Once Resolution Plan has approved by NCLT Commercial Tax Department cannot create further dues: Allahabad HC [Read Order]

In a recent case, the Allahabad High Court quashed the passed under section 28(2) (ii) of the U.P. VAT Act 2008 and under section 9(4) of the U.P. Tax on Entry of Goods Act 2007 demanding tax, holding that once the Resolution Plan has been approved by the NCLT, the Commercial Tax Department cannot create further dues.

Tehri Iron And Steel Casting Limited , the writ petitioners have sought for the issue a writ order or direction in the nature of Certiorari calling for the record and to quash the Impugned Orders dated 15.12.2022 passed under section 28(2) (ii) of the U.P. VAT Act 2008, under section 9(4) of The U.P. Tax on Entry of Goods Act 2007 and the order under section 12(3) of The U.P. Tax on Entry of Goods Act 2007.

The case of the petitioner is that the petitioner went into a Corporate Insolvency Resolution Process ( CIRP), on May 31, 2018. A Resolution Professional was appointed on the same day and thereafter proceedings continued before the National Company Law Tribunal (NCLT). As per the procedure, the creditors were asked to submit their claims before the Resolution Professional.

The specific notice was also sent to the Commercial Tax Department, U.P. by the Resolution Professional of the petitioner. The impugned orders, with regard to the Assessment Year 2012-13 was passed on December 15, 2022 and February 8, 2023. On May 21, 2019, the Resolution Plan was approved by the NCLT.

Counsel appearing on behalf of the petitioners, to buttress his argument that once the Resolution Plan has been approved by the NCLT, the Commercial Tax Department cannot create further dues by way of passing orders, has relied upon judgment in Ghanshyam Mishra and Sons (P) Ltd. Vs. Edelweiss Asset Reconstruction Co. Ltd., reported in [SC] [2021].

The Supreme Court in Vaibhav Goyal & Another Vs. Deputy Commissioner of Income Tax & Another (2025), it was held that “Once the Resolution Plan is approved by the NCLT, no belated claim can be included therein that was not made earlier. If such demands are taken into consideration, the appellants will not be in a position to recommence the business of the CD on a clean slate.”

In view of the above law laid down by the Supreme Court, the division bench of Justice Shekhar B. Saraf and Justice Praveen Kumar Giri viewed that the principle is crystal clear that once the Resolution Plan has been approved by the NCLT, all other creditors are barred from raising their claims subsequently, as the same would disrupt the entire resolution process.

These impugned Orders passed under Sections 28(2)(ii) of the U.P. Vat Act, 2008, Sections 9(4) and 12(3) of U.P. Tax on Entry of Goods Act, 2007, respectively as well as demand notice dated February 8, 2023 passed by respondent No.3 against the petitioner relating to financial year 2012-2013, are quashed and allowed the petition.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates