GST Demands for Pre-Insolvency Period Barred After Resolution Plan Approval: Delhi HC

Era Infra Engineering Limited Vs Joint Commissioner CGST Delhi South Commissionerate & Ors. (Delhi High Court)

The Delhi High Court heard three writ petitions challenging demand-cum-show cause notices and consequential orders issued under the GST law for different financial years prior to the completion of insolvency proceedings. The petitioner, engaged in the construction industry, had undergone corporate insolvency resolution proceedings after an application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016. An Interim Resolution Professional was appointed, later confirmed as the Resolution Professional, and claims were invited from creditors, including the GST Department. During the insolvency process, the GST registration of the petitioner was cancelled, and the GST Department filed claims, which were subsequently crystallised at a reduced amount based on expressions of interest received during the resolution process.

A resolution plan submitted by a successful resolution applicant was approved by the National Company Law Tribunal, Delhi, on 11 June 2024. The approval order expressly stated that the resolution plan would be binding on all stakeholders, including the Central Government and statutory authorities, and that the moratorium would cease from the date of approval. Following this approval, new management took over the company.

Despite this, the GST Department issued impugned orders in November 2024 raising demands for periods prior to the approval of the resolution plan. The petitioner challenged these demands, contending that they were untenable since the claims relating to those periods had already been dealt with during the insolvency process and stood extinguished after approval of the resolution plan. The Department argued that the orders merely crystallised amounts and that no recovery steps had been taken.