Quick answer: In Srei Equipment Finance Limited v. Union of India and Ors., WPA No. 6268 of 2026 (2026:CHC-AS:1689), decided on 1 October 2026 (heard to conclusion on 25 September 2026), Aryak Dutt, J. of the Calcutta High Court allowed a writ petition against a Show Cause-cum-Demand Notice dated 26 September 2025 and an Order-in-Original dated 29 December 2025. These had confirmed, under Section 73(9) of the Central Goods and Services Tax Act, 2017, an IGST demand of Rs. 1,68,78,057 for excess input tax credit on imported goods in Financial Year 2021-22, with interest and a penalty of Rs. 16,87,806. The petitioner’s resolution plan had been approved by the National Company Law Tribunal on 11 August 2023, and no GST claim for the period had been lodged in the insolvency process. The Court held that the dues, with interest and penalty, “stood extinguished” on approval of the plan and that the tax authorities had no jurisdiction to initiate or continue any proceeding for them. It also quashed a notice of 13 January 2026 demanding Section 50 interest for delayed GSTR-3B returns for July and August 2021. The Court left open the petitioner’s liability, if any, arising later.
Key Takeaways
- Approval of the plan is the cut-off. For a period wholly before the plan’s approval date, an unclaimed GST demand cannot be initiated afterwards. Both the show cause notice and the order-in-original were held to be “proceedings in respect of an extinguished claim” (¶15).
- “Adjudication versus recovery” did not save the demand. The Department argued that determining tax is distinct from recovering it. The Court held that the bar extends to initiating or continuing “any proceedings”, and that a DRC-07 summary is itself a recoverable demand (¶20).
- The post-moratorium “cause of action” argument failed. Liability relating to the months after the insolvency commencement date arose during the process and had to be brought to the resolution professional (¶16).
- Board instructions bind officers. The Court relied on a CBIC circular and a standard operating procedure, as recorded in the judgment, to hold that officers cannot ignore Board instructions issued for uniform administration (¶22).
- Writ jurisdiction was exercised despite Section 107. The Court treated the question as one of pure law going to the root of jurisdiction, on admitted facts (¶24).
- Limited reach. The Court did not decide penalty without fraud under Section 73, and expressly declined to opine on any subsequent liability (¶¶25, 29).
1. Introduction
When a company emerges from a corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (the IBC), its new owners expect a clean slate. Statutory dues that were not part of the approved resolution plan are meant to fall away. The difficulty arises when a tax authority, having stayed silent through the process, issues a demand for an earlier period years after the plan is approved. This judgment addresses that situation under the Central Goods and Services Tax Act, 2017 (the CGST Act).
The petitioner, Srei Equipment Finance Limited, is a non-banking financial company. Its corporate insolvency resolution process (CIRP) began on 8 October 2021 and its plan was approved on 11 August 2023. On 26 September 2025, a CGST authority issued a notice under Section 73 of the CGST Act alleging that the petitioner had wrongly availed IGST input tax credit (credit for tax paid on inputs, set off against output tax) on imported goods in 2021-22. The Order-in-Original confirmed the demand. The Calcutta High Court quashed both.
The decision matters for three reasons. It applies the extinguishment principle to a GST demand, for a period that straddles the start of the insolvency process. It rejects the distinction between assessing a liability and enforcing it. And it shows how a High Court may treat an appellate remedy under Section 107 of the CGST Act where the objection goes to the authority’s power to act at all.
Section 2 sets out the facts and holding, Section 3 analyses the reasoning and what it leaves open, Section 4 draws out practical consequences, and Section 5 concludes. The decision is that of a single Judge, and its weight should be assessed accordingly.
2. Case Summary and Background
The process. On an application by the Reserve Bank of India under Section 227 of the IBC read with Section 239(2)(zk), the National Company Law Tribunal, Kolkata Bench, admitted the petitioner and its holding company, Srei Infrastructure Finance Limited, into CIRP by an order of 8 October 2021. A moratorium under Section 14 of the IBC took effect from that date, and public announcements inviting claims under Section 15 followed on 11 October 2021 (¶3). The Court recorded as admitted that no GST authority lodged a claim with the Administrator or Resolution Professional for the dues now demanded (¶4).
The plan. The plan submitted by National Asset Reconstruction Company Limited was approved by the Committee of Creditors and then by the Adjudicating Authority under Section 31 of the IBC on 11 August 2023, the “Effective Date”. Clause 3.2.9, headed “Treatment of Government Authorities”, provides in substance that claims for the period before the Effective Date, whether known or unknown, assessed or unassessed, crystallised or contingent, are to be dealt with strictly under the plan and, save as it provides, stand extinguished. The National Company Law Appellate Tribunal rejected a challenge to the approval on 5 January 2024 (¶5).
