Heera Construction Company Pvt. Ltd Vs Union of India (Kerala High Court)
Kerala High Court has quashed a show cause notice and subsequent order for service tax dues issued against Heera Construction Company Pvt. Ltd., ruling that such proceedings cannot be initiated against a company once its resolution plan has been approved under Section 31 of the Insolvency and Bankruptcy Code (IBC), 2016. The decision, delivered on July 25, 2025, emphasizes the “clean slate” principle established by the Supreme Court, which extinguishes all claims not part of an approved resolution plan.
Heera Construction Company Pvt. Ltd., currently undergoing a Corporate Insolvency Resolution Process (CIRP), challenged the service tax demands for the financial years 2014-2015, 2015-2016, and 2016-2017. The company’s CIRP commenced with an order from the National Company Law Tribunal (NCLT) on March 27, 2019. Subsequently, a resolution plan was approved by the Committee of Creditors on June 14, 2022, and received NCLT approval on March 31, 2023.
Despite the ongoing insolvency proceedings and the approval of the resolution plan, the tax authorities issued a show cause notice (Ext.P4) on October 10, 2019, to the company’s erstwhile management. Although further action on this notice was initially not pursued, adjudication proceedings recommenced, leading to a new communication (Ext.P5) and ultimately an Order-in-Original (Ext.P7) on July 19, 2024, adjudicating the service tax claims. The petitioner argued that these tax proceedings were legally unsustainable due to the statutory prohibitions under Sections 31 and 32A of the IBC.
