Facts of the Case

The petitioner, Patanjali Foods Limited, challenged the order-in-original dated 21.01.2025 along with corrigendum dated 03.02.2025 passed for Financial Year 2017-18 by the Assistant Commissioner, CGST, Narela Division. The petitioner is the successor entity of Ruchi Soya Industries Ltd., which underwent corporate insolvency resolution proceedings before the NCLT, Mumbai Bench. A resolution plan submitted by a consortium led by Patanjali Ayurved Limited was approved by the NCLT on 24.07.2019 with certain conditions and was finally approved on 04.09.2019, pursuant to which the company was taken over on a clean slate basis and renamed as Patanjali Foods Limited. Subsequent audits culminated in a show cause notice dated 18.06.2024 and demands were raised covering periods from 2017-18 onwards, including periods prior to approval of the resolution plan.

Issues Involved

Whether GST demands pertaining to periods prior to approval of the resolution plan could be raised after takeover of the corporate debtor on a clean slate basis, whether the effective date of approval of the resolution plan was 24.07.2019 or 04.09.2019, and whether statutory dues not forming part of the approved resolution plan stood extinguished under Section 31 of the Insolvency and Bankruptcy Code, 2016.

Petitioner’s Arguments

The petitioner contended that once the resolution plan was approved and implemented on a clean slate basis, no statutory demands relating to periods prior to approval could survive. Reliance was placed on the Supreme Court judgment in Ghanashyam Mishra & Sons (P) Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd., which held that all claims not forming part of the approved resolution plan stand extinguished. It was further argued that the final approval of the resolution plan occurred on 04.09.2019 and not on 24.07.2019, as the earlier order was conditional and subject to further compliance.

Respondent’s Arguments

The Revenue contended that the resolution plan stood approved on 24.07.2019 under Section 31(1) of the IBC and that the demands raised were valid. Reliance was placed on records including references on the IBBI website and proceedings before the NCLAT to contend that the approval date should be taken as 24.07.2019.

Court Order / Findings

The Delhi High Court examined the orders dated 24.07.2019 and 04.09.2019 passed by the NCLT, Mumbai Bench and held that while the resolution plan was conditionally approved on 24.07.2019, final approval was granted only on 04.09.2019 after compliance with directions relating to source of funds and other conditions. Relying on decisions of the Andhra Pradesh High Court and the Bombay High Court in cases involving the petitioner itself, and applying the law laid down by the Supreme Court in Ghanashyam Mishra & Sons, the Court held that all GST demands relating to periods prior to 04.09.2019 stood extinguished. Consequently, the impugned order raising demands for such periods was held to be unsustainable.

Important Clarification

The Court clarified that while demands for periods prior to 04.09.2019 are barred, the GST authorities are at liberty to issue a fresh show cause notice for periods subsequent to approval of the resolution plan. It was further clarified that the period during which the writ petition remained pending shall be excluded for the purpose of computing limitation, and any fresh notice issued by 15.02.2026 shall be treated as within limitation.

Final Outcome

The writ petition was allowed. The impugned order raising GST demands for periods prior to 04.09.2019 was set aside. The respondents were granted liberty to issue a fresh show cause notice for the period after 04.09.2019, to be adjudicated in accordance with law, subject to the directions on limitation issued by the Court.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/75411122025CW57842025_172036.pdf

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