Court clarified that service tax on lease rentals can be an operational debt but claims can be undermined by delays and pre-existing disputes.

JUDGEMENT

The instant application was filed by Search Pharma Private Limited (Operational Creditor/Applicant), under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code” or “IBC”) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution Process (hereinafter referred to as ‘CIRP’) against Vishal Mega Mart Private Limited (Corporate Debtor/Respondent) for the default amount of Rs. 64,67,067/- including interest. The date of default is 13.01.2014.

2. The averments made by the Operational Creditor/Applicant in its Application and as argued by the learned counsel are summarised as under:

i. This application is in furtherance of the order dated 27.05.2022 in CP-205-2015(O&M) titled M/S Search Pharma Private Limited Versus M/S Vishal Mega Mart Private Limited, passed by the Hon'ble High Court of Punjab And Haryana in which the Court has given directions as to reference of the above stated matter to NCLT, Chandigarh Bench in pursuance of the judgment passed in CA No. 4041/2020, titled as Action Ispat And Power Pvt. Ltd. Vs. Shyam Metalics And Energy Ltd.

ii. The Operational Creditor entered a Memorandum of Understanding dated 26.06.2009 for lease with Corporate Debtor for three years up to 29.06.2012 at a consolidated monthly rent of 9,00,000. Operational Creditor executed Lease Deed dated 01.09.2011 and total Lease amount thus calculated and agreed is Rs. 10,53,548/-.

iii. The Petitioner obtained Service Tax registration under “Renting of Immovable Property” on 07.09.2009 and started charging service tax on invoices.

iv. Corporate debtor sent a letter dated 28.11.2009 for non-applicability of Service Tax on renting of immovable property and Refund of already paid Service Tax. Vide letter dated 20.10.2010 Corporate Debtor admitted the liability of Service Тaх. v. Clauses 5 & 6 of the lease agreements (Annexures P-2 & P-3) bind the Respondent to pay all charges including electricity, water, maintenance, and service tax, and absolve the Petitioner of any liability thereon.

vi. Corporate Debtor sent Notice dated 21.02.2012 for termination of lease. A Summon dated 05.09.2012 regarding proper payment of Service Tax was sent to the Petitioner by the Office of Commissioner of Service Tax.

vii. Operational Creditor on its own, to avoid payment of interest and penalty upon the service tax liability and to avail the benefits of Service Tax Voluntary Compliance Encouragement Scheme, 2013 paid an amount of Rs. 23,09,667/- to the Tax Authorities.

viii. Operational Creditor issued legal notice dated 13.01.2014 to the Corporate Debtor to clear the dues of Service Tax for the period commencing 2008-09 till 2012-13. Corporate Debtor sent a reply to legal notice.

ix. The Operational Creditor had also issued notice of demand to the Corporate Debtor under the provisions of the Companies Act, 1956 asking it to make the payment but the Corporate Debtor had not made the payment, deliberately avoiding and neglecting to pay the said amount.

Corporate Debtor sent a reply to Notice of demand.

x. The rent receipts issued by the Operational Creditor to the Corporate Debtor are inclusive of Service Tax liability which is compounded @ 10% of the total rent.

xi. In view of the judgement of the Delhi High Court titled as Home Solutions Retails (India) ltd. Vs. Union of India (UOI) and Ors decided on 23.09.2011, citation at 182(2011) DLT548, it was held that there is value addition when the premises is let out for use in the course of or furtherance of business or commercial.

xii. As per part IV of the petition, the Total