FILING OF GST RETURNS DURING CORPORATE INSOLVENCY RESOLUTION PROCESS

[Mr. M. GOVINDARAJAN]

The provisions of Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) provides for filing application before the Adjudicating Authority by the Financial creditor or operational creditor or by corporate debtor himself to initiate corporate insolvency resolution process against the corporate debtor.   On admission of the application the Adjudicating Authority by an order-

• declare a moratorium;
• cause a public announcement of the initiation of corporate insolvency resolution process and call for the submission of claims; and
• appoint an interim resolution professional.

From the date of appointment of the interim resolution professional the management of the affairs of the corporate debtor shall vest in the interim resolution professional.  The powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional. The resolution professional is appointed followed by the interim resolution professional. Therefore the resolution professional is to look after the affairs of the corporate debtor. Since the administration is on the going concern basis the resolution profession is to take care of the day to day activities of the corporate debtor.  During this process he is to issue invoices and to levy GST, pay the tax and to file GST returns regularly during his tenure.

In ‘T.R. Ravichandran, Resolution professional v. The Assistant Commissioner (ST), Kilpauk, Assessment Circle & 12 others’ – 2019 (12) TMI 649 - NATIONAL COMPANY LAW TRIBUNAL - CHENNAI BENCH the resolution professional filed the miscellaneous application before the Adjudicating Authority, Chennai Bench seeking permission to the corporate debtor to have access to its GST portal account to file GST returns during the period of corporate insolvency resolution process and to allow the applicant to pay the net GST liability from the date of commencement of the corporate insolvency resolution process till its completion disregarding non-payment of arrears dues of GST for the period prior to the commencement of the corporate insolvency resolution process.

The Revenue contended that the relief sought by the applicant cannot be granted because there is no provision set out in the GST Act to accept current dues before clearing past dues, therefore the Revenue prayed to dismiss the application filed by the resolution professional.

The Adjudicating Authority analyzed the provisions of the Code. It observed that any company once it has gone into corporate insolvency resolution process, if at all the corporate debtor is to run as a going concern, it can be obligated to pay the taxes from the date of initiation of corporate insolvency resolution process.  As to the dues prior to the commencement of the corporate insolvency resolution process the department is entitled to make a claim against the corporate debtor as mentioned in the corporate debtor.

The Adjudicating Authority further observed that if the corporate debtor’s GST portal is blocked it would be difficult to the corporate debtor in corporate insolvency resolution process to generate bills falling within the ambit of GST and pay the taxes for the post admission period.

The Adjudicating Authority further observed that the tax authorities fall within the ambit of operational creditor as to the pre admission claim concerned, the Department is at liberty to make its claims before the Resolution professional instead of instating upon the resolution professional to pay the pre-admission dues before accepting the current liabilities arising during the corporate insolvency resolution process.

The Adjudicating Authority categorically pointed out the section 238 of the Code is having overriding effect  on all other laws which are in contravention  to the provisions of the Code.  Therefore the Department cannot raise an objection saying since no provision has been made in GST or in its software to accept such accounts, the business happening in the market after initiation of the corporate insolvency resolution process through debtor company will come to a standstill and in such situation no company under corporate insolvency resolution process can function as a going concern.

The Adjudicating Authority directed the Department to allow the corporate debtor to have its access to its GST net portal account, permit the resolution professional to file GST returns of the corporate debtor generated after the commencement of the corporate insolvency resolution process without insisting upon payment of the past dues of GST during the pre admission period and accept net GST liability after availing the eligible input tax credit from the date of commencement of the corporate insolvency resolution process and adjust such GST payment remitted by the corporate debtor towards discharge of GST during the corporate insolvency resolution process.