,12,094/-. The Order passed by the Adjudicating Authority directing the Appellant to refund the aforesaid amount is unsustainable and is set aside - appeal allowed.
Issues Involved:
1. Whether the transaction in question was a Preferential Transaction under Section 43 of the Insolvency and Bankruptcy Code (IBC). 2. Whether the deposit of VAT by VE Commercial Vehicles Limited violated the Moratorium imposed under Section 14 of the IBC. Issue-wise Detailed Analysis: 1. Preferential Transaction under Section 43 of the IBC: The primary issue was whether the transaction involving the deposit of Rs.17,12,094/- by VE Commercial Vehicles Limited to the Commercial Tax Department constituted a Preferential Transaction under Section 43 of the IBC. The Resolution Professional (RP) filed an application under Section 43, arguing that the deposit was a Preferential Transaction. However, the Appellate Tribunal found that Section 43 was not applicable as the transaction was not made by the Corporate Debtor. The payment was made by VE Commercial Vehicles Limited in response to a statutory demand under the Madhya Pradesh VAT Act, 2002, not involving any transfer of property or interest by the Corporate Debtor. Therefore, the application under Section 43 was deemed misconceived and not maintainable. 2. Violation of Moratorium under Section 14 of the IBC: The second issue was whether the deposit of the VAT amount by VE Commercial Vehicles Limited violated the Moratorium under Section 14 of the IBC. The RP contended that the Moratorium prohibited any recovery of dues from the Corporate Debtor. However, the Tribunal noted that the recovery was not from the Corporate Debtor or its assets but from VE Commercial Vehicles Limited, which had availed input tax credit without the GST dues being deposited by the Corporate Debtor. The transaction was a statutory compliance by VE Commercial Vehicles Limited to reverse the input tax benefit it had taken. The Tribunal concluded that the transaction did not violate Section 14, as it did not involve any action against the Corporate Debtor or its assets. The Commercial Tax Department's action was in accordance with Section 28 of the MP VAT Act, 2002, which allows recovery from any person holding money for the dealer. Conclusion: The Tribunal concluded that the Adjudicating Authority erred in directing the refund of Rs.17,12,094/- to the RP. The transaction did not constitute a Preferential Transaction under Section 43, nor did it violate the Moratorium under Section 14 of the IBC. Consequently, the order of the Adjudicating Authority was set aside, and the appeal was allowed. The RP's application was dismissed, with each party bearing its own costs.
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