Jharkhand High Court Rejects ESL Steel’s ITC Claim Prior To The Approval Of The Resolution Plan By NCLT

The Jharkhand High Court rejected ESL Steel’s Input Tax Credit (ITC) claim prior to the approval of the resolution plan by the National Company Law Tribunal (NCLT).

The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that the liability of the earlier management may not be shifted to the current management, but at the same time, the credit available to the earlier management will also not be available to the current management as the current management was not a taxpayer during the period of procurement of inputs or capital goods as availed in the TRAN-1 filed on November 30, 2012.

The State Bank of India, being the major financial institution of the Petitioner, had filed a Company Petition before the National Company Law Tribunal, Kolkata, under the provisions of the Insolvency and Bankruptcy Code, 2016, for initiating the corporate insolvency resolution process of the Petitioner. The Application of SBI was admitted, and a Resolution Professional was appointed as the Interim Insolvency Resolution Professional (IRP). During the course of its proceedings, the Resolution Professional filed a Resolution plan, which was approved by the NCLT.

During the pendency of IBC proceedings, the earlier Management of the Petitioner Company had filed the original TRAN-1 on September 27, 2017. While filing the Form TRAN-1, the GST Portal did not allow the Petitioner to disclose and transition the CENVAT Credit on the Capital Goods received during the months of July and August 2017, amounting to Rs. 92,13,412.

The respondent department confirmed the demand of Rs. 6,02,34,616 on the ground of irregular availment of transitional credit during the period 2017–18, which includes the transitional credit of Rs. 5,10,21,204 claimed by the Petitioner prior to April 17, 2018, and the balance amount of Rs. 92,13,412 claimed by the Petitioner as Transitional credit by filing a new TRAN-1.

The petitioner contended that no recovery or proceeding can be continued against the petitioner for any alleged dues prior to April 17, 2018, i.e., the date on which the NCLT approved the petitioner's resolution plan.

The petitioner urged that it is only the past obligations of the past period that get extinguished once the new management has taken over the Company as part of the Resolution Plan. There is no statute or judgement that says that past credit due to the company gets expunged.

The court observed that the current management was not a taxpayer for the period prior to June 4, 2018. i.e., the date of the change of management and therefore the liability of the earlier management should not be shifted to the current management. Likewise, the credit available to the earlier management will also not be available to the current management, as the current management is not a taxpayer.

Case Title: M/s ESL Steel Limited Versus Principal Commissioner

Citation: 2023 LiveLaw (Jha) 20

Case No.: W.P.(T) No. 1995 of 2023

Date: 11.07.2023

Counsel For Petitioner: Biren Poddar

Counsel For Respondent: P.A. S. Pati

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