Gujarat HC Quashes GST Charge on Property Purchased Through IBC Liquidation

KRBL Limited Vs State of Gujarat (Gujarat High Court)

The petitioner, a public limited company engaged in rice processing and exporting, purchased non-agricultural land measuring 44,212 square metres at Village Varsamedi, Taluka Anjar, District Kutch, through a registered sale deed dated 17.12.2021 executed by the liquidator of M/s Gran Electronics Private Limited after an auction conducted during liquidation proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The petitioner sought directions for certification of the revenue entry in its favour and challenged the order dated 05.01.2022 demanding Rs.56,01,79,095/- towards GST dues, mutation Entry No. 6295 recording the State GST Department’s charge over the property, and rejection of Entry No. 4454 without hearing the petitioner.

Gran Electronics Private Limited had entered the corporate insolvency resolution process after admission of an application under Section 7 of the IBC by the National Company Law Tribunal (NCLT), Mumbai, on 17.01.2020, whereupon a moratorium under Section 14 came into force and an Interim Resolution Professional (IRP) was appointed. Public announcements inviting claims were issued during the corporate insolvency resolution process and later during liquidation after the NCLT ordered liquidation on 12.02.2021 and appointed a liquidator under Section 34(1) of the IBC. The Resolution Professional rejected the Sales Tax Department’s claim of Rs.77,08,69,644/- for want of supporting documents. Thereafter, during liquidation, although the liquidator specifically called upon the State Tax Department to submit or update its claim, no claim was lodged either physically or through e-mail within the prescribed time. The liquidator subsequently conducted an e-auction, declared the petitioner the successful bidder, executed the sale deed, and issued a sale certificate. The sale deed expressly stated that the purchaser would not be responsible for Government, GST, VAT, bank or other dues, which would be dealt with under the waterfall mechanism under Section 53(1) of the IBC.