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Informist, Thursday, Mar. 27, 2025

 

NEW DELHI – The Supreme Court on Thursday quashed demand notices issued by the tax department under Central Sales Tax Act, 1956, Chhattisgarh Value Added Tax Act, 2005 and Entry Tax Act, 1976 and consequent proceedings against JSW Steel Ltd. with respect to Monnet Ispat & Energy Ltd., which was acquired by JSW Steel under insolvency route. The demand notices were issued to JSW Steel despite liabilities against Monnet Ispat & Energy being extinguished after the resolution plan was approved.

 

In 2021, the apex court had ruled that all creditors, including the central government, state government or any local authority are bound by the resolution plan as approved by the national company law tribunal and all claims which were not a part of the plan stood extinguished. JSW Steel had filed a contempt case against the tax department and said that the latter had not followed the apex court's 2021 ruling, which also involved a petition by the company.

 

When the law laid down by the top court in 2021 was clear and unambiguous and specifically when JSW Steel's own case was part of the batch which was dealt with, the tax department ought not to have proceeded further with the recovery proceedings and ought to have dropped them forthwith, said the apex court. The continuation of such proceedings despite the judgment and order of the top court being pointed out to their notice is nothing but contemptuous in nature, said Justice B.R. Gavai and Justice Augustine George Masih.

 

"However, we do not propose to proceed against the respondents/contemnors in as much as they are entitled to benefit of doubt," said the court. Noting that the respondents have tendered an unconditional apology, the court said, "we hold that the act of the alleged contemnors is contemptuous in nature, we do not propose to take any action against them". 

 

In 2018, the tribunal had approved the resolution plan submitted by the consortium of JSW Steel and AION Investments Pvt. Ltd. Thereafter, various demand notices were raised upon the JSW Steel by the Odisha Mining Corporation Ltd. for recovery of sales tax against iron ore purchased by the erstwhile company. Challenging this, JSW Steel had moved the top court, which in 2021 made the ruling regarding extinguishing of claims after the resolution plan approval.

 

However, the Assistant Commissioner, Commercial Tax Department, Raipur-II, Chhattisgarh, in 2022, issued a demand notice to JSW Steel. This resulted in three separate demands for the outstanding amount of central sales tax of INR 10.83 million, value added tax of INR 26.64 million, and entry tax of INR 6.15 million for the period between Apr. 1, 2017 to Jun. 30, 2017, and JSW Steel was directed to pay the amounts within 30 days of receipt of the demand notice.

 

Thereafter, Additional Revenue Collector, Commercial Tax Office, Circle-7, Raipur, Government of Chhattisgarh, issued another demand notice to JSW Steel in 2022 under Section 146 of the Chhattisgarh Land Revenue Code, 1959 containing three separate demands of Central Sales Tax, Sales Tax and Entry Tax for the same amounts as the demand notice issued by the Assistant Commissioner, Commercial Tax Department. JSW Steel was again directed to pay the outstanding dues within seven days. 

 

On Thursday, shares of JSW Steel ended 0.3% higher at INR 1,059.75 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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