The demand. An audit query of 1 August 2025 alleged erroneous availment of IGST input tax credit for 2021-22. The petitioner replied on 22 September 2025, pointing to the concluded CIRP. The Show Cause-cum-Demand Notice of 26 September 2025, with a Form GST DRC-01 summary, proposed a demand of Rs. 1,68,78,057 with penalty, aggregating to Rs. 1,85,65,863. The petitioner answered in Form GST DRC-06 on 22 October 2025. By the Order-in-Original of 29 December 2025, with a Form GST DRC-07 summary, the demand was confirmed under Section 73(9) with interest under Section 50 and a penalty of Rs. 16,87,806. The order recorded the CIRP period, the absence of any claim and the approved plan, but proceeded on the footing that the cause of action arose after the moratorium (¶6). A separate notice of 13 January 2026 demanded Section 50 interest for delayed GSTR-3B returns for July and August 2021 (¶7).
The arguments. The petitioner relied on Section 31(1) and Section 238 of the IBC, on Supreme Court decisions holding that dues not forming part of an approved plan stand extinguished, on favourable outcomes on the same plan before other High Courts, on a CBIC circular and standard operating procedure, and on the inapplicability of Section 88 of the CGST Act to a revived company (¶¶8–9). Counsel for the CGST authorities “fairly did not dispute” the binding nature of Ghanashyam Mishra, but argued that determining a liability is distinct from recovering it, relying on Sundaresh Bhatt, and that Sections 73, 75 and 88 supplied the machinery (¶10).
Issues and holding. The Court decided three things: that the 2021-22 dues did not survive approval of the plan (¶¶15–17); that the assessment-versus-recovery distinction and Sections 73, 75 and 88 did not alter that result (¶¶18–21); and that the writ petition would be entertained despite the appeal under Section 107 (¶24). It held that the dues, “together with interest and penalty thereon, stood extinguished upon approval of the resolution plan” on 11 August 2023 and that the respondents had no jurisdiction to initiate or continue any proceeding. The notice, the order, the DRC-07 summary and the interest notice were quashed (¶¶26–28). There was no order as to costs (¶31).
3. Legal Analysis
3.1 The statutory scheme and the authorities applied
Section 31(1) of the IBC, as amended on 16 August 2019, makes an approved plan binding on the corporate debtor and its creditors, “including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force” is owed (¶11). The CGST authorities are therefore bound. Section 238 of the IBC gives it overriding effect, and the Court noted that Section 82 of the CGST Act, which creates the Government’s first charge, itself operates “save as otherwise provided in the Insolvency and Bankruptcy Code, 2016” (¶21).
The Court describes the consequence of approval as “explained by a Bench of Three Learned Judges” in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 (¶12), but does not reproduce the passage. It sets out the rationale from Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531: a successful resolution applicant “cannot suddenly be faced with ‘undecided’ claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up”, and may take over the business “on a fresh slate” (¶13). It then relies on Vaibhav Goel v. Deputy Commissioner of Income Tax, (2025) 8 SCC 511, as holding that income tax demands raised after approval for earlier years, with no claim lodged, were extinguished and unenforceable (¶14). Applying these, the Court found the position “plain”: the period fell wholly before the Effective Date, no claim was lodged, and the show cause notice, “the very initiation of a proceeding under Section 73”, and the order, its culmination, were both proceedings on an extinguished claim (¶15).
The reasoning is orthodox, but two observations are in order. The Court takes its account of Ghanashyam Mishra and Vaibhav Goel from the parties’ submissions and the Department’s concession rather than analysing either text, so the judgment is a secondary source on how far they go. And Vaibhav Goel, as described, concerns income tax. The extension to GST rests on the breadth of Section 31(1), which speaks of dues “under any law for the time being in force”. That is a sound textual reading, but the judgment cites no earlier decision on the CGST Act.
3.2 The “cause of action arose after the moratorium” finding
The Order-in-Original had reasoned that the cause of action arose after the moratorium. The Court answered that the liability “relates to Financial Year 2021-22”, and that the portion relating to the months 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 (¶16).
This is the least explained step. Credit availed after the commencement date was availed by a debtor whose business continued during the process. The judgment treats such claims as ordinary pre-plan claims. It does not discuss whether a debt incurred during the process could be treated differently, for example as a cost of running the business during CIRP. The holding is therefore best read as authority for a period ending before the Effective Date where no claim was lodged, on admitted facts.
3.3 Assessment versus recovery, and Sundaresh Bhatt
The Department’s principal argument was that Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, (2023) 1 SCC 472 recognised a continuing power to assess during a moratorium while forbidding only recovery. The Court answered in four steps. It confined that decision to the period of a moratorium under Sections 14 and 33(5) in a liquidation, where liabilities are paid in the order of priority under Section 53 and are not extinguished (¶19). It observed that Sundaresh Bhatt itself described demand notices as “an initiation of legal proceedings against the corporate debtor”, and that Ghanashyam Mishra bars initiation or continuation of “any proceedings” for an extinguished claim (¶20). It held that the impugned order was no academic quantification: it confirmed a demand under Section 73(9), levied interest and penalty, and came with a DRC-07 summary which “on its own terms is a recoverable demand” (¶20). It concluded that the “distinction between adjudication and recovery cannot survive” (¶20).
The line between a plan-approval case and a moratorium case is principled. Before approval a claim exists and can be determined and lodged; after approval the question is whether any claim remains. The strongest ground is the DRC-07 point: an order that culminates in a recoverable demand cannot be recast as a finding only. The weaker element is the Court’s reliance on what Ghanashyam Mishra bars, which is stated without quotation.
The Court also held Section 88 of the CGST Act, concerning liability of a company in liquidation, inapplicable: the petitioner was never wound up, and Section 88 “presupposes a subsisting tax liability and cannot revive one extinguished under Section 31(1)”. It answered Sections 73 and 75 the same way: a general power of adjudication, exercised on a claim the IBC has extinguished, is “directly inconsistent” with Section 31(1) (¶21). That is the right approach to Section 238 of the IBC. The inconsistency lies between the power exercised and the statutory effect of the plan, not between two statutes in the abstract.
3.4 The plan, the Board’s instructions and comity
Three supporting points appear. Clause 3.2.9 itself provided for extinguishment, and the plan “binds the respondents contractually as well as statutorily” (¶17). The Court relied on Circular No. 134/04/2020-GST dated 23 March 2020, which, as the judgment records, contemplates that pre-commencement dues be claimed before the Adjudicating Authority or Resolution Professional, and on Instruction No. 1083/02/2022-CX8 dated 23 May 2022, a standard operating procedure recording that unsubmitted or belated claims stand extinguished on approval. The impugned order adverted to neither, and “Departmental adjudicating officers cannot ignore instructions of the Board issued for the uniform administration of the Act” (¶22). Finally, other High Courts had set aside pre-approval demands against the same plan, and “consistency and judicial comity” pointed the same way (¶23). The first two points are strong, since a department that has recorded extinguishment in its own instructions is poorly placed to deny it. The third is supporting only: the judgment names none of those decisions, and comity is not precedent.
3.5 Maintainability despite the appellate remedy
The Court held that an appellate remedy under Section 107 of the CGST Act “is not an absolute bar to the exercise of writ jurisdiction where the authority has acted wholly without jurisdiction or in disregard of binding law”. The paragraph cites Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1 and Godrej Sara Lee Ltd. v. Excise and Taxation Officer, 2023 SCC OnLine SC 95, in language that reads as a record of the petitioner’s submission. It then states: “The facts are admitted. The question is one of pure law going to the root of the respondents’ authority to initiate the proceedings at all”. Relegating the petitioner to an appeal, with its attendant pre-deposit, “would serve no purpose” (¶24). The holding is tied to that combination: admitted facts, a pure question of law and a challenge to jurisdiction. It is unlikely to support a writ where extinguishment is itself disputed on the facts.
3.6 What was not decided, and critique
The Court found it unnecessary to examine the contention that no penalty could be imposed under Section 73 without a finding of fraud, wilful misstatement or suppression (¶25). The judgment does not examine limitation under Section 73, the merits of the credit allegation, or the entitlement to the credit. It reserves the position: “Nothing in this order shall be construed as an expression of opinion on the subsequent liability of the petitioner if any” (¶29).
In sum, the outcome follows the extinguishment line as the judgment records it, and the Department did not contest the binding force of Ghanashyam Mishra. The reasoning is firm on the text of Section 31(1), the DRC-07 point and the Board’s instructions. It is thinner on summarised authority, on the months after commencement, and on comity. As a single-Judge ruling, it may be tested on appeal, and other High Courts may approach GST specifically in their own way.
4. Practical Significance
For resolution applicants. The decision supports plan drafting that expressly addresses pre-Effective Date government claims, as Clause 3.2.9 did. Keep the approved plan, the Tribunal order and the public announcement on file for each GST registration of the corporate debtor, so that a notice for an earlier period can be answered with those documents at the first reply stage, as the petitioner did in its DRC-06 response.
For corporate debtors after approval. A notice for a pre-Effective Date period should not be answered on merits alone. Raise extinguishment in the reply to the show cause notice and have it recorded in the order. The interest notice here, for late GSTR-3B returns, stood on the same footing as the tax demand and fell with it.
