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SC ruling on IBC will have overriding effect over indirect tax recoveries

The move, according to tax experts, will set a precedent for matters related to recoveries

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The top court held that to the extent of tax recoveries initiated by the Customs–a department under CBIC, after initiation of a moratorium period under the IBC, the department “should not” have first right of recovery from the distressed assets

Bhavini Mishra Shrimi Choudhary New Delhi

3 min read Last Updated : Aug 27 2022 | 12:06 AM IST

The Supreme Court (SC), in a significant verdict, has ruled that liquidation proceedings in the case of a bankrupt firm will take precedence over recoveries of indirect taxes once a moratorium has been imposed under the Insolvency and Bankruptcy Code (IBC).

The court judgment is on a dispute between the Central Board of Indirect Taxes and Customs (CBIC) and ABG Shipyard. ABG Shipyard, which owes Rs 22,842 crore to its creditors, is undergoing liquidation. The firm’s promoters are facing a multi-agency probe for allegedly siphoning off money given as bank loans.

The court held as regards tax recoveries initiated by the Customs,

Topics : IBC Indirect Tax Supreme Court IBC rules IBC proceedings Insolvency and Bankruptcy Code NCLT