Asian Colour Coated Ispat Ltd. v. The Union Of India Through The Ministry Of Finance, Dept. Of Revenue And ORS

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 17873 OF 2024 Asian Colour Coated Ispat Limited .. Petitioner

Versus

The Union of India & Ors .. Respondents Mr. Gopal Mundhra, with Mr. Harsh Shah, Ms.Ginita Bodani i/b Economic Laws Practice, Advocates for the Petitioner. Digitally signed by ANJALI TUSHAR ASWALE Date:

2025.04.17 18:24:53 +0530 ANJALI TUSHAR ASWALE Mr. Siddharth S. Chandrashekhar, with Mr. Abhishek Mishra, Advocates for Respondent Nos. 2 to 4.

CORAM: B. P. COLABAWALLA & FIRDOSH P. POONIWALLA, JJ.

DATE:

P. C.

1.

Mentioned. Taken out of turn. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.

2.

The Petitioner has challenged the Order in Original No. Raigad/ADC/44/(SS)24-25 dated 30.08.2024 ("Impugned Order") issued under Section 73 of the Central Goods and Services Tax Act, 2017 ("CGST Act") and relating to Financial Year 2019-2020.

3.

The primary ground for challenging the Impugned Order is the approval of a Resolution Plan under the statutory regime constructed in terms of the Insolvency and Bankruptcy Code, 2016 ("IBC") and the statutory injunct which would operate in respect of any claim which may pertain to a period prior to the Resolution Plan being approved. 4.

It is in the aforesaid context, the learned counsel appearing for the Petitioner, contended that the challenge is liable to be accepted bearing in mind the decisions handed down by this Court in the case of AMNS Khopoli Limited (Formerly known as Uttam Galva Steels Limited) vs. Assistant Commissioner of Income Tax (International Tax) & Ors. [Writ Petition (L) No. 6313 OF 2024]; and Uttam Galva Metallics Ltd. And Mr. Subodh Karmarkar Versus Assistant Commissioner of Income Tax, Union of India [Writ Petition (L) No. 9421 OF 2022].

5.

According to Mr. Mundhra, the issue raised in the above Writ Petition is no longer res integra bearing in mind the judgments rendered by the Supreme Court in the context of Section 31 of the IBC and the law enunciated in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company [2021 (4) TMI 613 - Supreme

Court] and Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors [2020 (8) SCC 531].

6.

For the purposes of evaluating the challenge which stands raised, it would be apposite to notice the following salient facts. The Petitioner was incorporated as a limited company on 02.02.2005 under the Companies Act, 1956 and was stated to be engaged in the business of manufacturing, processing, importing and exporting steel products, tubes, pipes and other allied articles. On 04.04.2016, State Bank of India, asserting itself to be a financial creditor, filed an application under Section 7 of the IBC. That Petition ultimately came to be admitted by the National Company Law Tribunal ("NCLT") on 20.07.2018 when an Interim Resolution Professional came to be appointed, and a moratorium was enforced in terms of Section 14 of the IBC.

7.

On 20.08.2018, a Committee of Creditors ("CoC") came to be constituted and whereafter a public notice came to be issued inviting Expressions of Interest ("EOI") from parties. On 08.03.2019, JSW Steel Coated Products Limited submitted a Resolution Plan for consideration of the CoC. Pursuant to deliberations which ensued before the CoC, a revised Resolution Plan came to be tendered on 06.04.2019. The aforesaid

Resolution Plan was again revised and submitted for consideration of the CoC on 24.04.2019 and which ultimately came to be approved on 28.06.2019. The plan was thereafter transmitted for affirmation and approval to the NCLT on 10.07.2019.

8.

The NCLT, by its order of 26.10.2020, ultimately came to approve the said Resolution Plan. The factum of approval of the aforenoted Resolution Plan as well as the order of the NCLT was duly communicated to the Respondents by the Petitioner vide its letters dated 21.12.2020 and 22.04.2021.

9.

It is only thereafter a Show Cause Notice bearing No. 83/CGST/RGD/JC/2024-25 dated 24.05.2024 ("SCN") was issued by Respondent No. 3 for the Financial Year 2019-20 under Section 73 of the CGST Act. Responding to the aforesaid, the Petitioner submitted its reply on 12.06.2024. The said SCN was adjudicated by Respondent No. 4 by way of issuance of the Impugned Order.

10.

The learned counsel for the Petitioner principally contended that the Respondents stand denuded of jurisdiction or authority to commence any proceedings pertaining to a period prior to the approval of the

Resolution Plan by virtue of Section 31 of the IBC. It was the submission of Mr. Mundhra that this Court has consistently taken the position that such an action would not sustain bearing in mind the legal position which has come to be conclusively settled by the Supreme Court in the case of Ghanashyam Mishra and Essar Steel (supra).

11.

In the present Writ Petition, on 25.03.2025, a Division Bench of this Court, on a prima facie examination of the matter, granted ad-interim relief by restraining the Revenue from taking any further steps, whether coercive or otherwise, in relation to the Impugned Proceedings. Such interim relief has continued till date.

12.

In the affidavit in reply, the Respondents submitted that the Petitioner's written submissions w.r.t. claims standing extinguished by virtue of the approval of the Resolution Plan were not considered while passing the Impugned Order merely due to sheer oversight and that the office of the Respondents have issued necessary Instructions to the jurisdictional authority directing them not to pursue any recovery proceedings in the matter.

13.

