The Punjab and Haryana High Court has quashed GST demands totalling approximately ₹1.62 crore against the assessee and another petitioner for financial years preceding the initiation of the Corporate Insolvency Resolution Process (CIRP).
The bench of Acting Chief Justice Ashwani Kumar Mishra and Justice Rajesh Gaur applied the Supreme Court’s ruling in Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd.
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The bench left undisturbed a separate demand pertaining to financial year 2023–24, which related to a period after the conclusion of the CIRP proceedings and was not otherwise challenged by the petitioners.
The writ petition was filed challenging demands raised by the GST department.
The Court divided the disputed demands into two categories based on their relationship with the insolvency proceedings.
The first category comprised a demand of ₹1,60,82,836 for financial year 2019–20 and another demand of ₹1,27,012 for financial year 2021–22. Together, these amounted to ₹1,62,09,848. The Court recorded that both demands related to periods before the initiation of CIRP.
The second category concerned a substantially smaller demand for financial year 2023–24, relating to a period after the finalisation of the insolvency resolution proceedings.
This distinction formed the basis of the Court’s decision to grant relief against the earlier demands while leaving the later demand unaffected.
The central issue was whether the demands relating to periods before the initiation of CIRP were covered by the Supreme Court’s decision in Ghanashyam Mishra, and whether the same ruling could apply to a demand arising for a period after the insolvency proceedings had concluded.
The High Court recorded that counsel for both sides agreed that the demands for financial years 2019–20 and 2021–22 stood covered by the Supreme Court’s judgment.
The Bench accordingly treated those demands separately from the liability relating to financial year 2023–24.
In considering the demands for the two earlier financial years, the High Court relied on Ghanashyam Mishra and Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd., reported in (2021) 9 SCC 657.
The Court noted that the demands preceded the initiation of CIRP and that the parties were in agreement about the applicability of the Supreme Court’s ruling.
On that basis, it partly allowed the writ petition and quashed the demands for financial years 2019–20 and 2021–22.
The order also clarified that the components of interest, penalty and other related amounts would be appropriated in the same proportion. The relief therefore extended to the corresponding treatment of these ancillary components.
The Court took a different view of the demand for financial year 2023–24 because it related to a period subsequent to the CIRP proceedings.
The Bench expressly recorded that this demand did not fall within the ambit of the Supreme Court ruling relied upon for the earlier demands.
Counsel for the petitioners also stated that the demand for financial year 2023–24 was otherwise not questioned. Consequently, the Court did not adjudicate its substantive correctness and left it undisturbed.
The order contains a minor numerical inconsistency: paragraph 1 records this demand as ₹35,848, while paragraph 2 records it as ₹35,844. The difference does not affect the Court’s distinction between the earlier demands and the post-CIRP demand.
The High Court’s relief was confined to the demands for financial years 2019–20 and 2021–22, which it identified as preceding the initiation of CIRP.
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