Delhi HC Quashes GST ITC Demand for Ignoring IBC Moratorium Plea

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).