GST Demand for Pre-CIRP Period Quashed; IBC “Clean Slate” Extinguishes Past Dues
Issue
Whether the GST Department can raise a demand under Section 73 for a period prior to the approval of a Resolution Plan (FY 2017-18) once the National Company Law Tribunal (NCLT) has approved the plan under the Insolvency and Bankruptcy Code (IBC).
Facts
Petitioner: A logistics and warehousing company.
The Event: Corporate Insolvency Resolution Process (CIRP) was initiated. The NCLT, Chennai approved the Resolution Plan with an “Effective Date” of 11.01.2023.
The Plan Terms: The approved plan explicitly recorded the extinction of all indirect tax dues and the termination of legal proceedings for periods prior to the effective date.
The Conflict: Despite this, the GST authorities issued a notice and passed a demand order for FY 2017-18 (a period falling well before the plan’s effective date).
The Appeal: The department’s demand was confirmed in the initial appeal, leading the petitioner to file a writ.
Decision
Binding Effect (Section 31 IBC): The High Court reiterated the settled law (Supreme Court in Ghanashyam Mishra) that once a Resolution Plan is approved under Section 31 of the IBC, it becomes binding on all stakeholders, including the Central/State Government.
Clean Slate Theory: All claims that were not part of the approved Resolution Plan stand extinguished. No person (including Tax Authorities) is entitled to initiate or continue any proceedings regarding those past dues.
Jurisdictional Bar: Since the demand pertained to FY 2017-18 (pre-CIRP), the Department had no jurisdiction to raise it after the plan was approved.
Ruling: The impugned orders (demand and appellate order) were quashed. The petition was allowed in favour of the assessee.
Key Takeaways
Operational Creditor Status: Tax authorities are considered “Operational Creditors” under the IBC. If they fail to file their claim with the Resolution Professional (RP) within the stipulated time, or if their claim is settled at a lower value in the plan, they lose the right to recover the balance amount forever.
Post-CIRP Compliance: While the past slate is wiped clean, the new management must ensure strict compliance from the “Effective Date” onwards. Any default after 11.01.2023 in this case would be fully recoverable.
HIGH COURT OF GUJARAT
Sical Logistics Ltd.
v.
State Tax Officer
BHARGAV D. KARIA and Pranav Trivedi, JJ.
R/SPECIAL CIVIL APPLICATION NO. 12753 of 2025
SEPTEMBER 19, 2025
Nitin K Mehta for the Petitioner. Ms Shrunjal Shah, AGP for the Respondent.
JUDGMENT
Bhargav D. Karia, J. Heard learned advocate Mr. Nitin Mehta for the petitioners and learned Assistant Government Pleader Ms.Shrunjal Shah for the respondent Nos.1 and 2.
2. Rule, returnable forthwith. Learned AGP Ms.Shrunjal Shah waives service of notice of rule for respondent Nos.1 and 2.
3. Having regard to the controversy involved which is in narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for hearing.
4. By this petition under Articles 226 and 227 of the Constitution of India, the the petitioner has prayed for quashing and setting aside the Order-in Original dated 21-12-2023 passed under Section 73 of the Gujarat Goods and Services Tax Act, 2017 [‘GST Act’ for short] by the Respondent No. 1, Ghatak 100 (JAMNAGAR) Range 24, Division 11 (JUN) Gujarat, for Financial Year 2017-18, and also challenged the appellate Order dated 25/04/2025 passed by Respondent No. 2 in appeal.
5. Brief facts of the case are that:
5.1 The petitioner-Company is in the business of warehousing services and providing logistics services throughout India. By order dated 10.03.2021 passed by the NCLT, Chennai Bench, the Corporate Insolvency Resolution Process (CIRP) was initiated against the Petitioner-Company.
5.2 It is the case of the petitioner that a Resolution plan submitted by Pristine Malwa Logistics Park Private Limited for the Corporate Debtor came to be approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 vide order dated 08.12.2022 passed by the NCLT, Chennai.
