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

Held

The Court held that the impugned demand notices and consequential orders were not tenable. The reasoning was based on the Supreme Court's pronouncements in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Limited, which clearly states that once a resolution plan is approved by the adjudicating authority, all claims not part of the resolution plan stand extinguished. Consequently, no proceedings can be initiated or continued in respect of claims not included in the plan for periods prior to the approval date. The Court also noted that the GST Department had participated in the insolvency proceedings and filed its claims. Therefore, it could not raise further demands after the resolution plan was approved, as this would negate the finality of insolvency proceedings and saddle the new management with additional liabilities for past periods. The Court explicitly stated that it had not gone into the merits of the orders or the demands themselves. The impugned orders and demands were set aside.

Facts

The Petitioner, M/s Era Infra Engineering Limited, faced financial difficulties and underwent insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The GST department filed claims during these proceedings. A resolution plan for the Petitioner was approved by the National Company Law Tribunal (NCLT) on June 11, 2024, and new management took over. Subsequently, the GST department issued demand-cum-show cause notices and impugned orders on November 14, 2024, and November 25, 2024, seeking to recover substantial amounts for Financial Years 2017-18, 2018-19, and 2019-20. The Petitioner challenged these notices and orders before the Delhi High Court, arguing that no fresh demands could be raised after the approval of the resolution plan, as the GST department's claims were already considered in the insolvency process.

Key Issues

1. Whether the impugned demand notices and orders, issued by the Joint Commissioner CGST Delhi South Commissionerate & Ors. for periods prior to the approval of the resolution plan, are tenable, given that the Petitioner was undergoing Corporate Insolvency Resolution Process (CIRP) and the GST department had filed its claims therein? (Question of law) Petitioner's arguments: The Petitioner contended that once a resolution plan is approved under the IBC, all claims, including statutory dues, that are not part of the plan are extinguished. They relied on the 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. The Petitioner argued that the impugned demands were raised after the NCLT's approval of the resolution plan on June 11, 2024, and therefore, are unsustainable. Respondents' arguments: The Revenue, represented by Mr. R. Ramachandran, SSC, stated that the impugned orders were merely meant to crystallize the amounts and no recovery steps had been taken. They also relied on the Supreme Court judgment in Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs.