The Delhi High Court is set to examine whether a company undergoing liquidation under the Insolvency and Bankruptcy Code, 2016 (IBC) can seek exemption from the mandatory pre-deposit required to maintain a GST appeal, on the ground that using liquidation funds for the deposit would conflict with the statutory distribution mechanism under the IBC.
The Bench of Justice Anil Kshetarpal and Justice Bharat Parashar sought the assistance of Additional Solicitor General Raghavendra Shankar to examine the interaction between Section 107(6) of the Central Goods and Services Tax Act, 2017, and the liquidation framework under the IBC, particularly Section 53.
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According to the petition, the company has been undergoing liquidation pursuant to an order passed by the National Company Law Tribunal, New Delhi, on September 20, 2018. Its assets have been realised during the liquidation proceedings, and the proceeds are required to be administered in accordance with the statutory waterfall mechanism prescribed under Section 53 of the IBC.
The company challenged an order dated September 23, 2025, confirming a substantial GST demand along with penalty. It instituted a statutory appeal under Section 107 of the CGST Act.
However, the petitioner submitted that the tax authorities had declined to entertain the appeal without compliance with the pre-deposit requirement under Section 107(6). It relied on notices dated March 16, 2026, and April 9, 2026, requiring the deposit and stating that, in its absence, the appeal would be treated as not filed.
The High Court’s order does not specify the amount of the disputed demand or the pre-deposit sought.
The principal argument advanced by the company was that, once liquidation begins, its assets and realisation proceeds must be administered and distributed in accordance with the IBC.
The petitioner contended that requiring the liquidator to make a pre-deposit from the liquidation estate, as a condition for consideration of the GST appeal, would divert funds towards a disputed statutory claim outside the distribution mechanism under Section 53.
According to the petitioner, this would effectively accord preferential treatment to the tax authority. Its objection was therefore directed at the use of liquidation funds to satisfy an appellate condition before the disputed tax liability had attained finality.
The Bench observed that the submissions raised a substantial question concerning the interaction between the GST appellate mechanism and the statutory obligations of a liquidator under the IBC.
It considered the issue deserving of examination, particularly because compliance with the pre-deposit requirement would involve using funds forming part of the liquidation estate while the tax liability remained under challenge in statutory appellate proceedings.
The dispute consequently places two statutory requirements before the court: the pre-deposit condition for maintaining a GST appeal and the obligation to administer liquidation proceeds within the framework of the IBC.
Having regard to the nature and importance of the issue, the court requested Additional Solicitor General Raghavendra Shankar, who was present in court, to assist the Bench.
The assistance sought specifically concerns the interplay between Section 107(6) of the CGST Act and the relevant provisions of the IBC, including the effect, if any, of Section 53 on the statutory pre-deposit requirement.
The October 9 order does not grant a waiver of the pre-deposit requirement or finally decide whether liquidation under the IBC entitles a company to such relief. It identifies the legal question for consideration and seeks assistance before further examination.
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