Srei Equipment Finance Limited Vs Office of The Assistant Commissioner (Delhi High Court)
The petition challenged the order dated 23rd December, 2025 passed by the Assistant Commissioner, GST South Commissionerate. By the impugned order, the authority invoked the extended period of limitation under the proviso to Section 74(1) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 for alleged excess or wrongful availment of Input Tax Credit (ITC). The authority confirmed a demand of ineligible ITC amounting to Rs. 67,50,000 under Section 74(1), ordered appropriation of Rs. 6,53,400 already deposited via DRC-03, confirmed applicable interest under Section 50 with appropriation of Rs. 2,10,715 already deposited, and imposed a penalty of Rs. 67,50,000.
The proceedings were preceded by a summons under Section 70 of the CGST Act dated 25th August, 2020, to which the petitioner responded on 1st September, 2020. Subsequently, the petitioner was arrayed as a respondent before the National Company Law Tribunal (NCLT), Kolkata Bench, in proceedings under Section 227 read with Section 239(2)(zk) of the Insolvency and Bankruptcy Code, 2016 (IBC). An order dated 8th October, 2021 declared a moratorium, which was informed to have been approved on 11th August, 2023.
Despite the moratorium, a Show Cause Notice dated 24th June, 2025 was issued based on investigation. It alleged that another entity had issued invoices without underlying supply of goods or services, leading to wrongful availment and utilization of ITC. The notice stated that the petitioner had availed ITC of Rs. 53,46,000 as per GSTR-2A data and Rs. 67,50,000 during F.Y. 2018-19 on the basis of such invoices, and had failed to provide valid documentary evidence such as payment proof and service contracts. Accordingly, the notice proposed recovery of ineligible ITC along with interest and penalty under Section 74(1).
The petitioner responded on 23rd July, 2025, raising, inter alia, that it had been admitted to Corporate Insolvency Resolution Process (CIRP) under the IBC by order dated 8th October, 2021 and that the Reserve Bank of India had superseded its Board and appointed an Administrator. It contended that once moratorium was declared, proceedings ought to be kept in abeyance and the appropriate course for the respondents was to submit their claim before the Resolution Professional.
The respondents argued that there was no sufficient notice of the IBC proceedings, as public notice was issued only at Kolkata, and therefore the Resolution Plan could not be considered binding upon the respondent authority in Delhi.
Upon consideration, the Court observed that in the reply to the Show Cause Notice, a specific ground was raised regarding the declaration of moratorium and the maintainability of proceedings in view of statutory protection under the IBC. The respondents were duty-bound to deal with this objection in the impugned order. Failure to address the issue amounted to denial of opportunity of hearing and demonstrated non-application of mind.
In these circumstances, the Court held that the objection regarding availability of alternate remedy was liable to be overruled. The impugned order dated 23rd December, 2025 was quashed and set aside.
The petitioner was permitted to appear before the respondent authority on 16th March, 2026 with written submissions and documents. The respondents were directed to grant an opportunity of hearing and to deal with all contentions raised by the petitioner, including the issue relating to the moratorium. The decision was to be taken expeditiously and communicated to the petitioner.
The petition was allowed in these terms. It was clarified that the petitioner would be at liberty to pursue appropriate remedies in accordance with law if the fresh order was adverse. Pending applications were disposed of.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Impugned in the present petition is the order dated 23th December, 2025 passed by the Assistant Commissioner, GST South Commissionerate, operative part of which reads thus:-
“1. I hereby invoke the extended period of limitation so provided under proviso to Section 74(1) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 for excess/wrongly availment of ITC.
2. I confirm the demand of ineligible ITC of Rs.67,50,000/-(IGST – Rs.67,50,000/-) (Rupees Sixty Seven Lakh Fifty Thousand only) under Section 74(1) of CGST Act, 2017 read with section 20 of the IGST Act, 2017 and corresponding provisions of SGST Act. Further, I ordered to appropriate Rs. 653400/- from the above demand as the taxpayer has deposited the same vide DRC-03 dated 30.09.2020 as discussed in the Para 15.7 above.
3. I confirm the demand of applicable interest on the amount of Rs.67,50,000/as mentioned at para (2) above, under Section 50 of CGST Act, 2017 read with Section 20 of IGST Act, 2017 and corresponding provisions of SGST Act, 2017. Further, I ordered to appropriate Rs. 210715/- from the above applicable interest as the taxpayer has deposited the same vide DRC-03 dated 30.09.2020 as discussed in in the Para 15. 7 above.
4. I impose a penalty of Rs. 67,50,000/- (IGST – Rs.67,50,000/- ) under Section 74(1) of CGST Act, 2017 read with section 20 of the IGST Act, 2017 and corresponding provisions of SGST Act;”
2. The said order was preceded by a Summon issued under Section 70 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) on 25th August, 2020. In response to the said summons, a reply was submitted on 1st September, 2020.
3. The present petitioner was arrayed as a respondent before the National Company Law Tribunal, Kolkata Bench, Kolkata, in C.P.(IB) No. 294/2021, which was under Section 227 read with clause (zk) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”).
4. In the said proceedings, an order was initially passed on 8th October, 2021 declaring a moratorium, which is informed to have been approved on 11th August 2023.
