The National Company Law Appellate Tribunal (NCLAT) has dismissed Paradeep Phosphates’ request for Entry Tax exemption in Odisha. The tribunal supported a lower court’s ruling, indicating that the claim was time-barred. Paradeep Phosphates sought this exemption under a rehabilitation scheme approved in 2008, but the Odisha government had previously opposed the tax concession. The appellate tribunal found no basis for granting the exemption.
On Monday, the NCLAT rejected Paradeep Phosphates’ petition regarding Entry Tax exemption in Odisha under a BIFR-sanctioned rehabilitation scheme.
A two-member bench upheld the decision made by the Cuttack bench of the National Company Law Tribunal (NCLT), noting that the claim was barred by limitations.
Paradeep Phosphates Ltd (PPL) did not present a valid case to the NCLT for issuing any directive to grant exemption from Entry Tax payments until 2014 as per the sanctioned scheme dated September 2, 2008, the tribunal stated.
“We believe that the adjudicating authority, after considering all relevant aspects of the matter, has rightly rejected the plea filed by the appellant,” remarked the bench, which included Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra.
PPL, a public limited company involved in the manufacturing and sale of fertilizers and related products, was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) on July 20, 2005, and was placed under a Draft Rehabilitation Scheme (DRS).
The company sought exemption from VAT/Sale Tax and Entry Tax from the Odisha government under the Sick Industrial Company, Special Provisions Act, 1985.
However, the Odisha government contested the tax exemption claim, arguing that it had no policy to provide relief to sick industrial companies.
The dispute escalated to the Odisha High Court and subsequently to the Supreme Court, which in February 2014 ordered Paradeep Phosphates to deposit 50 percent of the tax demand, along with interest.
In the meantime, significant changes occurred in the legal framework governing sick industrial companies. The Insolvency and Bankruptcy Code (IBC) came into effect on December 1, 2016, leading to the repeal of the Sick Industrial Companies (Special Provisions) Act (SICA), under which PPL had previously sought relief through the BIFR-sanctioned rehabilitation scheme.
PPL then approached the Kolkata bench of the NCLT in May 2017, requesting that the rehabilitation scheme approved by the former BIFR be recognized as an approved resolution plan under Section 31 of the IBC.
The Odisha government opposed this application and filed objections. The matter was later transferred to the Cuttack bench of the NCLT, which dismissed it.
This decision was subsequently challenged before the NCLAT, which also rejected the appeal.
The NCLAT noted that the Odisha government had communicated to the BIFR in 2008 that it had “no policy” to grant relief to sick industrial companies, effectively denying consent for tax concessions.
The appellate tribunal dismissed PPL’s argument of “deemed consent” under Section 19(2) of SICA, stating that the state had clearly expressed its objections within the required timeframe. It also pointed out that the seven-year rehabilitation scheme period concluded in 2014 and that PPL had failed to challenge the 2011 BIFR order within the limitation period.
Source: ETCFO.com
