TMI Blog2021 (10) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... y appellate or adjudicatory jurisdiction in respect of issues arising under other statutes. Scope of revision by the Resolution Professional - powers conferred under Regulation 14 of the CIRP regulations - HELD THAT:- After going through the Regulations 10 to 14 of the CIRP Regulations, it is clear that IRP/RP may, under Regulation 10, call clarifications from a creditor for substantiating the whole or part of its claim. Furthermore, under Regulation 12, the IRP/RP is entitled to updation of the creditor's claim based on the satisfaction of the claim. Finally, Regulation 13 mandates to verify every claim as on the insolvency commencement date within seven days from the last date of the receipt of the claims - Undisputedly, the IRP/RP has revised the admitted claim of the Respondent based on the circumstances. The exercise of revision of the GST assessment order was beyond the jurisdiction of the IRP/RP. It is pertinent to mention that the IRP/RP was not having the adjudicatory power given by the GST Act. Regulation 14 of the CIRP Regulations only authorises the IRP/RP to exercise power where the claim is not precise due to any contingency or other reasons. In the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements for the financial year 2018-19 and also based on the Notification No.9/2017-Integrated TA (Rate) dated 28.6.2017 issued by the Government of India. Needless to mention here that on receipt of the Appeal from the Resolution Professional, the Joint Commissioner shall take a decision in the matter, as early as possible, so that the recovery of the GST amount from the Corporate Debtor should not be delayed any further. 2.3 After that the Appellant/Resolution Professional had filed MA/205/KOB/2020 before the Hon'ble NCLT, Kochi Bench seeking clarifications, as under, before the Hon'ble NCLT, Kochi Bench in the Order dated 4 November, 2020 passed in MA/140/KOB/2020. a. Issue necessary clarification to the Applicant as to whether the Resolution Professional has the authority under Regulation 13 and 14 of the CIRP Regulations to file an appeal before the Joint Commissioner, GST, as part of the verification and determination of a claim submitted by the GST department in Form B. b. Issue necessary clarifications to the Applicant as to whether the judgement, decree or Order, if any, passed by the Appellate Authority under CGST Act pursuant to the Appeal, against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28.6.2017. The Health Care Services by clinical establishment is exempted from GST and hence revenue generated under the Head, In-patient Collections , Outpatient Collections and Laboratory and Diagnostic Services being the Health Care Services rendered to admitted Outpatient respectively are not liable to GST. Hence a further clarification as sought for in this MA is not called for as to whether he can file an appeal before the Joint Commissioner GST. Regarding the relief that when Moratorium is declared by this Tribunal, the Order of the Appellate Authority under CGST Act is binding on the Applicant Resolution Professional, the decision of the Calcutta High Court in Burn Standard (supra) is significant which states that the Moratorium will not stand in the way of Resolution Professional to file an appeal before the State Tax Department. The relevant paragraph of that decision is quoted below:- 2.4.3 Undisputedly in the present case, M/s. Burn Standard Co. Ltd., the plaintiff is the corporate debtor and the suit has not been filed against the corporate debtor within the meaning of Section 14 of the said Code, namely, M/s. Bum Standard Co. Ltd. Therefore, submission made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.08.2020. 6. Being aggrieved by the action of RP, the Respondent' State Tax Officer (Works Contract)' filed an application bearing No. MA/140/KOB/2020 before the Adjudicating Authority under Section 60(5) of the IBC to allow the claim amount submitted by the Respondent in full. 7. The Adjudicating Authority vide its Order dated 04.11.2020 had directed the Appellant to file an appeal before the Joint Commissioner, State Sales Tax Department for a reassessment of the GST amount payable, based on the audited financial statements for the Financial Year 2018 19 and the Notification issued by the government of India dated 28.06.2017 within two weeks from the date of the Order. 8. The RP stated that after receiving proper and validated information from the promoters of the Corporate Debtor, the COC, in a meeting held on 15 July 2020, directed the RP to explore other possibilities to re-verify the claim amount. 9. After that, with the permission of the COC at its 23rd Meeting held on 12.11.2020, the Appellant had filed Miscellaneous Application MA/205/KOB/2020 before the NCLT, Kochi bench to issue necessary clarification to the Appellant in respect to the filing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culated the GST liability for non-filing of return for the Financial Year 2018-19 and 2019-20 on the best judgement basis on the total turnover of the Corporate Debtor. However, as per Notification No.9 of the 2017-integrated tax rate dated 28 June 2017, the healthcare services by a clinical establishment or authorised medical practitioner or para medics are exempted from Goods and Service Tax. Accordingly, revenue under the head inpatient collections and outpatient collections and laboratory and diagnostic services being the healthcare services rendered to admitted patients and outpatients respectively are not liable to GST. Also, the pharmacy sales to 'inpatients' and canteen collections on food supplied to the inpatients as advised by the Doctor/Nutritionists are a part of the composite supply of healthcare and is not separately taxable. The said liability was also not crystallised as on the insolvency commencement date. 16. Based on the above premise and in the best interest of the CIRP, the RP revised the admitted claim amount of the Respondent to ₹ 106,09,299/- after due verification of the GST claims with the books of accounts of the Corporate Debtor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) dated 28.6.2017. 