The GSTAT Delhi in the case of DGAP v. Puma Realtors Pvt Ltd, [NAPA/84/PB/2025, order dated August 26, 2025], held that once a resolution plan is approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016, all claims and dues not included in the resolution plan stand extinguished, and consequently, the Resolution Applicant cannot be held liable for unquantified Input Tax Credit (ITC) benefits not passed on by the previous entity under Section 171 of the CGST Act, 2017. The anti-profiteering proceedings against Puma Realtors Pvt Ltd were therefore closed.
Facts:
Puma Realtors Pvt Ltd (“the Petitioner”) was subject to anti-profiteering proceedings initiated by the Director General of Anti-Profiteering (DGAP) for alleged failure to pass on ITC benefits to eligible recipients.
The DGAP (“the Respondent”) issued a Show Cause Notice and conducted investigations against Puma Realtors.
The Petitioner’s ownership was taken over by a new company, M/s One Group Developers Pvt Ltd, (the Resolution Applicant) following approval of a Resolution Plan under the IBC by the NCLT in June 2021.
The Petitioner contended that in view of the takeover and approval of the Resolution Plan, the pending claims including unquantified ITC benefits stood extinguished and the new owner could not be held liable for actions of the prior company.
The Respondent contended that the resolution plan’s approval does not absolve the Resolution Applicant from responsibility of passing on ITC benefits under the CGST Act.
Disputing this, the Petitioner approached the GST Appellate Authority under Section 171 of the CGST Act, 2017, seeking closure of the proceedings on account of the resolution plan approval under the IBC.
Issue:
Whether the approved Resolution Applicant under the IBC can be held accountable for passing on unquantified ITC benefits arising from the corporate debtor’s actions prior to the approval of the Resolution Plan, under Section 171 of the CGST Act, 2017?
Held:
The GSTAT Delhi in NAPA/84/PB/2025 held as under:
- Observed that, Section 238 of the IBC contains a non-obstante clause giving it overriding effect over inconsistent laws, including GST provisions.
- Noted the Supreme Court decision in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta and Ors. [MANU/SC/1577/2019], which held that all claims not submitted and decided during insolvency proceedings stand extinguished on approval of a resolution plan.
- Held that, claims and dues not included in the resolution plan approved by the NCLT stand frozen and extinguished.
- Noted that, the Resolution Applicant takes over the debtor on a “fresh slate” and cannot be burdened with “undecided” claims post-approval.
- Further noted that, unquantified ITC benefits not documented before the NCLT approval stand extinguished.
Our Comments:
This judgment aligns closely with the principles enunciated by the Supreme Court in the Essar Steel India Limited vs. Satish Kumar Gupta and Ors [MANU/SC/1577/2019] and in the case of Ghanashyam Mishra and Sons Pvt. Ltd. through Authorized Signatory v. Edelweiss Asset Reconstructions Company Ltd. through the Director [(2021) SSC On Line SC 313] which emphasize the sanctity of the resolution plan under the IBC, granting finality and preventing reopening of dues or claims not part of the plan. The overriding effect of Section 238 IBC ensures that insolvency proceedings prevail over other laws like the CGST Act in cases of conflict.
The Authority’s reasoning recognizes the “clean slate” doctrine inherent in insolvency resolution, shielding the Resolution Applicant from historic unquantified liabilities. This approach is consistent with the legislative intent to promote successful resolution and revival of corporate debtors without perpetual litigation risks.
Relevant Provisions:
Section 171, CGST Act, 2017:
“171. Antiprofiteering measure.-
(1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.
(2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him….”
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