For the Department. Pre-commencement claims must be lodged with the Resolution Professional within the process. An audit query issued more than two years after approval, on a pre-approval period, is exposed, and the assessment-versus-recovery distinction should not be relied on after approval. Instructions recording extinguishment will be read against the officer. The decision does not touch proceedings for post-Effective Date periods.
For credit claims. The Court did not hold that the credit was properly availed; it held that the claim to recover it had gone. Nothing in the decision relaxes the substantive conditions for input tax credit for a business that has not been through insolvency.
For choice of remedy. A writ is realistic where facts are admitted and the only question is whether the approved plan bars the proceeding, since the Court bypassed the Section 107 appeal and its pre-deposit on that footing (¶24). Where it is disputed whether a claim was in fact lodged, or the plan is ambiguous, a statutory appeal is the safer forum.
For litigation strategy. Plead precisely: the commencement date, the Effective Date, the tax period, the absence of a claim, the plan clause and the Board instructions. Separate pre-Effective Date and post-Effective Date periods in the prayer, since the Court reserved the latter, and keep the penalty-without-fraud point alive as an alternative ground.
5. Conclusion
Srei Equipment Finance is a clear application of the IBC’s extinguishment principle to a GST demand. Where the period lay wholly before approval of the plan and no claim had been lodged, the Calcutta High Court held that tax, interest and penalty had ceased to exist, and that a show cause notice, an order-in-original and an interest notice were all proceedings on an extinguished claim. It rejected the distinction between assessing and recovering, treated the DRC-07 summary as a recoverable demand, held Section 88 of the CGST Act inapplicable to a revived company, relied on the Board’s own circular and standard operating procedure, and declined to send the petitioner to the Section 107 appeal.
The decision is strongest on statutory text and the Department’s own instructions, and weakest on its treatment of the months after commencement and its reliance on summarised authority. It leaves penalty without fraud, limitation and the petitioner’s subsequent liability undecided.
For assessees, the lesson is to raise extinguishment early and document the plan and the absence of a claim. For the Department, it is to lodge claims within the process. The open question for both is how tax periods that straddle the commencement date will be treated.
Authorities and Legislation
Applied or relied on by the Court:
- Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531 — rationale of a “fresh slate” and the “hydra head” passage (¶13).
- Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 — Three-Judge Bench decision explaining the consequence of approval of a plan (¶¶12, 20); its binding force was not disputed by the Department (¶10).
- Vaibhav Goel v. Deputy Commissioner of Income Tax, (2025) 8 SCC 511 — demands for earlier periods raised after approval, with no claim lodged, stand extinguished (¶14).
- Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs, (2023) 1 SCC 472 — relied on by the Department; distinguished by the Court as a moratorium-in-liquidation decision (¶¶18–20).
- Circular No. 134/04/2020-GST dated 23 March 2020 and Instruction No. 1083/02/2022-CX8 dated 23 May 2022, as described in the judgment (¶22).
Cited by counsel only (recorded in the submissions and not separately analysed by the Court):
- By the petitioner: Principal Commissioner of Income Tax v. Monnet Ispat and Energy Ltd., (2018) 18 SCC 786; Ruchi Soya Industries Ltd. v. Union of India, (2022) 6 SCC 343; Commissioner of Sales Tax, Orissa v. SREI Equipment Finance Ltd., Civil Appeal Nos. 1436-1439 of 2010; Ultra Tech Cement Ltd. v. Union of India, WPA 2036 of 2020 (Calcutta High Court, 18 September 2026); Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1; Godrej Sara Lee Ltd. v. Excise and Taxation Officer, 2023 SCC OnLine SC 95.
- Decisions of the Karnataka, Gujarat, Bombay and Allahabad High Courts on the same plan, referred to without names (¶¶9, 23).
Legislation considered:
- Sections 14, 15, 31, 33(5), 53, 227, 238 and 239(2)(zk), Insolvency and Bankruptcy Code, 2016 — https://www.indiacode.nic.in/
- Sections 50, 73, 75, 82, 88 and 107, Central Goods and Services Tax Act, 2017 — https://www.indiacode.nic.in/
- Article 226, Constitution of India — https://www.indiacode.nic.in/
Case record:
- Srei Equipment Finance Limited v. Union of India and Ors., WPA No. 6268 of 2026, High Court at Calcutta (Appellate Side), 2026:CHC-AS:1689, heard on 1, 11, 18 and 25 September 2026 and delivered on 1 October 2026 — https://indiankanoon.org/doc/13608157/
This article is not legal advice and does not create an attorney–client relationship. Readers should verify the certified copy of the judgment and any subsequent clarificatory orders before relying on it, and consult a qualified advocate on the facts of their matter.