GSTAT: Anti-Profiteering Proceedings Extinguished Against Puma Realtors After Insolvency Resolution; SCN Set Aside

Proceedings were initiated against the respondent developer for alleged profiteering under Section 171 of the CGST Act. During the course of the hearing, it was informed that the company had been declared insolvent and its business assets had been taken over by One Group Developers Pvt. Ltd., from 1 June 2021, after approval of a resolution plan by the NCLT, Delhi.

The Directorate General of Anti-Profiteering (DGAP) submitted that the investigation could not proceed further in view of the insolvency process and sought legal advice from the Senior Standing Counsel. The legal opinion obtained by the Principal DG of DGAP examined whether claims relating to non-passing of input tax credit benefits survive after approval of a resolution plan.

Core Issue: Whether anti-profiteering proceedings under Section 171 of the CGST Act can continue against a company whose resolution plan has been approved under the IBC and where the alleged claims were not part of such plan.

GSTAT’s Ruling: The Appellant tribunal relied upon Section 238 of the IBC, which contains a non-obstante clause overriding other laws, and Supreme Court rulings in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., it was opined that all claims not included in an approved resolution plan stand extinguished. Therefore, any alleged profiteering liability under Section 171, not part of the resolution proceedings, cannot be enforced against the resolution applicant or the revived entity.

The Tribunal held that once a resolution plan is approved by the NCLT under Section 31 of the IBC, all prior statutory dues and claims not forming part of the plan stand extinguished. Since the anti-profiteering investigation related to the period before the plan’s approval and no quantification had been made, the liability cannot survive against the new management. The Tribunal, therefore, found no reason to proceed further and ordered that the show-cause notice issued by the DGAP be set aside and the proceedings under Section 171 be closed.

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