IBC Cannot Replace Statutory Process For Determination And Recovery Of GST Liability: NCLT Hyderabad
Kirit Singhania
19 March 2026 11:28 AM IST
The National Company Law Tribunal (NCLT) at Hyderabad on Wednesday observed that liquidation proceedings under the Insolvency and Bankruptcy Code cannot be employed as a substitute for the statutory process governing determination and recovery of GST liability.
The bench of Judicial Member Rajeev Bhardwaj and Technical Member Sanjay Puri delivered the ruling in an application filed by the Central Goods and Services Tax (CGST) Department seeking directions against the liquidator of Lanco Kondapalli Power Ltd and MCM Pacific Pte Ltd in relation to the sale of Phase-III assets.
“Any liability that may arise under the GST framework can be enforced through the statutory mechanism provided under the GST laws, including the powers available to the tax authorities for assessment and recovery. The liquidation proceedings under the IBC cannot be employed as a substitute for the statutory processes governing tax determination and recovery.”, the tribunal observed.
The corporate debtor had entered CIRP on April 23, 2019, and was subsequently ordered into liquidation on April 16, 2021. As per the e-auction process initiated on April 8, 2022, MCM Pacific emerged as the successful bidder and was issued a Letter of Intent on June 21, 2022, for the purchase of Phase-III assets.
The CGST Department relied on an Advance Ruling of June 7, 2024 and an earlier NCLT order dated February 14, 2025 to contend that the transaction constituted a domestic supply liable to GST. It alleged that subsequent steps including communications dated December 10, 2025 and January 29, 2026 indicated an attempt to treat the transaction as export to evade GST liability.
Opposing the plea, the liquidator pointed out that the purchaser had already deposited approximately Rs. 24.50 crore towards GST during appellate proceedings and that the matter was pending before appropriate forums.
The tribunal held that determination of GST liability, including classification of supply and recovery of dues, falls exclusively within the statutory framework under GST laws. It emphasized that the IBC cannot be used as a substitute for such mechanisms.
Holding the application under Section 42 of the Code to be not maintainable, the tribunal dismissed the plea while granting liberty to the department to pursue remedies under GST law.
For Applicant: Advocates Santhi Chandra, Avinash Desai
For Respondents: Advocates Anupam Prakash, Sameer Kumar, Vaibhav Pachauri, K Vatsa Kumar, Liquidator