Resolution Professional cannot modify GST levied under the Assessment Order

Case analysis of Mr Bijoy Prabhakaran Pulipra v. State Tax Officer (Works Contract)
Case Citation: (2021) ibclaw.in 476 NCLAT
Date: 07/10/2021

(By Rohit Pradhan, final year law student from Symbiosis Law School, Hyderabad)

Facts

An application for CIRP was filed against the Respondent under Section 9 of the IBC, 2016 before NCLT Kochi. The appellant was appointed as the Interim Resolution Professional (IRP). Later, he was confirmed as a Resolution Professional (RP), by the Committee of Creditors (COC).

Respondent made the claim of Rs. 28,41,59,349.06/- During the CIRP, the Resolution Professional revised the given claim to Rs. 1,06,09,200/-, after due verification of the GST claim. Resolution Professional sent a detailed report regarding the said revision to the Respondent. However, the said revision was made after 5 months of acceptance of Respondent’s original claim.

Aggrieved by the action of Resolution Professional, Respondent filed an application before the Adjudicating Authority under Section 60(5) of the IBC. The Adjudicating Authority then directed the Appellant to file an appeal before the Joint Commissioner for the reassessment of the GST amount payable.

The Promoters and the COC sought with the Resolution Professional to look into the possibility of re-verification of the claim amount. Appellant then filed an application before the NCLT seeking clarification w.r.t approaching the Joint Commissioner. NCLT then confirmed that the previous order for approaching the Joint Commissioner does not have any defect or error.

Aggrieved by this clarification, the present appeal is filed.

Issues:

• Whether the CIRP Regulation supersede the GST Act, 2017?
• Whether the Interim Resolution Professional / Resolution Professional modify the GST levied under the Assessment Orders passed by the GST Authority under the GST Act?

Contentions

Appellant’s Contentions

It was contended that, the amount claimed by the GST department was exorbitantly high and did not consider relevant Notifications issued by the Government of India. One being to exempt GST on healthcare services by a Clinical establishment/medical practitioner/para-medics.

Appellant contended that laboratory and diagnostic services being the healthcare services; canteen food being supplied; on the advice of doctors, etc would be exempt from the GST liability. Based on the above rationale, the Resolution Professional revised the amount of the Respondent to Rs. 106,09,299/-.

Respondent’s Contentions

It was contended that the assessee, Corporate Debtor, was in total arrears of Rs. 28,41,59,349.06. Appellant affirmed the said amount; after due verification. It was after five months that the Resolution Professional revised the same.

It was contended that, appellant was relying on the notification; however, a Notification will not supersede the GST Act.

Respondent challenged the actions of the Appellant; citing Swiss Ribbons Pvt. Ltd and Anr v. UOI [2019] ibclaw.in 03 SC stating that Resolution Professional does not have any adjudicatory powers under the IBC Law. Hence, the Appellant herein has no power to adjudicate the Order passed by the Respondent.

Section 62 of the CGST/SGST Act 2017 empowered the assessing authority to pass assessment order against the non-filers; which the Respondent did accordingly; and passed 18 of such orders. In furtherance. The Appellant does not hold any right to adjudicate upon such matter. Here it was contended that, the Appellant interfered and reduced the price; during the resolution period; the time by when those assessment order attained finality.

Findings

Tribunal observed that all the assessment orders were passed before the declaration of Moratorium. Therefore, such order attained the finality in the absence of any challenge against the assessment orders before the Appellate Authority; according to the Statutes.

Tribunal held that, the Resolution Professional cannot modify the GST amount which was levied under the Assessment Orders as per the GST Act, 2017. No Revision against the Assessment orders could be made under Section 238 of the IBC.

If Resolution Professional is aggrieved by the Assessment Orders; he should had filed the Appeal under Section 107 of the CGST/SGST Act, 2017 read with the Rule 108 of the GST Rules 2017.

Tribunal also looked into the scope of Revision conferred upon the Resolution Profession under Regulation 14 of the CIRP Regulations.

Tribunal analysed Regulation 10 to 14 of the CIRP Regulations. Regulation 10 states that, the Resolution Professional can seek clarifications form the Creditor of its claim. Regulation 13 states that, the Resolution Professional need to verify the claim within seven days from the last date of the receipt of the Claims. Regulation 14 empowers the Resolution Professional to determine the amount of claim. Regulation 14(2) empowers the Resolution Professional to consider revision; if he comes across additional information warranting such revision.

Here in the present case, the Promoter and Suspended Managing Director of the Corporate Debtor informed the Resolution Professional; that, GST Department is charging them exorbitantly without taking account of the Notification passed the Central Government. Resolution Professional then got additional access to the new information. After the due-diligence, the Resolution Professional revised the original estimate and then lowered it.

However, Tribunal maintained that the Appellant moved beyond its Jurisdiction. Such exercise of power was not mandated for the GST assessment order. GST Act did not give any adjudicatory power to the Resolution Professional. The power under Regulation 14 of the CIRP Regulations can only be invoked if the claim is found not be precise for any contingency or other reasons.

Tribunal observed that the IBC is a complete code. It provides that the COC need to exercise its commercial wisdom; however, it cannot exercise the Judicial wisdom. It has no role in the acceptance or rejection of the claim.

Acceptance or rejection of a claim is under the duties of IRP/Resolution Professional, and the aggrieved party can agitate the same before the Adjudicating Authority. Tribunal finally held that the Resolution Professional committed an error in exercising their power and exercised the powers of GST Authorities under the pretext of Regulation 14 of the Code, which would not be sustainable.

Personal Remarks

Tribunal clarified that be it IRP or RP; none has been bestowed with the Rights to modify the GST levied under the GST Act. GST Act does not confer the adjudicatory rights upon the IRP/RP. Regulation 14 of the CIRP provides the IRP/RP with the rights to revise the claims. However, the same power cannot be exercised to modify the GST levied under the GST Act. It clarifies that the GST Act supersedes the CIRP Regulation. Tribunal commented upon the role of COC and held that, the COC can only exercise their commercial wisdom and they cannot replace it with the Judicial wisdom.