Tax appellate tribunal asks CBIC to frame norms for tax recovery in insolvency cases

New Delhi, October 27, 2022

Indirect tax appellate tribunal CESTAT has asked Central Board of Indirect Taxes and Customs (CBIC) to frame guidelines to deal with outstanding tax demands against companies facing insolvency proceedings.

Giving its ruling in the Ultratech Nathdwara Cement Ltd. case, the Ahmedabad bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) observed that the revenue department has no proper guideline as to what stand is to be taken in a case where the proceedings under the Insolvency and Bankruptcy Code (IBC) is in progress before NCLT/NCLAT or at higher forum.

The tribunal noted that the assessee against whom the IBC proceedings are initiated approach CESTAT for disposing of the appeals in the light of the NCLT's orders. However, in the absence of any guideline by the CBIC, the tax officers are unaware as to what stand is to be taken in such cases.

"Therefore, we are of the view that the Central Board of Indirect Taxes & Customs (CBIC) may consider issuing guideline/procedure for dealing with the case before this tribunal wherein, against the assesse's company IBC proceeding has been initiated," the CESTAT said in an order dated October 20.

KPMG Tax Partner Abhishek Jain said the insolvency and bankruptcy law in India overrides any other law and stipulates that recovery proceedings, including tax recovery, cannot be initiated post approval of the resolution plan. This has also been affirmed by the apex court in the case of Ghanashyam Mishra & Sons.

"This judgement by the CESTAT will be much appreciated by the industry, and the guidelines when issued will help streamline the process for indirect tax authorities to tackle matters involving interplay with the IBC law and avoid unnecessary litigation," Mr. Jain added.

[The Hindu]