M/S Era Infra Engineering Limited vs. Joint Commissioner CGST Delhi South Commissionerate & Ors.

Held

The Court held that the demand-cum-show cause notices and the consequential impugned orders are not tenable and are therefore set aside. The reasoning is based on the Supreme Court's pronouncements in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited, which established that once a resolution plan is approved under Section 31 of the IBC, all claims, including statutory dues, that are not part of the resolution plan stand extinguished. No proceedings can be initiated or continued for claims not included in the plan for periods prior to the NCLT's approval. The GST Department, having participated in the insolvency proceedings and filed its claims, cannot raise further demands after the resolution plan's approval. The new management cannot be burdened with additional demands for previous periods. The Court explicitly stated that the merits of the orders or the demands were not examined. The petitions were disposed of in these terms.

Facts

The Petitioner, M/s Era Infra Engineering Limited, is challenging demand-cum-show cause notices and consequential impugned orders issued by the Joint Commissioner CGST Delhi South Commissionerate. These relate to financial years 2018-19, 2019-20, and 2017-18, with total demands ranging from approximately Rs. 8.04 crore to Rs. 9.72 crore. The Petitioner underwent insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The GST department filed claims during these proceedings, which were crystallized to Rs. 1,94,26,381/-. A resolution plan was approved by the NCLT on June 11, 2024, and the new management took over. The impugned orders were issued after the resolution plan's approval, seeking recovery of sums for periods prior to the approval.

Key Issues

1. Whether the demand-cum-show cause notices and impugned orders issued by the GST authorities for periods prior to the approval of the resolution plan are tenable, given that the GST department participated in the insolvency proceedings and the resolution plan was approved under Section 31 of the IBC? (Question of law) Petitioner's arguments: The impugned demands are untenable because they relate to periods before the NCLT's approval of the resolution plan on June 11, 2024. The GST department's claims were considered and incorporated into the resolution process. Therefore, no fresh demands could be raised for prior periods after the resolution plan's approval. Reliance was placed on Supreme Court judgments in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta and Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited. Revenue's arguments: The orders were merely intended to crystallize the amounts, and no recovery steps had been taken by the department. Reliance was placed on Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs.