GST Anti-Profiteering Proceedings Unsustainable Post IBC Resolution: GSTAT Sets Aside DGAP Notice u/s 171(1) [Read Order]
The GSTAT concluded that any claim arising from alleged profiteering or unpassed benefits of ITC prior to the IBC resolution cannot be revived or enforced.
GST Anti-Profiteering Proceedings - Post IBC Resolution - GSTAT - DGAP Notice - taxscan
GST Anti-Profiteering Proceedings - Post IBC Resolution - GSTAT - DGAP Notice - taxscan
The GST Appellate Tribunal ( GSTAT ), Principal Bench, New Delhi, has set aside the notice issued by the Directorate General of Anti-Profiteering (DGAP), observing that anti-profiteering proceedings cannot continue once a company has undergone insolvency and its resolution plan has been approved under the Insolvency and Bankruptcy Code (IBC).
DGAP conducted an investigation into alleged profiteering by Puma Realtors in relation to benefits arising from input tax credit (ITC) under the GST Act.
However, during the proceedings, it was brought to the Tribunal’s notice that the company had been declared insolvent and its ownership and liabilities had been taken over by One Group Developers Pvt. Ltd. on 1 June 2021, after the approval of a resolution plan by the National Company Law Tribunal (NCLT), Delhi.
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The Tribunal, noting the resolution, directed the DGAP to obtain a legal opinion on whether anti-profiteering claims under Section 171 of the CGST Act, 2017 could still be pursued after the IBC resolution process.
The Principal Director General of DGAP sought a written opinion from Senior Standing Counsel Shri Zoheb Hossain, who clarified that under Section 238 of the IBC, its provisions have an overriding effect over all other laws, including the GST Act.
The counsel quoting important decisions of the Supreme Court confirmed that once a resolution plan is approved by the NCLT, all prior claims or proceedings not included in the plan stand extinguished including statutory dues owed to government authorities.
The GSTAT, depending on the cases precedents quoted by the counsels, concluded that any claim arising from alleged profiteering or unpassed benefits of ITC prior to the IBC resolution cannot be revived or enforced.
The Tribunal noted that the approved resolution plan had no mention of anti-profiteering liabilities, meaning such claims stood legally extinguished.
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Justice (Retd.) Dr. Sanjaya Kumar Mishra said that “Therefore, the NAA’s claim would stand extinguished as it was not included in the Resolution plan approved by the Adjudicating Authority vide Order dated 01.06.2021.”
Accordingly, the bench accepted the DGAP’s submission and set aside the show-cause notice, holding that the continuation of anti-profiteering proceedings post-IBC resolution would be legally unsustainable.
The proceedings under Section 171 of the CGST Act were closed accordingly.
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