5.3 The National Company Law Tribunal, by order dated 08.12.2022 held as under:
“K. RELINOUISHMENT/WAIVER OF LIABILITIES AND APPROVALS
The Resolution Applicant has inter alia sought for the following reliefs based on provisions of the Code and Regulation 37 of the CIRP Regulations;
| Sr. No | Reliefs And/Or Concessions And Approvals Sought | Orders Thereon | |
| 9 | Clause 9.21.1 (I) All actual and potential dues and liabilities under the provisions of any indirect tax laws, including but not limited to, the Central Excise Act, 1944, the Finance Act, 1994 (Service Tax), The Customs Act, 1962 Foreign Trade Policy 2009-14/2015-20, the Central Sales Tax Act, 1956, Respective State Value Added Tax Act, respective State Entry Tax Laws, The CENVAT Credit Rules, 2004, the Central Goods and Services Tax Act, 2017 Integrated Goods and Services Tax Act, 2017 and the respective State Goods and Services Tax Act, 2017 (each as amended from time to time and including the rules made thereunder) including taxes, sales tax deferral liabilities, duties, penalties, interest, fines, cesses, charges, unpaid tax deducted at source or tax collected at source, octroi tax, stamp duty, local body tax, municipal taxes, or other fiscal incentives (including without limitation, the indirect tax dues) whether admitted or not, due or contingent, whether or not set out in the Information Memorandum, Virtual Data Room, or the balance sheets of the Corporate Debtor or the profit and loss account statements of the Corporate Debtor or the asserted or unasserted, crystallised or uncrystallised, known or unknown, secured or unsecured, disputed or undisputed, present or future, in relation to any period prior to the Effective Date or arising on account of the acquisition of control by Resolution Applicant over the Corporate Debtor pursuant to this Resolution Plan shall stand exempted, settled and extinguished. All notices, assessments (whether commenced or not), appellate or other proceedings pending or threatened in relation to the Corporate Debtor, in relation to any period prior to the Effective Date or arising on account of the acquisition of control by Resolution Applicant over the Corporate Debtor pursuant to this Resolution Plan, or on account of the measures contemplated under this Resolution Plan shall stand terminated and withdrawn and the Corporate Debtor shall be exempted from any reassessment, revision or other proceedings under the provisions of an indirect tax law and the Corporate Debtor or the Resolution Applicant shall at no point of time be, directly or indirectly, held responsible or liable in relation thereto; (Pg.No.1123 of resolution plan) | Granted in terms of the judgement of the Hon’ble Supreme Court in Ghanashyam Mishra and Sons v. Edelweiss Asset Reconstruction Company Limited 2021 SCC Online SC 313 |
25. On hearing the submissions made by the Ld. Counsel for the Resolution Professional, and perusing the record, we find that the Resolution Plan has been approved with 77.55% voting share. As per the COC, the plan meets the requirement of being viable and feasible for the revival of the Corporate Debtor. By and large, all the compliances have been done by the RP and the Resolution Applicant for making the plan effective after approval by this Bench. On perusal of the documents on record, we are also satisfied that the Resolution Plan is in accordance with sections 30 and 31 of the IBC and also complies with regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
28. Subject to the observations made in this Order, the Resolution Plan in question is hereby APPROVED by this Adjudicating Authority. The Resolution Plan shall form part of this Order. The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that the revival of the Debtor Company shall come into force with immediate effect. The Moratorium imposed under section 14 shall cease to have effect from the date of this Order.”
5.4 It is the case of the petitioner that despite the statutory mandate that no past or future claims, whether claimed or not, of government and statutory authorities including under Indirect Tax Laws for the past period, the respondent-Authority has issued notice dated 30.09.2023 proposing to demand GST for FY 2017-18. In response to the same, the petitioner filed reply dated 13.12.2023. Contending that keeping in view the approved resolution plan and section 31(a) of IBC, no demand can be raised in case of the petitioner as the demand was of a period prior to effective date of resolution plan and even prior to initiation of CIRP process.
5.5 Without considering the reply of the petitioner and without considering the binding effect of the approved resolution plan under IBC, the respondent authority passed impugned order dated 21.12.2023 confirming the demand raising the untenable ground that they were not intimated by the liquidator about his appointment within 30 days.
5.6 It is the case of the petitioner that impugned order dated 21.12.2023 was never sent to them in physical form or by email. Thereafter, the petitioner filed application for cancellation of registration on 26.06.2024 which was rejected vide order dated 22.08.2024 which was uploaded on portal. However, the same was neither communicated to the petitioner through email nor via any physical copy. Following this, without giving prior notice, the respondent No.1 took action to freeze the petitioner’s bank account by notice dated 25.11.2024 at which point of time, the petitioner came to know about issuance of the impugned order.