We have heard the learned counsel for the parties and also perused the papers and proceedings in the above Writ Petition. At the outset, it would be necessary to extract the provisions of Section 31 (1) of the IBC, since it makes the terms of resolution of corporate debtors binding on the world at large. They are extracted below:

"31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under subsection (4) of section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan." [Emphasis Supplied] 14.

Even a plain reading of the foregoing would show that once the Adjudicating Authority (the NCLT) approves the Resolution Plan, it would be binding on, among others, the Central Government and its agencies in respect of payment of any statutory dues arising under any law for the time being in force. It is now trite law that the effect of resolution of a corporate debtor is that the terms of resolution bind the tax authorities and their

enforcement actions - a position in law declared in numerous judgments of the Supreme Court. While it is not necessary to extract from a long line of decisions of the Supreme Court to note the effect of approval of the Resolution Plan under Section 31 of the IBC, as rightly pleaded by the Petitioner-Assessee, the judgment in Ghanshyam Mishra (supra) comprehensively summaries the import of various judgments on the point. The following extracts from Ghanshyam Mishra (supra) are noteworthy: "102. In the result, we answer the questions framed by us as under: 102.1.

That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall 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.

102.2. The 2019 Amendment to Section 31 of the I&B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect.

102.3. Consequently all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its

approval under Section 31 could be continued. " [Emphasis Supplied] 15.

It is therefore crystal clear that once a Resolution Plan is duly approved under Section 31 (1) of the IBC, the debts as provided for in the Resolution Plan alone shall remain payable and such position shall be binding on, among others, the Central Government and various authorities, including the tax authorities. All dues which are not part of the Resolution Plan would stand extinguished and no person would be entitled to initiate or continue any proceedings in respect of any claim for any such due. No proceedings in respect of any dues relating to the period prior to the approval of the resolution plan can be continued or initiated. In this clear view of the matter, there can be no doubt that the Impugned Proceedings and their continuation against the Petitioner-Assessee are wholly misconceived and untenable.

The Impugned Order is essentially for the Financial Year 2019-20. Evidently, such proceedings pertain to the period prior to the approval of the Resolution Plan. The Resolution Plan came to be approved on 26.10.2020. The conduct of such proceedings which has resulted in the passing of the Impugned Order would be directly in conflict with the law declared in Ghanshyam Mishra (supra). Consequently, nothing in the Impugned Proceedings can legitimately survive.

16.

We may mention that a co-ordinate bench of this Court in Alok Industries Ltd. v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 285 (Bombay) held in favour of the Assessee quashing various proceedings for Income Tax re-assessment initiated against a corporate debtor that had undergone a resolution under the IBC. So also, in AMNS Khopoli Limited v. Assistant Commissioner of Income Tax and Others [Writ Petition (L) No. 6313 OF 2024] the re-assessment proceedings initiated in the facts of that case were quashed and set aside by a Division Bench of this Court. In particular, Paragraphs 15 and 16 of AMNS Khopoli (supra) are noteworthy and are extracted below: "15.

In the circumstances, since the Resolution Plan expressively provides that no person shall be entitled to initiate any proceedings or inquiry, assessment, enforce any claim or continue any proceedings in relation to claims so long such result to a period prior to the Effective Date of the Resolution Plan, i.e., 10th November 2022 impugned notices are bad in law. Further, the impugned notices are bad in law also because respondents failed to take into account that after approval of the Resolution Plan by the NCLT, a creditor including the Central Government, State Government or local authority is not entitled to initiate proceedings on the Resolution Applicant, in relation to claims which are not part of the Resolution Plan approved by the NCLT.

Pertinently, respondents had not submitted any claims to the IRP, as required under the Code, despite the public announcement being issued by the IRP, as prescribed under the Code.

16. The impugned notice issued under Section 143 (2) of the Act by Respondent No. 1 and the consequential impugned notices issued under Section 142 (1) of the Act by Respondent No. 2 and all subsequent communications issued by Respondent No. 2 pursuant to the aforementioned impugned notices are bad in law since assessment and inquiry under the Act is sought to be initiated in gross violation of provisions of the Code in as much as it relates

to a period prior to the Effective Date."

17.

The aforesaid position in law squarely applies to the facts of the instant case and necessitates quashing the Impugned Order. Evidently and admittedly, the Impugned Order relates to the period prior to the approval of the Resolution Plan of the Petitioner-Assessee, and therefore the claim made in the Impugned Order stands extinguished. This is why the Supreme Court has clearly ruled that initiation and continuation of proceedings relating to the period prior to the approval of the Resolution Plan cannot be indulged in. Upon completion of the CIRP, the Petitioner-Assessee has completely changed hands and has begun on a clean slate under new ownership and management.

18.

Consequently, all the notices and communications issued by the Revenue in connection with the Impugned Proceedings, and the consequential actions as impugned in this Writ Petition are hereby quashed and set aside in terms of prayer clauses (a), which, for felicity, is extracted below: - a. "That this Hon'ble Court be pleased to issue a Writ of Certiorari or writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India, calling for the records pertaining to the Petitioner's case and after going into the validity

and legality thereof to quash or set aside the Impugned Order No. Raigad/ ADC/44/(S8)24-25 dated 30.08.2024 issued by Respondent No. 4 and Show Cause Notice bearing No. 83/CGST/RGD/JC/202425 dated 24.05.2024 issued by Respondent No. 3". 19.

Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.

20.

This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax [FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.]