GST Department Can't Raise Fresh Demands For Pre-CIRP Period After Resolution Plan Approval: Delhi High Court

The Delhi High Court has made it clear that the GST Department cannot raise fresh demands for a period prior to the commencement of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016, after the resolution plan has been approved by the NCLT.A division bench of Justices Prathiba M. Singh and Shail Jain held, “no demand can be raised after the resolution plan has been approved ,in respect of a period prior thereto.”For context, Petitioner was involved in the construction industry and owing to certain financial difficulties, it underwent insolvency proceedings.During the course of insolvency proceedings, the GST department also filed its claims to the tune of Rs. 4,02,30,448/- before the Resolution Professional.The claim of the GST department was crystallised to an amount of Rs.1,94,26,381/- and the resolution plan was approved by the NCLT.In the meantime, the impugned orders were issued by the GST Department, seeking to recover the remaining sum.Petitioner argued that the impugned demands would be untenable, as they relate to the period prior to the final approval of the resolution plan by the NCLT and the Department's claims were already considered and made part of the resolution process. It was contended that no fresh demands could have been raised in respect of the previous periods after the approval of the resolution plan. Petitioner thus sought quashing of demand orders.Granting relief, the High Court said,“The GST Department, having already participated in the insolvency proceedings and having filed its claims, cannot raise further demands in this manner, as there has to be a final conclusion to the insolvency proceedings.”The Court added that the new management, whose resolution plan was approved by NCLT, cannot be saddled with any of the additional demands in respect of the previous period.It relied on Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited (2019) where the Supreme Court held that all dues, including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval could be continued.Appearance: Ms. Kavita Jha, Sr. Adv. and Ms. Kanika Sethi, Adv. for Petitioner; Mr. R. Ramchandran, SSCN with Mr. Prateek Dhir, Adv. Ms. Vaishali Gupta, Panel Counsel (Civil) GNCTD for RespondentsCase title: M/S Era Infra Engineering Limited v. Joint Commissioner Cgst Delhi South Commissionerate & Ors.Case no.: W.P.(C) 2281/2025Click here to read order

GST Department Can't Raise Fresh Demands For Pre-CIRP Period After Resolution Plan Approval: Delhi High Court

Kapil Dhyani

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