5.7 Thereafter, the petitioner filed appeal on 03.12.2024 before the Commissioner (Appeals), who by order dated 25.04.2025, dismissed the appeal.
Being aggrieved by the aforesaid order the petitioner approached this Court by way of present petition.
6. Learned advocate Mr. Nitin Mehta for the petitioner submitted that in view of the above observation made by the NCLT, the respondent-Authority could not have issued the notice as held by the Hon’ble Apex Court in case of Ghanashyam Mishra & Sons (P.) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. SCL 237 (SC)/2021 9 SCC 657 which reads as under:
“102. In the result, we answer the questions framed by us as under:
That once a resolution plan is duly approved by the adjudicating authority under sub-section (1) of
102.1. Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shalt’ stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan.
102.3. The 2019 Amendment to Section 31 of the I8B Code is clarificatory and declaratory in nature and therefore will be effective from the date on which the I&B Code has come into effect.
102.3. Consequently all the 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 under Section 31 could be continued.”
6.1 Learned Advocate Mr. Nitin Mehta also referred to and relied upon the decision of the Hon’ble Apex Court in case of Vaibhav Goel v. Deputy Commissioner of Income-tax SCL 262 (SC)/ 2025 SSC Online SC 592 in which, after considering the decision in case of Ghanashyam Mishra and Sons Pvt. Ltd. (supra), the Hon’ble Apex Court has held as under:
“8. In view of the declaration of law made by this Court, all the dues including the statutory dues owed to the Central Government, if not a part of the Resolution Plan, shall stand extinguished and no proceedings could be continued in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 of the IB Code. In this case, the income tax dues of the cbD for the assessment years 2012-2013 and 2013-2014 were not part of the approved Resolution Plan. Therefore, in view of sub-section (1) of Section 31, as interpreted by this Court in the above decision, the dues of the first respondent owed by the cD for the assessment years 2012-2013 and 2013-2014 stand extinguished.
11. In view of the above discussion, the Resolution Plan approved on 21st May 2019 is binding on the first respondent. Therefore, the Subsequent demand raised by the first respondent for the assessment years 20122013 and 2013-2014 is invalid.
13. The additional demands made by the first respondent in respect of the assessment years 2012-2013 and 2013-2014 will operate as roadblocks in implementing the approved Resolution Plan, and appellants will not be able to restart the operations of the CD on a clean slate.
14. We, therefore, hold that the demands raised by the first respondent against the CD in respect of assessment years 20122013 and 2013-2014 are invalid and cannot be enforced. We set aside the impugned orders of NCLT and NCLAT and allow the appeal accordingly.”
6.2 Learned advocate Mr. Nitin Mehta further relied upon a decision of this Honourable Court in case of SREI Equipment Finance Ltd. v. Office of the Principal Commissioner, Central GST and Central Excise Commissionerate GST 142 (Gujarat)/Special Civil Application No. 10016 of 2025 dated on 11.09.2025 in which, this Court, after considering similar facts and applying decision in case of Ghanashyam Mishra and Sons Pvt. Ltd. (supra), has quashed and set aside the order-in-original passed by the Assistant Commissioner of Sales Tax.
7. Per contra, learned Assistant Government Pleader Ms. Shrunjal Shah appearing for the respondents could not controvert the submissions made by learned advocate Mr. Nitin Mehta for the petitioner.
8. Considering the above decisions as well as the order passed by the NCLT, the impugned orders dated 21.12.2023 and 25.04.2025 passed by the respondent No.1 and 2 respectively, would not survive as the same are passed for Financial Year 2017-2018 raising the demand under the GST Act for a period which is prior to the date of the order of the NCLT passed on 08.12.2022 approving the Resolution Plan wherein, the NCLT has held that on the effective date is 11.01.2023 which is subsequent to the date of approval of the Resolution Plan, all claims which are not part of the Resolution Plan shall stand extinguished and no person would be entitled to initiate or continue any proceeding in respect to a claim which is not part of the Resolution Plan.
9. Therefore, no demand can be raised for the period prior to the effective date/date of approval of the Resolution Plan. The respondent-Authority therefore, could not have conducted the proceedings under the provisions of the GST Act for the Financial Year 20172018 raising the demand by passing the impugned Orders dated on 21.12.2023 and 25.04.2025.
10. The petition therefore, succeeds and is accordingly allowed. The impugned orders dated 21.12.2023 and 25.04.2025 are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No orders as to cost.