Section 14 IBC Does Not Bar Finalization of Tax Assessment and Adjudication Proceedings: Kerala High Court

The Kerala High reiterated that tax assessments and adjudication proceedings can proceed despite ongoing insolvency proceedings under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The National Company Law Tribunal (Tribunal) ordered liquidation proceedings for a BMW Car Dealer. The proceedings were initiated after an application was filed by the Federal Bank of India (FBI) under Section 7(4) of the IBC. However, the liquidator received claims detailing five items from the Deputy Commissioner Of Central Tax And Central Excise (Commissioner).

“From perusal of Section 14 of the IBC and several Judgments of the other High Courts as well as the Supreme Court, it is well settled that Section 14 of the IBC does not create a bar for finalisation of the assessment and adjudication proceedings in respect of the taxes. On the resolution once the reference has been admitted, there is moratorium for recovery of the tax dues but, there is no bar for finalisation of the assessment and adjudication proceedings”, the Bench of Justice Dinesh Kumar Singh observed.

Advocate Anil D. Nair appeared for the Petitioner/Company and Advocate P.R. Sreejith appeared for the Respondents/Commissioner.

The Petitioner, a BMW car dealer, approached the High Court challenging the liquidation order issued by the Tribunal. The Tribunal initiated insolvency proceedings against the Petitioner following an application filed by the FBI under Section 7(4) of the IBC. The Petitioner's resolution plans were rejected, and the Tribunal ordered liquidation and appointed an Interim Resolution Professional (IRP). The Liquidator received a claim from the Commissioner detailing five items. The Petitioner approached the High Court and challenged the Tribunal's decision.

The Court observed that Section 14 of the IBC does not prevent the completion of assessment and adjudication procedures for tax dues. Even after the resolution is accepted, there is a moratorium on tax collection, but assessment and adjudication procedures can still be finalized.

Accordingly, the Court dismissed the Writ Petition.

Cause Title: Platino Classic Motors India Pvt. Ltd v Deputy Commissioner Of Central Tax And Central Excise (2023:KER:66864)

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