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tata steel: SC rejects Tata Steel plea to set it free from Bhushan steel liabilities

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The Supreme Court on Monday rejected Tata Steel’s appeal seeking clearance from all liabilities related to the erstwhile Bhushan Steel, which it had acquired for ₹35,200 crore through the corporate insolvency resolution process in 2018.

Bhushan Steel under the new management of Tata Steel (TSL) had moved the Allahabad High Court challenging various demand notices issued by the UP government to the tune of over ₹346 crore towards commercial taxes, including Entry Tax and Value Added Tax between 2007 and 2018.

The high court, which held that no amount was due and payable by TSL, had left the question of unjust enrichment – raised by the state – open, saying this question cannot be decided in the petitions filed under Article 226 of the Constitution, which deals with the power of high courts to issue certain writs.

Challenging the high court judgment, senior counsel KV Vishwanathan, appearing for TSL, argued that the top court should decide the issue as it has to be a “clean slate” for the new management.
“The UP government cannot levy these taxes after five years… The state government has failed to prove the demand … and for the new management it is a closed chapter as the resolution plan was approved in 2018,” he argued.

A Bench led by Justice MR Shah said the high court had not opined anything but just kept it open. “The issue cannot be raised at this time. What if it (tax) was recovered and passed on by the company?”

The apex court also noted that the high court had left the question of unjust enrichment open, and no final adjudication had taken place on this.

“The SLP (Special Leave Petition) is dismissed. However, if any question or issue of unjust enrichment is raised, it will be open for TSL to defend/oppose the same and the defences available to the petitioner left open will be dealt in accordance with law,” Justice Shah said.

The Allahabad High Court had said that Tata Steel had acquired BSL but since the demand created under the impugned assessment orders was part of the resolution plan sanctioned by the National Company Law Tribunal, the orders should not be recovered from TSL since the dues would stand extinguished in view of the law laid down by the SC in an earlier judgment.

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