M/S Isolux Corsan INDIA Engineering And Construction Private Limited vs. The State Of Bihar
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M/s Isolux Corsan India Engineering and Construction Private Limited, a company under liquidation by order of the National Company Law Tribunal (NCLT) dated February 6, 2020, filed a writ petition through its Liquidator. The petition challenged a re-assessment order for the year 2012-2013. The petitioner contended that the Liquidator was not issued notice of the re-assessment proceedings and therefore could not participate. Claims for refund for the years 2013-2014 to 2015-2016 were also pending. The State argued that notices were sent via email and to the advocate handling refund applications, who had informed them of the liquidation. The State also contended that the moratorium under Section 14 of the IBC does not apply once liquidation commences, unlike Section 33(5).
Held
The Court held that the re-assessment order (Annexure-C) for the year 2012-2013 was vitiated by a violation of the principles of natural justice because the Liquidator, appointed on February 6, 2020, was not informed of the re-assessment proceedings. Notices were issued to the assessee's email after the Liquidator's appointment, indicating the Liquidator was unaware. The Court relied on the principles laid down in ABG Shipyard Liquidator (supra), which permits assessment but prohibits recovery during liquidation proceedings without approaching the Liquidator. The Court set aside Annexure-C solely on the ground of violation of natural justice, without delving into the merits. The operative directions included quashing the demand notice related to Annexure-C, directing the Liquidator to appear before the Assessing Officer on August 21, 2024, with the assessment order itself serving as notice for re-assessment. The Assessing Officer was directed to hear the matter on merits after the Liquidator files objections. The Court expressly stated it was not called upon to consider the refund issue for the years 2013-2014 to 2015-2016. The ratio decidendi is that proceedings affecting a company in liquidation must adhere to principles of natural justice, requiring notice to the Liquidator, and recovery of dues must follow the procedure laid down in the IBC.
Key Issues
1. Whether the re-assessment order for the year 2012-2013, issued after the company was ordered to be wound up, is vitiated by a violation of the principles of natural justice, specifically the non-issuance of notice to the Liquidator? (Question of mixed law and fact, turning on Section 33(5) of the Insolvency and Bankruptcy Code, 2016 and principles of natural justice). Petitioner's Arguments: The Liquidator was not served with notice of the re-assessment proceedings, preventing participation. Reference was made to Section 33(5) of the IBC, which states no suit or legal proceeding can be initiated by or against a corporate debtor after a liquidation order. The petitioner relied on ABG Shipyard Liquidator v. Central Board of Indirect Taxes & Customs, (2023) 1 SCC 472, for the proposition that while assessment is permissible, recovery is not without approaching the Liquidator. Revenue's Arguments: Notices were sent via email and to the advocate handling refund applications, who was aware of the liquidation. The judgment in ABG Shipyard Liquidator (supra) was interpreted to mean that only Section 14 moratorium stays recovery, not liquidation under Section 33(5).
Sections Cited
Section 33(5), Section 14
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 01-08-2024 The writ petition is filed by an assessee which is under liquidation by orders of the National Company Law 2/6 Tribunal (for brevity ‘NCLT’) Chandigarh Bench, Chandigarh. The Liquidator who represents the assessee has been appointed as per Annexure-2 order dated 06.02.2020 passed by the NCLT. The Liquidator representing the assessee has come before this Court with the writ petition challenging the re-assessment for the year 2012-2013; translated copy of which order is produced as Annexure-C along with the counter affidavit of Respondent Nos. 3 and 4. 2. Learned Counsel for the petitioner contends that the Liquidator was never issued with notice of re-assessment and could not participate in the re-assessment. There are also claims of refund which are being prosecuted for the years 2013- 2014 to 2015-2016 before the appropriate authority. In such circumstance, there should be a proper assessment proceeding taken with the participation of the petitioner. It is also pointed out from Section 33 (5) of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC’) that when a liquidation order has been passed, no suit or other legal proceeding shall be initiated instituted by or against a corporate debtor. Reference is also made to ABG Shipyard Liquidator v. Central Board of Indirect Taxes & Customs, (2023) 1 SCC 472, wherein it has been categorically stated that though the Taxes Department would be 3/6 entitled to make an assessment or determine the quantum of duty, there could be no recovery made; for which the Liquidator will have to be approached with a proper claim after the assessment is finalised.
The learned Government Advocate, on the other hand, submits that the order itself indicates that notices were sent on e-mail and even the Advocate who was prosecuting the refund application before the Tax Authorities was given notice, who had informed the respondents that the company is in liquidation. It is also pointed out from the judgment in ABG Shipyard Liquidator (supra) that the clear direction is that only when there is a moratorium under Section 14, there could be a stay of recovery. Since the liquidation has commenced, there is no further moratorium, is the contention.
With respect to the claim for recovery we have to only look at the operative portion of ABG Shipyard Liquidator (supra) and we extract from Paragraph No. 57:
On the basis of the above discussions, following are our conclusions:
Once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited juri iction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate 4/6 recovery of dues by means of sale/confiscation, as provided under the Customs Act.
After such assessment, the respondent authority has to submit its claims (concerning customs dues/operational debt) in terms of the procedure laid down, in strict compliance of the time periods prescribed under the IBC, before the adjudicating authority.
In any case, the IRP/RP/liquidator can immediately secure goods from the respondent authority to be dealt with appropriately, in terms of the IBC.
It has been categorically stated that the moratorium spoken of under the IBC is either as per the terms of Section 14 or Section 33(5) and that in such circumstance there can be no recovery made though the authorities would be entitled to assess or determine the quantum of duties or taxes.
In the present case, admittedly, in the case of the assessee the liquidation proceedings had commenced by Annexure-2 order dated 06.02.2020 and the Liquidator was appointed. As we saw from Annexure-C, the notices were all issued to the e-mail of the assessee after the Liquidator was appointed which makes it clear that the Liquidator was never informed of the re-assessment proceedings. In such circumstances, Annexure-C suffers from the defect of the 5/6 assessee having not been heard.
In the present case, initially the State had also objected to the filing of the writ petition, which was without getting an approval from the NCLT. When the objection was raised, the Liquidator had approached the NCLT for ex post facto approval which was denied. An appeal to the National Company Appellate Tribunal, however, found favour with the contention and declared the writ petition filed to be one with proper approval as granted by the Appellate Tribunal.
On the totality of the circumstances, we are of the opinion that the Liquidator should be noticed and participated in the re-assessment proceedings. Only for violation of principles of natural justice, we set aside the Annexure-C order without going into the merits of the matter. The Liquidator shall appear before the Assessing Officer on 21.08.2024 after filing proper objections. The assessment order at Annexure-C itself shall be considered as a notice for re-assessment. After filing the objection, the Assessing Officer shall hear the matter on the same day or any other date with intimation to the Liquidator, who is representing the assessee. The matter shall be considered on merits and an assessment order passed, which again has to be enforced only by filing a proper claim before the Liquidator and 6/6 going by the decision in ABG Shipyard Liquidator (supra). Necessarily the demand notice with respect to Annexure C assessment order for 2012-2013 would stand quashed. As far as the refund for the years 2013-2014 to 2015-2016, we are not called upon to consider the issue at all.
We hence allow the writ petition with the above directions.
Anushka/- (K. Vinod Chandran, CJ) ( Partha Sarthy, J) AFR/NAFR CAV DATE Uploading Date Transmission Date
Reproduced from the public record of the Patna High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.