CBIC asked to issue guidelines for tax officials for cases which are going through IBC proceedings

28 Oct 2022 , 09:27 AM

The Central Board of Indirect Taxes and Customs has been requested to provide suitable instructions to its employees about cases where Insolvency and Bankruptcy Code (IBC) proceedings are ongoing, by the Ahmedabad branch of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT).

According to the CESTAT, departmental officials are unsure of what position should be taken in these situations when they are before the bankruptcy court or the appellate body because there is no policy in place.

The IBC supersedes all other laws and provides that once a firm is admitted for debt resolution under the bankruptcy code, recovery proceedings–including tax recovery–cannot be started.

The bench noted that the revenue department lacked adequate instructions on how to proceed when IBC proceedings were ongoing before the National Company Law Tribunal or the appellate authority.

The decision concerned a situation in which UltraTech Cement had received a tax claim from the revenue department after the NCLT had authorized the company’s proposal to acquire bankrupt Binani Cement.

According to UltraTech, no debts were owed to the applicant under the NCLT’s resolution plan, hence the revenue department could not collect the tax claim.

However, the CESTAT stated that even if the IBC superseded all other Acts, “this tribunal cannot declare definitively whether the assessed sum can be recovered by the department or not in the absence of any clear provision under the Customs/Central Excise Act.”

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