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Quashes ₹1.68 Crore GST Demand Against SREI Equipment Finance After
The has firmly reiterated that tax authorities cannot resurrect claims against a after a is approved under the . In a significant ruling delivered on , Justice Aryak Dutt quashed a ₹1.68 crore GST demand raised against for the financial year 2021–22, holding that the liability stood extinguished upon the approval of the by the . The decision underscores the binding nature of a on all statutory authorities, including those under the , and provides clarity on the interplay between insolvency proceedings and tax adjudication.
Background of the and the Disputed GST Demand
, along with its holding company, was admitted into corporate insolvency resolution process () by the NCLT, Kolkata Bench, on . A submitted by was approved by the NCLT on , and the subsequently rejected a challenge to that approval in , bringing the process to finality. The plan expressly provided that all and liabilities—whether known or unknown, assessed or unassessed, crystallised or contingent—would stand extinguished, except as specifically provided in the plan.
Despite this, the GST authorities issued an audit query in concerning alleged excess availment of integrated goods and services tax (IGST) input tax credit on imported goods for . This eventually led to a show cause-cum-demand notice dated , followed by an on confirming the demand and imposing interest and a penalty of ₹16.87 lakh. The Department also issued a notice in demanding interest for alleged delayed filing of GSTR-3B returns for . Crucially, the GST authorities had not lodged any claim for these dues before the Administrator or Resolution Professional during the .
The Court’s Rationale: of Liabilities Under Section 31(1)
Justice Dutt anchored the decision on , which makes an approved binding on the Central Government, any State Government, and all statutory authorities. Observing that the dues related partly to the period before the insolvency commencement date and partly to the period after (from ), the Court held that both segments were required to be brought to the notice of the Resolution Professional so that they could be dealt with in the plan. Since the GST authorities failed to lodge any claim, they could not later initiate proceedings.
“The liability, if any, relates to Financial Year 2021-22. Portion of it which relates to the months after 8th October, 2021, arose during the itself and was equally required to be brought to the notice of the Administrator/Resolution Professional so as to be dealt with in the plan. When the respondents issued the on September, 2025, there was no claim left to adjudicate,” the Court noted.
The High Court emphasised that a successful resolution applicant cannot be confronted with undecided claims after the plan is approved, as the insolvency process is designed to enable the applicant to take over the business on a “”. The issuance of a itself constitutes the initiation of proceedings, and the impugned order not only determined liability but also confirmed the demand, imposed interest and penalty, and generated a recoverable demand through a .
Distinguishing Sundaresh Bhatt: The Key Difference
The GST authorities attempted to rely on the ’s decision in , arguing that tax authorities retain jurisdiction to determine tax, interest, fine, or penalty even during insolvency proceedings. However, Justice Dutt distinguished the case, noting that the had dealt with the operation of the under where the liabilities had not been extinguished. In the present case, the NCLT had already approved the , and the dues had ceased to survive. The Court also rejected the Department’s reliance on , which applies only to a company in liquidation, whereas SREI Equipment Finance had undergone and continued as a going concern under new management.
Recognition by the CBIC Itself
The Court found it significant that the had itself issued Circular No. 134/04/2020-GST dated and Instruction No. 1083/02/2022-CX8 dated , acknowledging that claims not submitted, or submitted belatedly, stand extinguished upon approval of a . The impugned order did not advert to either.
“The Board has itself recognised the position. Circular No. 134/04/2020-GST dated 23rd March, 2020, contemplates that dues for the period prior to the insolvency commencement date are to be claimed before the Adjudicating Authority/Resolution Professional, and the Standard Operating Procedure under Instruction No. 1083/02/2022-CX8 dated 23rd May, 2022, as placed before this Court, records that claims not submitted, or submitted belatedly, stand extinguished upon approval of the . The impugned order does not advert to either. Departmental adjudicating officers cannot ignore instructions of the Board issued for the uniform administration of the Act,” observed Justice Dutt.
Impact and Implications
This ruling reinforces the finality of resolution plans under the IBC and sends a clear message to tax authorities that they must actively participate in the by lodging all claims, including , within the prescribed timeline. Attempts to revive such liabilities post-approval will be struck down as without jurisdiction. The decision also clarifies that a itself initiates “proceedings” within the meaning of the IBC, and that the distinction between determination and recovery collapses once a confirmed demand is created.
For corporate debtors and resolution applicants, the judgment provides reassurance that the “” principle will be rigorously protected by the courts. It also highlights the importance of ensuring that resolution plans explicitly extinguish all pre-effective-date liabilities, as was done in this case.
The High Court quashed the show cause-cum-demand notice, the , the , and all proceedings arising from them, as well as the separate notice demanding interest for . The petition was allowed with no order as to costs.
The petitioner was represented by Advocates , , , , , , and . The CGST authorities were represented by Advocates , and .
