Indirect Tax Demands for Pre-Resolution Period Unsustainable Once Claims Extinguished by NCLT

Case Details: Sical Logistics Ltd. vs. State Tax Officer - [2025] 181 taxmann.com 210 (Gujarat)

Judiciary and Counsel Details

Bhargav D. Karia & Pranav Trivedi, JJ.
Nitin K Mehta for the Petitioner.
Ms Shrunjal Shah, AGP for the Respondent.

Facts of the Case

The petitioner was in the business of warehousing services and providing logistics services, challenged the issuance of demand orders relating to indirect tax dues. It underwent a corporate insolvency resolution process (CIRP), approved by the National Company Law Tribunal (NCLT). The approval order expressly recorded the extinction of all indirect tax dues for periods prior to the effective date and prohibited further proceedings for such claims. Despite this, the jurisdictional officer issued notices and passed demand orders, which were unsuccessfully appealed. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that in view of the NCLT approval and the binding effect under Section 31 of the Insolvency and Bankruptcy Code, 2016, no demands could be raised or continued for periods prior to the effective date. The court observed that claims not forming part of the approved resolution plan stood extinguished, and any proceedings in respect of such claims were impermissible. It interpreted Section 73 of the CGST Act to conclude that the impugned demand orders were unsustainable. Consequently, the writ petition was allowed and the demand orders were quashed.