The facts leading to the present appeal in nutshell are as under: That the appellant – company registered with the Service Tax Department was a company engaged in providing hospitality services. Thus, on and from 11.09.2018 the corporate insolvency resolution process against the appellant commenced and the appellant was subjected to moratorium under Section 14 of the IBC on and from 11.09.2018. Thus, Form No.1 was issued within the prescribed time limit and the tax dues were computed by the appellant as per the Scheme, 2019.
Vide communication dated 09.10.2020 to the Assistant Commissioner, the appellant explained that the settlement amount under the Scheme, 2019 could not be paid by the appellant before 30.06.2020 due to the legal moratorium imposed upon the company and permission sought to pay the due amount. By the impugned judgment and order the High Court has dismissed the said writ petition on the grounds that (i) the High Court shall not issue a direction contrary to the Scheme; (ii) the relief sought cannot be granted as the Designated Committee under the Scheme is not existing.
That the Designated Officers continue to act as the Designated Committee under the Scheme till the completion of the proceedings under the Scheme. It is submitted that therefore the reasoning given by the Hon’ble High Court that the Designated Committees are not in existence after 30.06.2020 and therefore the appellant is not entitled to any relief, may not be accepted, as even after 30.06.2020 and even as per the instructions issued by the CBEC, the respective Designated Committees continued to function and process the declarations manually. 3
It is further submitted by learned counsel appearing on behalf of the appellant that in the instant case the Hon’ble High Court has not properly appreciated the cause for which the appellant could not deposit the amount under the Scheme 2019 on or before 30.06.2020. It is submitted that as per the Resolution Plan accepted during the insolvency proceedings, the Resolution Applicant was required to deposit all statutory dues (including service tax dues) within 6 months from the effective date into an escrow account. 4 It is vehemently submitted that in any case, no person can be left remediless due to operation of law. While opposing the present appeal, Shri Vikramjit Banerji, learned ASG appearing on behalf of the Union of India has vehemently submitted that in the facts and circumstances of the case no error has been committed by the Hon’ble High Court in dismissing the writ petition and refusing to direct the respondents to accept the payment towards the settlement dues under the Scheme, 2019.
2 It is further submitted that in the present case, admittedly, no payment was made of settlement amount under the Scheme prior to 30.06.2020 and therefore, the prayer of the original petitioner to extend the time limit to make the payment of settlement amount under the Scheme, 2019 was rightly rejected by the Commissioner and the same has rightly not been interfered with by the Hon’ble High Court.
The Scheme, 2019 came to be introduced on 01.09.2019 and the last date for making the application under the Scheme was 30.12.2019 and in fact, the appellant submitted the application in Form No.1 on 27.12.2019 i.e. However, even before the Scheme, 2019 came to be introduced, the appellant was subjected to proceedings under the IBC which commenced on 11.09.2018 when the NCLT admitted the application under Section 7 of the IBC.
In a given case can the appellant be made to suffer for no fault of its own, and be rendered remediless and denied the benefit/relief though it was impossible for the appellant to carry out certain acts, namely to deposit the settlement amount during the moratorium. [Calcutta Iron Merchants’ Association (supra) (para 5)]
Also Read: https://newslaw.in/case-type/civil/acquisition-of-land-and-deemed-lapse-under-the-act-2013/
3 In the case of Gyanichand (supra) it was observed by this Court that it would not be fair on the part of the Court to give a direction to do something which is impossible and if a person has been directed to do something which is impossible, and if he fails to do so, he cannot be held guilty. 1
Now so far as the observations made by the High Court to the effect that the High Court cannot, in exercise of powers under Article 226 of the Constitution of India extend the period under the Scheme, 2019, to some extent the High Court is right.
In a given case it may happen that a person who has applied under the Scheme and who was supposed to make payment on or before 30.06.2020, became seriously ill on 29.06.2020 and there was nobody to look after his affairs and therefore he could not deposit the amount; such inability was beyond his control and thereafter, immediately on getting out of sickness he tried to deposit the amount and/or approached the Court – can the Court close its eyes and say that though there may be valid reasons and/or causes for that person’s inability to make the payment, still no relief can be granted to him?
2
Also Read: https://newslaw.in/case-type/civil/taxation-of-engineering-design-drawings-goods-or-services/
Now so far as the other ground given by the High Court, that the Designated Committees are not in existence, is concerned, it is required to be noted that the CBCE has issued a circular that in a case where the High Court/courts have passed an order setting aside the rejection of the claim under the Scheme after 30.06.2020, the applications can be processed manually. Present appeal is allowed accordingly.
Case Title: M/S. SHEKHAR RESORTS LIMITED (UNIT HOTEL ORIENT TAJ) Vs. UNION OF INDIA (2023 INSC 15)
Case Number: C.A. No.-008957-008957 / 2022
