A GST Notice After the Resolution Plan: When the Demand Is Already Extinguished

The department often argues that a resolution plan stops it recovering tax but does not stop it determining tax. On 1 October 2026 the Calcutta High Court rejected that argument on a Section 73 demand raised more than two years after the National Company Law Tribunal approved the plan. Its reasons for distinguishing Sundaresh Bhatt, and for treating the months spent in insolvency as covered, are the useful part.

The facts

SREI Equipment Finance Limited v. Union of India, WPA 6268 of 2026, was decided by Aryak Dutt J. The petitioner is an NBFC. On an application by the Reserve Bank of India under Section 227 of the Insolvency and Bankruptcy Code, the NCLT, Kolkata Bench, admitted it into the corporate insolvency resolution process on 8 October 2021. The moratorium began that day, and claims were invited on 11 October 2021. No GST authority lodged a claim.

The NCLT approved the resolution plan of National Asset Reconstruction Company Limited on 11 August 2023. The NCLAT rejected a challenge to the approval on 5 January 2024. Clause 3.2.9 of the plan provided that claims of government authorities for the period before the effective date, "whether known or unknown, assessed or unassessed", would stand extinguished except as the plan provided.

The department then took these steps:

• an audit query of 1 August 2025 alleging excess IGST credit on imports in FY 2021-22;
• a show cause notice under Section 73 dated 26 September 2025, proposing Rs 1,68,78,057 in tax and, with penalty, Rs 1,85,65,863 in all;
• an order-in-original dated 29 December 2025 confirming the IGST demand under Section 73(9), with interest under Section 50 and penalty of Rs 16,87,806;
• a separate notice of 13 January 2026 demanding Section 50 interest for late filing of GSTR-3B for July and August 2021.

The order-in-original itself recorded that the company had been in CIRP from 8 October 2021 to 11 August 2023, that no claim had been lodged, and that the plan had been approved. It confirmed the demand anyway, on the footing that "the cause of action arose after the moratorium".

What the Court decided

The petition was allowed. The Court held that the dues for FY 2021-22, with interest and penalty, were extinguished when the plan was approved on 11 August 2023, and that the department "had no jurisdiction to initiate or continue any proceeding in respect thereof". The show cause notice, the DRC-01, the order-in-original, the DRC-07 and the interest notice of 13 January 2026 were all quashed.

One ground was not decided. The petitioner had also argued that no penalty can be imposed under Section 73 without a finding of fraud, wilful misstatement or suppression. The Court found it unnecessary to examine that (para 25). The order also says expressly that it expresses no opinion on any liability for the period after the plan (para 29).

Five points worth taking from it

1. The cut-off is the date the plan was approved, not the date the CIRP began.

The department's "cause of action arose after the moratorium" point was answered in para 16. The months of FY 2021-22 after 8 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". By September 2025 "there was no claim left to adjudicate".

This follows the words of Ghanashyam Mishra, para 102.3, which extinguishes statutory dues not in the plan "for the period prior to the date on which the adjudicating authority grants its approval under Section 31". The Delhi High Court applied the same date in Patanjali Foods Limited v. Assistant Commissioner, CGST (11 December 2025). There the demand covered periods both before and after approval. The Court set aside the demand for the period before 4 September 2019, the date of final approval, and left the department free to issue a fresh notice for the period after it. It also excluded the time the writ was pending from limitation for that fresh notice. Andhra Pradesh and Bombay had made the same split in the same company's case.

So the date to take from the NCLT order is the approval date. Liability for the period after that date survives and can be pursued in the ordinary way. A demand that covers both periods is not wholly bad: the earlier part goes, and the department gets a fresh chance at the later part.

2. The "adjudication is not recovery" argument fails once a plan is approved.

The department relied on Sundaresh Bhatt v. CBIC, (2023) 1 SCC 472. In that case the Supreme Court held that the customs authority can determine duty during the moratorium and is barred only from recovering it. The Court held (paras 19 and 20) that the decision did not help the department, for two reasons:

• Sundaresh Bhatt concerned the moratorium period in a liquidation, where liabilities are not extinguished but are paid out of the estate in the order set by Section 53. A determined figure has somewhere to go. After a resolution plan has been approved, there is nothing to determine it for.
• Sundaresh Bhatt itself treats demand notices as "an initiation of legal proceedings", and Ghanashyam Mishra bars the initiation or continuation of "any proceedings" in respect of an extinguished claim.

The Court added that the order was not "a mere academic quantification". It confirmed a demand under Section 73(9) and levied interest and penalty, and the DRC-07 that accompanied it "on its own terms is a recoverable demand". In Era Infra Engineering Limited v. Joint Commissioner, CGST (15 December 2025), the Delhi High Court considered Sundaresh Bhatt in the same setting and reached the same result.

The department's fallback was that the Court should leave the adjudication standing and simply hold that recovery is subject to the plan. That was rejected too. The proceeding itself went, not just its enforcement.

3. Section 88 and Section 82 do not help the department.

Section 88 deals with companies in liquidation. SREI was never wound up; it continues as a going concern under new management. The Court also held that Section 88 "presupposes a subsisting tax liability and cannot revive one extinguished". Section 82, which gives the Government a first charge, is itself expressed to apply "save as otherwise provided in the Insolvency and Bankruptcy Code, 2016" (para 21).

4. The CBIC's own instructions are part of the reply.

The Court relied on Circular No. 134/04/2020-GST dated 23 March 2020 and Instruction No. 1083/02/2022-CX8 dated 23 May 2022. As placed before the Court, the Instruction records that claims not submitted, or submitted late, stand extinguished when the plan is approved. The order-in-original had not referred to either, and the Court said that adjudicating officers "cannot ignore instructions of the Board" (para 22). A reply that cites the department's own instructions is harder to pass over than one that cites only the Supreme Court.

5. The writ was entertained despite the Section 107 appeal.

The facts were admitted and the question was one of pure law going to jurisdiction. Relying on Whirlpool Corporation and Godrej Sara Lee, the Court held that sending the petitioner to an appeal, "with its attendant pre-deposit, would serve no purpose" (para 24).

Two cautions from other cases

The objection has to be raised, and raised in terms. Calcutta could decide the case outright because the department's own order recorded the CIRP dates, the absence of a claim and the approval of the plan. A different notice against the same company went differently. In SREI Equipment Finance Limited v. Assistant Commissioner, CGST, Delhi (12 February 2026), the notice was under Section 74 for FY 2018-19 on alleged fake invoices. The department argued that the public announcement had been published only in Kolkata, so the Delhi authority could not have known of the process. The Delhi High Court did not decide whether the dues were extinguished. It set the order aside because the officer had not dealt with the IBC objection, and sent the matter back. The practical lesson is to put the NCLT admission order, the public announcement and the approval order on record in the reply to the notice, so the adjudicating officer has to deal with them.

Extinguishment protects the company. It does not return money already paid. In Tata Steel Limited v. Union of India (12 November 2025), another bench of the same Court dismissed four writ petitions by a successor company. Before its insolvency, Bhushan Steel had reversed about Rs 145 crore of CENVAT credit "under protest" and had obtained waiver of pre-deposit for its CESTAT appeals. After the plan was approved, those appeals abated. The successor argued that the reversed amounts were in substance pre-deposits and should be returned. The Court held that the reversals were voluntary and not pre-deposits, since waiver had been sought and granted, and that the Tribunal had no power to decide the question once the appeals had abated. The judgment also sets out, with approval, the Jharkhand High Court's view in ESL Steel that the new management cannot claim credit relating to the period before the plan. Extinguishment works in both directions.

Is there contrary authority?

The opposite view was searched for in the High Court GST judgments available to us: courts declining to follow Ghanashyam Mishra on statutory dues, and courts accepting the adjudication-versus-recovery distinction after a plan had been approved. None was found. The Punjab and Haryana High Court in Ballarpur Industries Limited v. Assistant Commissioner, CGST (1 September 2026) quashed the demands for FY 2019-20 and 2021-22, recording that counsel agreed Ghanashyam Mishra covered them. It left a FY 2023-24 demand, for a period after the plan, untouched. Interest and penalty were apportioned in the same proportion. The same plan has also been applied in SREI's favour by the Karnataka High Court (11 September 2024) and the Rajasthan High Court (24 March 2025), both of which quashed GST proceedings for periods before approval.

The point on which the authorities are thinnest is the one in para 16: dues for the months spent in CIRP. Ghanashyam Mishra's words support the Calcutta reading, and Delhi in Patanjali Foods used the approval date. Even so, a reply should rely on the actual text of para 102.3 rather than assume the point is settled everywhere.

In short

1. Take three dates from the NCLT record: admission, the public announcement inviting claims, and approval of the plan. The approval date is the cut-off.
2. Check whether a claim was lodged and whether the plan provides for the dues. If neither, the dues for the period before approval, including the months during CIRP, are extinguished with their interest and penalty.
3. Raise it in the reply to the show cause notice, attaching the orders, and cite Circular 134/04/2020-GST and Instruction 1083/02/2022-CX8 alongside Ghanashyam Mishra and Vaibhav Goel.
4. Where the department relies on Sundaresh Bhatt, answer that it concerned liquidation, where liabilities survive, and that after approval of a plan there is nothing left to determine.
5. Where the demand covers periods both before and after approval, expect the earlier part to be quashed and a fresh notice to follow for the later part.
6. Do not expect extinguishment to bring back amounts already paid or reversed before the plan.

Our work on GST notices, adjudication and appeals is set out under GST practice and litigation support.

This note is general information drawn from reported decisions and is not advice upon any particular matter. The outcome in any case depends upon its own record, including the terms of the approved resolution plan.