Case Law Details
In re Maheshwary Ispat Limited (GST AAR West Bengal)
West Bengal Authority for Advance Ruling (AAR) recently addressed the issue of GST applicability on the sale of assets during the liquidation process of Maheshwary Ispat Limited. The company is currently undergoing liquidation, with Mr. Santanu Brahma appointed as the liquidator by the National Company Law Tribunal (NCLT), Kolkata. The applicant sought clarification on whether the sale of assets under liquidation constitutes a supply under GST law and whether the liquidator is required to obtain GST registration.
The AAR examined relevant legal provisions, including Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, which defines “supply,” and Section 24, which mandates compulsory registration in certain cases. The authority also referred to Notification No. 11/2020-Central Tax and Notification No. 439-F.T. under the West Bengal GST Act, which outline GST compliance requirements for companies undergoing insolvency proceedings. The liquidator had attempted to obtain GST registration but faced technical challenges due to the system requiring at least two promoters or partners, a requirement difficult to fulfill in liquidation scenarios.
The ruling referenced a similar decision in Mansi Oils and Grains Pvt. Ltd. (Order No. 02/WBAAR/2021, dated 29.06.2020), where it was determined that assets sold by an NCLT-appointed liquidator constituted a taxable supply under GST. Applying the same principle, the AAR held that the sale of Maheshwary Ispat Limited’s assets falls within the scope of taxable supply under GST. Consequently, the liquidator is obligated to obtain GST registration and comply with tax collection and filing requirements, even though technical difficulties exist in the registration process.
The AAR ruling clarifies that liquidators appointed under the Insolvency and Bankruptcy Code (IBC) must adhere to GST provisions when disposing of corporate assets. The decision also highlights a regulatory gap in the GST registration process for liquidated companies, which may require further clarification or procedural adjustments by tax authorities.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING WEST BENGAL
1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the BGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression „GST Act‟ would mean the CGST Act and the WBGST Act both.
1.2 The applicant submits that Maheshwary Ispat Limited is a company which is presently in liquidation and Mr. Santanu Brahma has been appointed as Liquidator of the Company by Hon‟ble NCLT, Kolkata vide order dated 19.12.2023.
1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01:
1. Whether any sale of assets of the company Maheshwary Ispat Limited which is in liquidation, done by the Liquidator of the company results in a supply of goods and/or services or both within the meaning of “supply” as defined under section 7 of the CGST Act 2017. If the answer is in affirmative, is the Liquidator appointed by Honb’le NCLT Kolkata Bench, required to obtain GST registration in terms of Section 25 of the CGST Act 2017 and WBGST Act 2017 read together with the Notification no. 11/2020-Central Tax dated 21-March-2020 and Notification no. 439-F.T. dated 03-April 2020, issued under WBGST Act, 2017.
2. If the answer to the question in (1) is in affirmative, how to obtain the registration when no specific registration process has been specified for a company which in Liquidation?
3. Is the Liquidator required to collect GST at applicable rates on sale of assets of the company Maheshwary Ispat Limited which is in liquidation? If the answer is in affirmative, how to discharge the GST obligation, file GST return and pass on the GST Input Tax Credit when GST registration of the Company in Liquidation is not allowed to be proceeded further on the GST Portal?
1.4 As per sub-section (2) of section 97 of the GST Act, the question on which the advance ruling is sought under this Act, shall be in respect of, —
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the provisions of this Act;
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
1.5 The questions made by the applicant against serial number (2) and (3) above are found not to be covered under any of the clauses of sub-section (2) of section 97 of the GST Act. This observation has been brought to the notice of the applicant in course of hearing and the application is admitted only in respect of question made against serial number (1).
1.6 The applicant states that the questions raised in the application have neither been decided by nor is pending before any authority under any provision of the GST Act.
Submission of the Applicant
The IRP / Liquidator of M/s Maheshwary Ispat Limited [“the Company” or “the Corporate Debtor” or “the CD – having CIN: U27106WB1997PLC082922 PAN: AACCM0964A] which is presently undergoing Liquidation, has made the following submissions:
A. hat a Company Petition was filed by Tata Capital Ltd. (erstwhile Tata Capital Financial Services Ltd.) before the Hon’ble High Court (HC) of Calcutta vide C.P. No. 560 of 2011 against the Corporate Debtor under the provisions of Section 433, 434 and 439 of the Companies Act, 1956. The Hon’ble High Court admitted the said petition on 12.10.2012 directing commencement of the winding up proceedings and subsequently, vide order date 21.06.16 read with order dated 28.11.16, the Company was directed to be wound up. Accordingly, the Ld. Official Liquidator (OL) was directed to take over the possession of the Company.
B. That by order dated 17.05.22 the Hon’ble High Court of Calcutta transferred the winding up proceedings to Hon’ble NCLT, Kolkata. Thereafter, pursuant to an application (vide IA No. 103/KB/2023) by one of the Secured Creditor namely the State Bank of India (SBI), in terms of the provisions of the Insolvency and Bankruptcy Code, 2016, Mr. Santanu Brahma (IBBI Regn. No. IBBI/IPA-01/IP-P01482/2018-19/12251) has been appointed as the Liquidator by order dated 19.12.2023.
C. That on 15.01.2024, Mr. Santanu Brahma (hereinafter “the Liquidator”) made a Public Announcement in Form B in the newspaper namely ‘Business Standard’ in English and ‘Aajkaal in Bengali.
D. That in due course the Liquidator started taking custody of the assets of the company from the Ld. Official Liquidator.
E. That on 09.05.2024, the Liquidator published the E-auction sale notice of the “Unexpired Lease of the Office Premises of the CD situated at City Centre 1, Kolkata 700064” (hereinafter referred to as “Asset”) in the newspaper namely “The Telegraph Calcutta edition in English, ‘Business Standard Kolkata edition in English and ‘Aajkaal Kolkata in Bengali.
F. That on 03.06.24, the Liquidator conducted the E-Auction of the asset of the CD being Unexpired Lease of the Office Premises of the CD situated at City Centre 1, Kolkata 700064′ in terms of the E-Auction Sale Notice dated 09.05.24 and M/s. Star Turn Exim Pvt. Ltd. emerged as a Successful Bidder.
G. hat the company, M/S Maheshwary Ispat Limited, did not possess a GST Registration as on 19.12.2023 being the date of appointment of Liquidator by the Hon’ble NCLT Kolkata Bench.
H. That Notification nos. 11/2020-Central Tax, dated 21-March-2020& 39/2020-Central Tax, dated 5th May 2020 were issued, which seeks to provide special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.And a Notification no. 439-F.Tdated 03-April 2020, (Corresponding to Central Notification No. 11/2020-Central Tax) was issued under West Bengal Goods and Service Tax Act, 2017 (WBGST)
I. That the said notifications notify, that those registered persons(hereinafter referred to as the erstwhile registered person), who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), undergoing the corporate insolvency resolution process and the management of whose affairs are being undertaken by interim resolution professionals (IRP) or resolution professionals (RP), as the class of persons who shall follow the following special procedure, from the date of the appointment of the IRP/RP till the period they undergo the corporate insolvency resolution process, as mentioned/specified in the above notifications.
J. That, subsequently Circular No.134/04/2020-GST dated 23.03.2020, Circular No.138/08/2020-GST dated 06.05.2020 were issued providing clarification in respect of issues under GST law for companies under Insolvency and Bankruptcy Code, 2016. However, the said circulars do not provide for any process or clarification when the company is in liquidation and the affairs of the company is being managed by a Liquidator.
K. That the assets/properties of the company in liquidation which are being sold /disposed of during liquidation may fall under the ambit of the taxable goods under GST. Accordingly, the liquidator to discharge the statutory duties cast on him proceeded with the application of GST Registration vide TRN: 192400106503TRN Dated 01.07.2024. However, the functionality of GST portal did not allow the liquidator to submit the application for GST Registration. An error message stating “Error Minimum 2 Promoters & Partners Required” populated at the time of submission of the Application and accordingly the GST Registration application process could not be completed.
