The court ruled that since the GST department had already participated in the insolvency proceedings and filed its claims, it cannot raise new demands.
Nidhi | Dec 24, 2025 |
No GST Demand Can be Raised For Previous Period Once Resolution Plan is Approved: Delhi High Court
The Delhi High Court has ruled that one the resolution plan is approved, the GST department cannot raise further demands for the period prior to Approval.
The petitioner, Era Infra Engineering Limited, faced financial difficulties and underwent insolvency proceedings before the National Company Law Tribunal (NCLT). The Union Bank of India had filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
During the insolvency proceedings, the GST department had cancelled the GST registration of the petitioner company and filed its claims amounting to Rs 4,02,30,448 before the Resolution Professional (RP), which was later crystallised to Rs 1,94,26,381. The company’s resolution plan was approved by the NCLT on June 11, 2024, with a new management taking over the company.
However, even after this, the GST department continued to issue show cause notices and orders for FY 2018-19, 2019-20, and 2017-18, raising tax demands for these financial years. Therefore, the petitioner approached the Delhi High Court challenging these orders.
The petitioner argued that the said orders were invalid, as they are related to the period prior to the final approval of the resolution plan by NCLT. The petitioner company argued that the GST department cannot raise new demands for the previous periods after the NCLT gave its approval to the resolution plan of the petitioner company.
The High Court, citing the decision of the Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd vs. Edelweiss Asset Reconstruction Company Limited in CA: 8129 of 2019, agreed with the assessee’s contention. It ruled that since the GST department had already participated in the insolvency proceedings and filed its claims, it cannot raise new demands. The court said that the new management cannot be burdened with the additional demands relating to the previous period.
Therefore, all the orders related to the three financial years were set aside by the court.
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