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“Preposterous”: Kerala High Court on NCLT exceeding jurisdiction in declaring tax assessment of company void

By way of background, a company (corporate debtor) named M/s Albanna Engineering (India) Private Limited was admitted to the Corporate Insolvency Resolution Process (CIRP) in October 2019. A moratorium was also declared under Section 14 of the IBC until December 2021 when a liquidation order was passed against the company.

On finding certain irregularities in the company’s assessment records for 2015-16, a notice was issued under Section 25(1) of the Kerala Value Added Tax Act.

Subsequently, a tax assessment was carried out and the company’s liability was pegged at about ₹11.76 crores.

This amount was then claimed by the Deputy Commissioner (works Contract) of the Kerala State Goods and Services Tax (GST) Department. The said claim was submitted before the resolution professional.

Meanwhile, the corporate debtor sought to challenge this tax assessment and filed a plea before the NCLT Kochi for permission to file an appeal against the assessment order.

The NCLT Kochi, however, decided on the validity of the tax assessment directly. In an order passed on October 26, 2022, it declared the tax assessment void ab initio, opining that it was passed in violation of Section 14(1)(a) of the IBC (concerning moratorium).

The NCLT, therefore, directed the resolution professional to disregard the tax assessment order under consider the GST department’s claims without factoring in the assessment order.

This development was challenged by the GST authorities before the High Court.

Source: Barandbench

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