NCLT Mumbai Rules, Loss of ITC Due To Corporate Debtor's Default In GST Filing Is Not Operational Debt
Pranav B Prem
The National Company Law Tribunal (NCLT), Mumbai Bench has held that the loss of Input Tax Credit (ITC) caused to a service recipient due to the corporate debtor’s failure to file GST returns does not constitute an operational debt. The Tribunal clarified that where the GST Department has already filed its own claim during liquidation, operational creditors cannot file a separate GST-linked claim for the same liability.
A Bench of Judicial Member Mohan Prasad Tiwari and Technical Member Charanjeet Singh Gulati dismissed the appeal filed by Instakart Services Pvt. Ltd. challenging the rejection of its claim in the liquidation of TopsGrup Services and Solutions Limited. The Tribunal recorded that once the GST authority had lodged its claim and it was duly admitted by the liquidator, Instakart could not revive the same liability as a separate operational debt. The Bench reiterated that the statutory duty to remit GST lies solely with the supplier of goods or services, and failure to deposit GST with the government is a matter strictly between the supplier and the tax department.
Instakart had entered into a long-standing service agreement under which the corporate debtor provided security and guarding services. Instakart argued that between July 2017 and August 2019, the corporate debtor failed to file GSTR-1 returns correctly for several invoices, preventing Instakart from availing input tax credit amounting to over ₹80 lakh. Instakart further claimed that it became aware of the liquidation only after the deadline for filing claims and filed its Form G with an 11-day delay. It submitted that due to the corporate debtor’s default, the GST burden wrongfully shifted onto it and that the liquidator ignored repeated follow-up requests.
The liquidator opposed the claim on multiple grounds, including delay in filing, incomplete documentation, and absence of supporting records despite repeated communications. The liquidator pointed out that the GST Department had already lodged its own claim of ₹17.69 crore, which had been admitted, and therefore no parallel claim could be entertained from Instakart in respect of GST liability. It was also emphasised that Instakart itself had acknowledged in an email dated 17 June 2021 that it owed nearly ₹41 lakh to the corporate debtor.
The Tribunal agreed with the liquidator’s reasoning. It found that the late claim was incomplete and that Instakart did not provide the mandatory supporting documents sought by the liquidator. It further noted that the liquidation had substantially progressed and that the assets of the corporate debtor had already been sold as a going concern. The Bench underscored that any failure by the corporate debtor to file GST returns was a matter for the GST Department to address directly, including through recovery proceedings or penalty action under the GST laws.
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The Tribunal held that Instakart, as a service recipient, could not convert its loss of ITC into an operational debt when the GST authority had already asserted its statutory claim. It concluded that “the claim filed by the Appellant for ₹86,60,659/- towards GST liability arising from the corporate debtor’s default cannot be admitted” and that there was “no justification for the Appellant to file a separate claim before the Liquidator towards the GST liability of the Corporate Debtor.” Finding no error in the rejection of Instakart’s claim, the Tribunal dismissed the appeal and upheld the liquidator’s decision. No order as to costs was passed.
Appearance
For Appellant: Aditya Mehta, Vrigil Breganza, Advocates
For Respondent: Prakash Shinde, Niyati Merchant, Advocates
Cause Title: Instakart Services Private Limited vs Mr. Anshul Gupta
Case No: IA No. 294/2024 in CP(IB)/1088(MB)/2020
Coram: Judicial Member Mohan Prasad Tiwari, Technical Member Charanjeet Singh Gulati