19.3 It is pertinent to point out here that the Corporate Debtor Company purchased both exemption and non-exemption of tax, and a Notification will not supersede the GST Act. 19.4 Against the rejection of the claim, the Respondent filed an Application, MA/140/KOB/2020 in (TIBA/11/KOB/2019 and IBA/28/KOB/2019) before the NCLT, Kochi Bench. The contentions raised by the Respondent in the above mentioned MA is that the rejection of the claim by the RP under the exercise of Regulation 14 is not sustainable because there is no un-preciseness in the amount claimed by the creditors either due to any other contingency or reasons. Regulation 14 of the CIRP verifies the preciseness of the claim made, and the same does not provide for any adjudicatory role to the RP. It is pertinent to refer to Judgement of the NCLAT in the matter of 'Navneet Kumar Gupta Vs. Bharat Heavy Electrical Ltd (CA(AT)(INS) No.743/2018)' dismissing the Appeal thereof in para 5 of the said Order, by following the decision of Apex Court as made in para 85 of the Apex Court judgment and the subsequent paras thereof in 'Swiss Ribbons Pvt. Ltd Another Vs. UoI' (2019 SCC online 73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of CIRP and the said section is inconsistent with Regulation 13 14 of CIRP Regulations due to the overriding effect of IBC Code, 2016 over the Goods and Service Tax Act, 2017. 19.7 However, the Appellant herein, without complying with the Order of NCLT to file an appeal under the provision of the GST law against the said assessment order, instead filed an Application seeking clarification, which the Hon'ble NCLT, Kochi Bench, dismissed. 19.8 The Respondent herein stated that all the assessment orders are passed before the declaration of Moratorium, in the absence of any challenge against the assessment order before the Appellate Authority as provided under the Statute by the Corporate Debtor/RP/ Appellant herein the same has become final. 19.9 Further, the time prescribed under Section 107 of the Act for filing Appeal was over; even though the Hon'ble NCLT Kochin Bench has given two weeks time to file an Appeal before the GST Appellate Authority, instead the Appellant filed clarification petition and the same was dismissed on 28.1.2021 with elaborate Order. 19.10 The Appellant filed an IA (IBC)/13/KOB/2021 before the NCLT under Section 30(6) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessment Proceedings are in the nature of statutory determination as to the Application of tax implications in respect of the activities of the Corporate Debtor. The Respondent could take recovery proceedings only after assessment proceedings. Thus accordingly, the Respondent filed the claims before the Appellant by the provisions of IBC, and thus the same is valid and proper. It was also not legal and not proper for the Appellant to file for the approval of the Resolution Plan when his petition for clarification was pending before Hon'ble NCLT. Discussion and Findings 20. We have heard the argument of the learned counsel for the parties and the record. Based on the argument advanced by the parties, the position that emerges is as follows; 20.1 Admittedly, the Appellant filed Clarification Petition MA/204/KOB/2020 before the Hon'ble adjudicating authority/NCLT, Koachin Bench seating the necessary clarification as to whether the RP has authority under Regulation 13 and 14 of CIRP Regulations to file Appeal before the Joint Commissioner, GST, as part of verification and determination of claim submitted by the GST department. The RP further sought clarification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as he deems fit from a creditor for substantiating the whole or part of its claim. 12. Submission of proof of claims.-(1) Subject to sub-regulation (2), a creditor shall submit 29[claim with proof] on or before the last date mentioned in the public announcement. 30[(2) A creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit the claim with proof to the interim Resolution professional or the Resolution professional, as the case may be, on or before the ninetieth day of the insolvency commencement date.] (3) Where the creditor in sub-regulation (2) is 31[a financial creditor under Regulation 8], it shall be included in the Committee from the date of admission of such claim: Provided that such inclusion shall not affect the validity of any decision taken by the Committee prior to such inclusion. 32[12-A. Updation of claim.-A creditor shall update its claim as and when the claim is satisfied, partly or fully, from any source in any manner, after the insolvency commencement date.] 13. Verification of claims.-(1) The interim Resolution professional or the Resolution professional, as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to determine the amount of claim in a case where the amount claimed by the creditor is not precise due to any contingency or other reasons. In such circumstances, IRP is authorised to make the best estimate of the amount of the claim based on the information available with him. 20.8 However, under regulation 14(2), IRP/RP is empowered to revise the amounts of claim admitted, including the estimates of the claims made under sub-regulation (1) when you come across additional information warranting such revision. 20.9 In the instant Appeal, IRP/RP has stated that on 13 July 2020 the promoter and Suspended Managing Director of the Corporate Debtor informed that the amount claimed by GST Department is exorbitantly high as the Department has erroneously charged GST on the total turnover of the Corporate Debtor without taking into account the Notification No. 9 of 2017 about integrated tax rate dated 28 June 2017 issued by Government of India. After getting access to the financial information of the Corporate Debtor maintained in the in-house IT server, he had verified the records of the Corporate Debtor with the assistance of the suspended Managing Director. He verified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority in law, had exercised the powers of GST authorities. Therefore, the said act of the Resolution Professional is without jurisdiction and not sustainable in law. 22. It is also important to mention that Insolvency and Bankruptcy Code is a complete code in itself. Section 25 of the Code provides the duties of the Resolution professional. Section 28 makes the provision for approval of the Committee of creditors for certain actions in the CIRP. The Committee of creditors is empowered to exercise its commercial wisdom in the Corporate Insolvency Resolution Process. But under the exercise of commercial wisdom, it cannot exercise judicial power. 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. For this reason, the Committee of Creditors has also recommended filing an Appeal before the appropriate forum. 23. In the circumstances stated above, we consider that the Resolution professional committed an error in exercising their power and exercised the powers of GST Authorities under the pretext of Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X
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