National Plywood Industries LTD. vs. Union Of INDIA And Anr.

Held

The Court held that the Commissioner of GST had not adequately examined whether the moratorium order passed by the NCLT under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016, also covered proceedings pending before the GST authorities. Section 14(1)(a) prohibits the institution or continuation of suits or proceedings against the corporate debtor, including the execution of any judgment, decree, or order. The Court noted that the Commissioner's order raised a question about whether adjudication constituted an execution order but did not definitively examine if the pending GST proceeding itself was covered by the moratorium. Consequently, the Court set aside the order dated 15.11.2019 and remanded the matter back to the Commissioner for a fresh consideration of this specific aspect. The Court directed that the reconsideration be completed within one month of receiving a certified copy of the order.

Facts

The petitioner, National Plywood Industries Ltd., challenged an order dated 15.11.2019 passed by the Commissioner, GST, Dibrugarh. This order confirmed a demand of Rs. 1,82,67,651/- and imposed a penalty of Rs. 1,82,67,581/- under Rule 173Q(1) of the Central Excise Rules, 1944. The petitioner argued that an order of moratorium had been passed by the National Company Law Tribunal (NCLT), Guwahati, on 26.08.2019 under Section 13 of the Insolvency and Bankruptcy Code, 2016, declaring the petitioner as a corporate debtor. The revenue contended that the Commissioner had considered this objection and found that adjudication of show cause notices was permissible as it determined liability and was not an execution order or decree.

Key Issues

1. Whether the order of moratorium declared by the National Company Law Tribunal (NCLT) under Section 14 of the Insolvency and Bankruptcy Code, 2016, prohibits proceedings before the GST authorities. Petitioner's argument: The petitioner contended that the NCLT's order dated 26.08.2019, declaring a moratorium under Section 13 (and implicitly Section 14) of the Insolvency and Bankruptcy Code, 2016, prohibited all proceedings against the corporate debtor, including those before tax authorities. They relied on Section 14(1)(a) of the Code. Revenue's argument: The revenue, through the Commissioner's order, argued that while a moratorium prohibits the execution of judgments, decrees, or orders, the adjudication process by tax authorities to determine liability is not barred. The Commissioner's order referenced Section 14 of the Insolvency and Bankruptcy Code, 2016, and interpreted adjudication as distinct from execution.