Liability Under GST Act Extinguished After CIRP Process: Andhra Pradesh HC Sets Aside Tax Demand Against Patanjali Foods Ltd
The Andhra Pradesh High Court set aside the tax demand orders issued against Patanjali Foods Limited while holding that the company’s liability under the GST Act got extinguished after the company underwent the CIRP process.
The Court dismissed the State’s submission that the order of the National Company Law Tribunal (NCLT), which approved the resolution plan (RP), was not binding on the State of Andhra Pradesh in view of Section 88 of the GST Act. The Court clarified that Section 238 of the Insolvency and Bankruptcy Code, 2016 (IBC) provided for a non-obstante clause which overrided all other laws.
A Division Bench of Justice R Raghunandan Rao and Justice Harinath. N observed, “The contention of the learned Government Pleader for Commercial Taxes that the order of NCLT is not binding on the State of Andhra Pradesh in view of Section 88 of the GST Act would have to be negatived in as much as Section 238 of the Insolvency and Bankruptcy Code provides for a non-obstante clause overriding all other laws.”
Advocate Vivek Chandra Sekhar S appeared for the petitioner.
M/s. Patanjali Foods Limited (petitioner) was called upon to pay tax, interest, and penalty under Demand-cum-Adjudication orders.
The petitioner, earlier known as Ruchi Soya Industries Limited, was subjected to insolvency proceedings under the IBC on account of its financial difficulties. A resolution plan (RP) was prepared by the committee of creditors and the same was approved by the NCLT.
The approved RP provided that all dues of the creditors, including the dues of the State were to be adjusted out of amounts paid by the successful applicants in the resolution process. Upon challenge of the NCLT’s order, the National Company Law Appellate Tribunal (NCLAT) dismissed the same.
The High Court referred to the decision in Ghanshyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company (2021), wherein the Supreme Court held on the date of approval of RP by the adjudicating authority, all the claims, which are not a part of RP, would stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
Therefore, the Court held,” In the circumstances, it must be held that the liability of the petitioner, arising out of the AP VAT Act or the GST Act stands extinguished to the extent of its liability up to 4 th September, 2019.”
The Court set aside the Demand-cum-Adjudication order against the petition.
Accordingly, the High Court allowed the petition.
Cause Title: Patanjali Foods Limited v. The Assistant Commissioner St Fac & Ors.
Appearance:
Petitioner: Advocates Vivek Chandra Sekhar S, Aishwarya Sharma and Kinjal Shrivastava
