GST Proceedings Barred After IBC Resolution Plan Approval: Calcutta High Court's Ruling in SREI Equipment Finance Limited vs Union of India & Ors.

Background and Context

The intersection of GST enforcement powers and the Insolvency and Bankruptcy Code, 2016 (IBC) has long been a contested legal terrain. A significant ruling from the Calcutta High Court has now settled a critical question: once a resolution plan is approved under Section 31(1) of the Insolvency and Bankruptcy Code, 2016, do GST authorities retain any jurisdiction to initiate or continue adjudication proceedings in respect of pre-approval dues that were never claimed during the Corporate Insolvency Resolution Process (CIRP)? The Court's answer is an unequivocal no.

The case of SREI Equipment Finance Limited Vs Union of India & Ors. arose from a direct clash between the adjudicatory powers vested in tax authorities under the Central Goods and Services Tax Act, 2017 (CGST Act) and the extinguishment mechanism embedded in the IBC. The Calcutta High Court's decision comprehensively addresses this conflict and establishes that the prohibition imposed by an approved resolution plan is not confined to recovery alone — it extends equally to the very initiation of proceedings concerning claims that have ceased to legally exist.

Facts of the Case

SREI Equipment Finance Limited, a Non-Banking Financial Company incorporated under the Companies Act, 1956 and registered under the GST laws, filed a writ petition challenging:

  1. A Show Cause-cum-Demand Notice dated 26 September 2025 along with summary in Form GST DRC-01.
  2. An Order-in-Original dated 29 December 2025 along with summary in Form GST DRC-07, confirming a demand of IGST of Rs. 1,68,78,057/- under Section 73(9) of the Central Goods and Services Tax Act, 2017, along with interest under Section 50 and penalty of Rs. 16,87,806/-, on allegations of excess availment of IGST input tax credit on imported goods during Financial Year 2021-22.
  3. A separate notice dated 13 January 2026 demanding interest under Section 50 of the CGST Act for alleged delay in filing GSTR-3B returns for July and August 2021.

The CIRP Timeline

The insolvency history of the petitioner is crucial to understanding the Court's ruling:

  • On 8 October 2021, the National Company Law Tribunal, Kolkata Bench, admitted the petitioner and its holding company, SREI Infrastructure Finance Limited, into the Corporate Insolvency Resolution Process upon an application by the Reserve Bank of India under Section 227 read with Section 239(2)(zk) of the Code of 2016 with rules of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019.
  • A moratorium under Section 14 of the Code of 2016 came into effect from that date.
  • Public announcements inviting claims under Section 15 of the Code of 2016 were made on 11 October 2021.
  • The resolution plan submitted by National Asset Reconstruction Company Limited was approved by the Committee of Creditors and subsequently by the Adjudicating Authority under Section 31 of the Code of 2016 by an order dated 11 August 2023 (referred to as the "Effective Date").
  • A challenge to the plan's approval was dismissed by the National Company Law Appellate Tribunal, Principal Bench, New Delhi, on 5 January 2024, conferring finality on the plan.

A critical undisputed fact: neither the GST respondents nor any other GST authority lodged any claim before the Administrator/Resolution Professional in respect of the GST dues now being demanded for Financial Year 2021-22.

Post-Approval Proceedings by Revenue

More than two years after the Effective Date, an audit query dated 1 August 2025 was issued alleging erroneous availment of IGST Input Tax Credit for Financial Year 2021-22. Despite the petitioner's reply dated 22 September 2025 specifically pointing to the concluded CIRP and the approved resolution plan, the Show Cause-cum-Demand Notice was issued on 26 September 2025, proposing a demand of Rs. 1,68,78,057/- with penalty aggregating to Rs. 1,85,65,863/-.

The petitioner replied in Form GST DRC-06 on 22 October 2025, relying on Sections 31 and 238 of the Code of 2016, Supreme Court decisions, and CBIC's own circulars. Despite this, the Order-in-Original dated 29 December 2025 confirmed the demand — while expressly recording the existence of the CIRP, the absence of any lodged GST claim, and the approval of the resolution plan. The revenue's justification was that the cause of action had arisen after the moratorium period.

The Approved Resolution Plan's Treatment of Government Claims

Clause 3.2.9 of the approved resolution plan specifically addressed the treatment of Government Authority claims. It provided, in substance, that: