Calcutta High Court Quashes ₹1.68 Crore GST Demand Against SREI Equipment Finance After CIRP

The Calcutta High Court on 1 October allowed SREI Equipment Finance Limited's petition and quashed the Rs. 1.68 crore GST demand raised for alleged excess availment of integrated goods and services tax (IGST) input tax credit on imported goods for FY 2021-22.

Justice Aryak Dutt held that tax authorities cannot initiate or continue proceedings for pre-resolution plan dues that were not lodged during the corporate insolvency resolution process (CIRP), as approval of the resolution plan extinguishes such liabilities. He observed:

“...The liability, if any, relates to Financial Year 2021-22. Portion of it which relates to the months after 8th October, 2021, arose during the CIRP itself and was equally required to be brought to the notice of the Administrator/Resolution Professional so as to be dealt with in the plan. When the respondents issued the show cause notice on September, 2025, there was no claim left to adjudicate.”

The National Company Law Tribunal (NCLT), Kolkata Bench admitted SREI Equipment Finance and its holding company into CIRP on 8 October 2021. The GST authorities did not lodge any claim for the disputed FY 2021-22 dues before the Administrator/Resolution Professional.

National Asset Reconstruction Company Limited submitted the resolution plan, which the NCLT approved on 11 August 2023. The plan provided that pre-effective-date claims and liabilities, whether known or unknown, assessed or unassessed, crystallised or contingent, would stand extinguished except as specifically provided. Subsequently, the National Company Law Appellate Tribunal rejected a challenge to the approval in January 2024, bringing the approval to finality.

The Department nevertheless issued an audit query in August 2025 concerning alleged excess input tax credit for FY 2021-22. It then issued a show cause-cum-demand notice on 26 September 2025.

GST authorities confirmed the demand through an Order-in-Original dated 29 December 2025 and imposed interest and a penalty of Rs. 16.87 lakh. SREI Equipment Finance also challenged a notice dated 13 January 2026 demanding interest for alleged delayed filing of GSTR-3B returns for July and August 2021.

The company relied on Section 31(1) of the Insolvency and Bankruptcy Code, 2016, which makes an approved resolution plan binding on the Central Government and statutory authorities.

The Court held that the FY 2021-22 dues stood extinguished when the NCLT approved the resolution plan on 11 August 2023. Since the GST authorities had not lodged their claim during the CIRP, they could not initiate or continue proceedings for those dues after approval of the plan.

Justice Dutt also observed that a successful resolution applicant cannot face undecided claims after approval of the resolution plan, as the insolvency process enables the applicant to take over the business on a “fresh slate”.

The GST authorities had argued that determination of tax liability differs from recovery and relied on the Supreme Court's decision in Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs. They contended that tax authorities retain jurisdiction to determine tax, interest, fine or penalty during insolvency proceedings.

However, the Court distinguished Sundaresh Bhatt, noting that the Supreme Court had dealt with the operation of the moratorium where the liabilities had not been extinguished. Here, the NCLT had already approved the resolution plan and the dues had ceased to survive.

It also held that issuance of a show cause notice itself initiates proceedings. It rejected the argument that the adjudication order merely determined the tax liability, noting that the order confirmed the demand, imposed interest and penalty, and the Department issued a DRC-07 summary creating a recoverable demand.

Further, the Bench rejected the Department's reliance on Section 88 of the Central Goods and Services Tax Act, 2017. It noted that the provision applies to a company in liquidation, whereas SREI Equipment Finance had undergone CIRP and continued as a going concern under new management after approval of the resolution plan.

It also considered CBIC Circular No. 134/04/2020-GST dated 23 March 2020 and Instruction No. 1083/02/2022-CX8 dated 23 May 2022. It noted that the Department itself had recognised that claims not submitted, or submitted belatedly, stand extinguished upon approval of a resolution plan. It observed:

“...the Board has itself recognised the position. Circular No. 134/04/2020-GST dated 23rd March, 2020, contemplates that dues for the period prior to the insolvency commencement date are to be claimed before the Adjudicating Authority/Resolution Professional, and the Standard Operating Procedure under Instruction No. 1083/02/2022-CX8 dated 23rd May, 2022, as placed before this Court, records that claims not submitted, or submitted belatedly, stand extinguished upon approval of the resolution plan. The impugned order does not advert to either. Departmental adjudicating officers cannot ignore instructions of the Board issued for the uniform administration of the Act.”

Justice Dutt also noted that the availability of an appellate remedy under Section 107 of the CGST Act did not prevent SREI Equipment Finance from invoking writ jurisdiction, as the authorities had acted without jurisdiction and contrary to binding law.

Accordingly, the High Court quashed the show cause-cum-demand notice, the Order-in-Original, the DRC-07 summary and all proceedings arising from them as well as the notice demanding interest for July and August 2021.

For the Petitioner: Advocates Avra Mazumder, Alisha Das, Sreeja Mukherjee, Rupomita Ghosh, Saakshi Shaw, Suman Bhowmik, Elina Dey and Gaurav Gupta.

For the CGST Authorities: Advocates Uday Sankar Bhattacharya, Kaustav Kanti Maitri and Banani Bhattacharya.