L. That a ticket no. G-202408020450811 was raised on the matter by the Liquidator on https://selfservice.gstsystem.in/ which was closed by the GST Helpdesk stating “Resolution: Dear Taxpayer, As per revised implementation, Minimum 2 Promoters & Partners is required for the below mentioned Constitution of Business: Foreign Company Foreign Limited Liability Partnership Limited Liability Partnership Private Limited Company Public Limited Company Public Sector Undertaking Society/Club/Trust/Association of Persons Unlimited Company. Therefore we request you to kindly add at least 2 Partners/Promoter by filing core amendment then save and then submit the application. If you face any other issues kindly raise another tickets with proper screenshots. Thanks Team GST”
M. That the GST Registration guidelines at https://tutorial.gat.gov.in/userguide/registration/Apply_for_Registration_Normal_Taxpayer.htm specified “Minimum 2 Promoters and Partners need to be added to submit the application for registration. In case you are proceeding with less than 2 Promoters and Partners, the below error message will be displayed….. ”
N. That since the company is in Liquidation, there are no Promoters/Directors of the company at present and the affairs are being managed by the Liquidator appointed by the Hon’ble NCLT, Kolkata vide its order dated 19.12.2023 and the erstwhile promoters/directors are not contactable.
3. Submission of the Revenue
3.1 The applicant is not yet registered and so it does not fall under any specific jurisdiction. Therefore, views from the officer from the revenue on the issue raised by the applicant are not available.
4. Observations & Findings of the Authority
4.1 We have gone through the records of the issue as well as submissions made by the authorized representatives of the applicant during the course of personal hearing.
4.2 We find that Maheshwary Ispat Limited is a company presently in liquidation and Mr. Santanu Brahma (IBBI Regn. No. IBBI/IPA-01/IP-P01482/2018-19/12251) has been appointed as the Liquidator vide order of the Hon‟ble NCLT, Kolkata,dated 19.12.2023.
4.3. We also find that Notification nos. 11/2020-Central Tax dated 21.03.2020 & 39/2020-Central Tax dated 05.05.2020 were issued, which seeks to provide special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
4.4 As per the said Notification, the Government, has notified those registered persons, who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), undergoing the corporate insolvency resolution process and the management of whose affairs are being undertaken by interim resolution professionals (IRP) or resolution professionals (RP), as the class of persons who shall follow special procedure as prescribed therein, from the date of the appointment of the IRP/RP till the period they undergo the corporate insolvency resolution process. It has also been stipulated that the said class of persons shall, with effect from the date of appointment of IRP / RP, be treated as a distinct person of the corporate debtor, and shall be liable to take anew registration in each of the States or Union territories where the corporate debtor was registered earlier, within thirty days of the appointment of the IRP/RP.
4.5 In the Insolvency and Bankruptcy Code, 2016″, it has been defined under clause (18) of section 5 that, “liquidator” means an insolvency professional appointed as a liquidator in accordance with the provisions of Chapter III or Chapter V of this Part, as the case.
4.6 The West Bengal Authority for Advance Ruling has given a ruling vide order No.02/WBAAR/2021 dtd. 29.06.2020 in the case of Mansi Oils and Grains Pvt. Ltd. that the sale of the assets of the applicant by NCLT appointed liquidator is a supply of goods by the liquidator, who is required to take registration under section 24 of the GST Act.
4.7 In view of the above discussions, we rule as under:
RULING
Any sale of assets of the company Maheshwary Ispat Limited which is in liquidation, done by the Liquidator of the company results in a supply of goods and/or services or both within the meaning of “supply” as defined under section 7 of the CGST Act 2017.
The Liquidator who is an insolvency professional being appointed by the Hon‟ble NCLT Kolkata Bench as a liquidator, is required to obtain GST registration in terms of Section 24 of the CGST Act, 2017 and WBGST Act 2017 read together with the Notification no. 11/2020-Central Tax dated 21-March-2020 and Notification no. 439-F.Tdated 03-April 2020, issued under the WBGST Act, 2017.
