The Rajasthan High Court has held that the demands by commercial taxes dept. stand extinguished with approval of a resolution plan by the National Company Law Tribunal (NCLT).
The bench of Justice Pushpendra Singh Bhati and Justice Munnuri Laxman has observed that with the finalization of insolvency resolution plan and the approval thereof by the NCLT, all dues of creditors, Corporate, Statutory and others stand extinguished and no demand can be raised for the period prior to the specified date.
The Commercial Taxes Officer, Works and Leasing Taxes, Bhilwara passed the assessment orders for the assessment years 2014-2015, 2015-2016 and 2016-2017 by which the respondents held the petitioner-company liable to pay the amount on account of non-payment of the entry tax for the goods purchased by the petitioner from outside the State of Rajasthan. In furtherance of the assessment orders, notice for payment of demand were also issued.
The Department, in order to recover the due amount from the petitioner-company, issued a notice/communication to the Manager SBI, Agoocha, District Bhilwara, invoking special mode of recovery under Section 50 of RVAT, 2003 read with Section 9 CST Act by which it had directed to recover the outstanding amount of Rs.1,86,04,374/- from the Bank account of the petitioner-company.
The petitioner-company has filed the present writ petitions challenging the action of respondents, directing to recover the outstanding amount from its Bank account.
The NCLT passed a final order under Section 31(1) of the IBC accepting the resolution plan, duly approved by the Committee of Creditors (CoC). The order of NCLT mandates that the CIRP shall be binding on the Corporate Debtors, McNally Bharat Engineering Company Ltd., its employees, members, creditors, guarantors including the Central Government, any State Government or any local authority to whom a debt in respect of payment of dues arising under any law for the time being in force, such authorities to whom statutory dues are owed and other stakeholders involved in the Resolution Plan.
The assessee contended that approval of the Resolution Plan by the NCLT with effect from 19.12.2023 waived and/or extinguished and/or settled all tax dues of whatever nature of Central, State and local authorities pertaining to the period prior to the effective date. The assessment orders pertains to the years 2014- 2015, 2015-2016 and 2016-2017 and for the recovery of the amount in pursuance of the same, communication was issued to the Bank in the year 2019, all liabilities of the petitioner which became a sick unit and went for CIRP stood extinguished on account of the acceptance of the Resolution Plan w.e.f. 19.12.2023.
The court while allowing the writ petition held that communication or notice dated 17.07.2019 issued in pursuance to the assessment orders dated 21.03.2017, 05.03.2018 and 28.03.2019 for the assessment years 2014-2015, 2015-2016 and 2016-2017 respectively do not stand to test of law, i.e. mandate of Section 31 read with Section 238 of the IBC.
Case Details
Case Title: McNally Bharat Engineering Company Ltd. Versus Commercial Taxes Officers
Case No.: D.B. Civil Writ Petition No. 11899/2019
Date: 27/11/2024
Counsel For Petitioner: Vinay Kothari, Ayush Goyal, Bhavyadeep Singh
Counsel For Respondent: Mahaveer Bishnoi, AAG