5. After the aforesaid order, a Show Cause Notice dated 24th June, 2025 was issued to the petitioner in the form of demand for the reasons mentioned in the said Show Cause Notice, which was based on an investigation.
6. Paragraph 11 of the said Show Cause Notice summarizes the liability and responsibility of the petitioner which is reproduced as under:-
“11. From the investigation conducted so far, it transpires the followings:
i. M/s. AGTSPL, GSTIN:37MKCA7278H1Z7, is engaged in issuance of invoice or bills without underlying supply of goods or rendering of service, in violation of the provision of the CGST Act, 2017 and rules made thereunder, leading to wrongful availment and utilization of ITC passed on by M/s. AGTSPL. M/s. SREI Equipment Finance Pvt Ltd (GSTIN; 07MKCS3431L1Z4) is one such recipients of M/ s. AGTSPL that has availed input tax credit on the basis of invoices without any underlying supply of goods and services or both issued by M/s. AGTSPL.
ii. GSTR-2A data data of the Noticee revealed that they have received Input Tax Credit amounting to Rs. 53,46,000/- on the basis of invoices issued by M/s. AGTSPL without rendering services as detailed in Table-II above.
iii. Self disclosed information provided by the Noticee revealed that they have availed Input Tax Credit amounting to Rs. 67,50,000/- during period F.Y. 2018-19 on the basis of invoices issued by M/ s. AGTSPL as detailed in Tabler. The Noticee has also failed to provide valid documentary evidence such as payment proof, service contracts to support claims of ITC received from M/s. AGTSPL.
iv. Therefore, ineligible input tax credit on Rs. 67,50,000/-availed by the Noticee is liable to be demanded along with applicable interest and penalty under Section 74(1) of CGST Act, 2017.”
7. The said Show Cause Notice was duly responded to by the petitioner vide reply dated 23rd July, 2025.
8. Amongst others, the grounds raised in paragraph 2 of the reply reads thus:-
“SEFL, being an NBFC, is regulated by the Reserve Bank of India. SEFL was taken to the National Company Law Tribunal, Kolkata Bench for undergoing Corporate Insolvency Resolution Process (here-in-after referred to as ‘CIRP’) under the insolvency and Bankruptcy Code, 2016 (IBC) by the Reserve Bank of India.
The Reserve Bank of India, vide notification dated 04.10.2021, superseded the Board of SEFL and appointed an Administrator to oversee its affairs.
By an Order dated 08.10.2021, the National Company Law Tribunal, Kolkata Bench admitted the application under Section 227 read with Section 239(2)(zk) of the IBC and admitted the SEFL to CIRP and appointed an Administrator to oversee the affairs of the Company. A copy of the Order dated 08.10.2021 passed by the National Company Law Tribunal Kolkata Bench in C.P.(IB) No.294 of 2021 (Reserve Bank of India Vs. SREI Equipment Finance Ltd.) is enclosed and marked as Annexure-2 to this reply petition.”
9. As such, it is the contention of the learned counsel for the petitioner that once the moratorium is approved, the option left with the respondents is to submit their claim before the Resolution Professional and the proceedings which led to the passing of the impugned order are, in such an eventuality, required to be kept in abeyance.
10. Learned counsel for the respondents submits that there was no sufficient notice with regard to the proceedings initiated under the IBC, as the public notice was issued only at Kolkata, and there is no reason to believe that the respondent-authority at Delhi would have had sufficient knowledge of the same. She would urge that, in such an eventuality, the position of law must be appreciated and an inference may be drawn that the Resolution Plan cannot be said to be binding upon the respondents.
11. We have considered the aforesaid submissions.
12. As regards the reply dated 23rd July 2025 submitted in response to the Show Cause Notice dated 24th June 2025, a specific ground has been raised qua the declaration of the moratorium and the maintainability of the proceedings against the petitioner, in view of the statutory protection provided under the provisions of the IBC.
13. The least that was expected of the respondents was to deal with the said issue in its order impugned.. A specific ground was raised in defence by the present petitioner regarding the very maintainability of the Show Cause Notice, that too on the basis of statutory protection. The respondent, in our opinion, was duty-bound to deal with the same and the failure to do so, amounts to a denial of the opportunity of hearing.
14. In such an eventuality, not only the objection raised by the respondents that the petitioner has an alternate remedy and that, as such, the writ petition is not maintainable, is liable to be overruled, but we also have to hold that the impugned order suffers from non-application of mind.
15. That being so, we deem it appropriate to quash and set-aside the impugned order dated 23rd December, 2025 passed by the respondents.
16. We permit the petitioner to appear before the respondent-authority on 16th March, 2026 with its written notes of arguments, if any, along with documents.
17. We expect the respondents to grant an opportunity of hearing to the petitioner and deal with all the contentions raised by the petitioner including the one raised in the present petition, which led to the order of remand.
18. Let the decision be taken expeditiously and communicated to the petitioner.
19. The petition, as such, stands allowed in above terms.
20. Pending application, if any, also stands disposed of accordingly.
21. Needless to clarify that it shall be open for the petitioner to take recourse to such remedy as shall be advisable in accordance with law in case if the order is adverse to its interest.
22. A copy of this Judgment be uploaded on the website of this Court.
