Maligi Madhusudhana Reddy (RP) Vs. Joint Commissioner, Central Goods and Services Tax - The determination of liabilities and imposition of penalties against the Corporate Debtor during the subsistence of the moratorium clearly amounts to continuation of proceedings against the Corporate Debtor, which is impermissible in view of the statutory bar contained in Section 14 of the Code.

  NCLT Hyd. (2026.03.18) in Maligi Madhusudhana Reddy (RP) Vs. Joint Commissioner, Central Goods and Services Tax [(2026) ibclaw.in 860 NCLT, IA(IBC) 456/2025 in CP(IB) No. 69/9/HDB/2023] held that;- 

• No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP.”

• The determination of liabilities and imposition of penalties against the Corporate Debtor during the subsistence of the moratorium clearly amounts to continuation of proceedings against the Corporate Debtor, which is impermissible in view of the statutory bar contained in Section 14 of the Code.

Excerpts of the Order;

# 1. The present application is filed by Maligi Madhusudhana Reddy1, Resolution Professional of M/s. Naoline Infrastructure Private Limited2 against the Joint Commissioner,Central Goods and Services Tax 3 Under section 60(5) read with section 14 of the Insolvency and Bankruptcy Code4, 2016, inter alia, seeking to set aside the Order in Original No. PUN-CGST-001/JC-VGM203/2024-25 dated 03-02-2025 passed by the Joint Commissioner, Central Goods and Services Tax, Office of the Principal Commissioner of Central Goods & Service Tax and Central Excise, Pune-I on the Corporate Debtor.

Brief Submissions of the Applicant:

# 2. It is submitted that this Tribunal, vide order dated 04.06.2024 in C.P. (IB) No. 69/9/HDB/2023, admitted the Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) and appointed Mr. Pankaj Bhattad as the Interim Resolution Professional (IRP). Subsequently, on an application filed in I.A. (IBC) No. 1523 of 2024, this Tribunal, vide order dated 23.07.2024, replaced the IRP and appointed the present Applicant as the Resolution Professional to conduct the CIRP of the Corporate Debtor.

# 3. The Applicant submits that, in response to the Public Announcement in Form ‘A’ issued by the Interim Resolution Professional on 06.06.2024, inviting claims from creditors, the Respondent filed its claim in Form ‘B’ on 03.09.2024, claiming an amount of Rs. 8,53,86,361/- against the Corporate Debtor on the basis of Show Cause Notice No. 13/2023-24 (GST) dated 29.08.2023.

# 4. It is submitted that the Applicant communicated the non-admission of the said claim, stating that there was no crystallized demand order establishing the liability prior to the commencement of CIRP of the Corporate Debtor.

# 5. The Applicant further submits that the Respondent thereafter issued a notice for final personal hearing dated 10.09.2024. In response, the Applicant submitted a detailed reply informing the Respondent that the Corporate Debtor was undergoing CIRP and that moratorium had been declared by this Tribunal, thereby prohibiting the institution or continuation of any proceedings against the Corporate Debtor.

# 6. It is submitted that the Respondent subsequently issued another notice dated 03.01.2025, fixing a personal hearing on 09.01.2025 through video conferencing. The Applicant once again submitted a reply reiterating that, in view of the moratorium declared under Section 14 of the Code, continuation of any proceedings against the Corporate Debtor was impermissible.

# 7. The Applicant submits that, despite the above submissions, the Respondent issued another notice dated 13.01.2025, fixing a personal hearing on 16.01.2025. The Applicant again submitted a detailed reply reiterating the subsistence of the moratorium and requested the Respondent to keep the proceedings in abeyance till the moratorium was lifted.

# 8. It is further submitted that the Respondent continued to issue further notices dated 17.01.2025 and 22.01.2025, fixing hearings on 21.01.2025 and 27.01.2025 respectively. The Applicant states that he attended the hearing held on 27.01.2025 through video conferencing and reiterated that the Corporate Debtor was undergoing CIRP and that the moratorium under the Code was in force.

# 9. The Applicant submits that, notwithstanding the repeated submissions regarding the moratorium, the Respondent proceeded to pass Order-in-Original No. PUN-CGST-001/JC-VGM-203/2024-25 dated 03.02.2025, holding that the Corporate Debtor had availed ineligible Input Tax Credit of Rs. 8,53,86,361/-, and further imposed penalties including (i) penalty of Rs. 8,53,86,361/- for availment of ITC without receipt of goods or services, (ii) penalty of Rs. 5,87,07,682/- for issuance of invoices without underlying supply, and (iii) penalty of Rs. 50,000/- for contravention of provisions of the CGST/SGST Act, 2017.

# 10. It is submitted that the Applicant thereafter addressed a reply to the said Order-in-Original, reiterating that during the currency of the moratorium, no proceedings could be continued against the Corporate Debtor.

# 11. The Applicant contends that the impugned order has been passed during the subsistence of the moratorium declared under Section 14 of the Insolvency and Bankruptcy Code, 2016, and is therefore illegal and unsustainable in law, as the provisions of the Code override other legislations in relation to the prohibition or continuation of proceedings against the Corporate Debtor.

# 12. Accordingly, the Applicant has approached this Tribunal seeking setting aside of the Order-in-Original dated 03.02.2025 passed by the Respondent.

Respondent:

# 13. It is noted that the Respondent–Assistant Commissioner of Income Tax was duly served with notice on 20.03.2025. However, despite service of notice, the Respondent failed to appear before this Tribunal on 02-04-2025, and remained absent on the subsequent hearing dates.

Findings and Decision:

# 14. We have heard Mr. Maligi Madhusudhana Reddy, Resolution Professional/Applicant, and perused the material available on record.

# 15. On perusal of the record, we observe that this Tribunal, vide order dated 04.06.2024 admitted the Corporate Debtor into Corporate Insolvency Resolution Process (CIRP) and consequently the moratorium under Section 14 of the Code came into force.

# 16. We further observe that the Respondent had issued a Show Cause Notice dated 29.08.2023 to the Corporate Debtor prior to the commencement of CIRP. After initiation of CIRP on 04.06.2024, the Respondent filed a claim in Form-B on 03.09.2024 before the Resolution Professional on the basis of the said Show Cause Notice.

# 17. However, the Applicant did not admit the claim as no final adjudicated order determining the liability of the Corporate Debtor existed as on the insolvency commencement date.

# 18. It is further observed that the Resolution Professional, through various communications, informed the Respondent that the Corporate Debtor was undergoing CIRP and that moratorium under Section 14 was in force. Despite the same, the Respondent continued with the adjudication proceedings and issued multiple notices fixing personal hearings.

# 19. Ultimately, the Respondent proceeded to pass Order-in-Original No5. PUN-CGST-001/JC-VGM-203/2024-25 dated 03.02.2025, determining tax liability and imposing penalties against the Corporate Debtor.

# 20. In this context, the Hon’ble NCLAT in Employees’ Provident Fund v. Jaykumar Pesumal Arlani (RP), (2025) ibclaw.in 10 NCLAT, has categorically held that once moratorium under Section 14(1) comes into effect, no assessment proceedings can be continued, and any claim arising out of an assessment carried out during the moratorium period cannot be pressed in the CIRP. The relevant para is extracted below:

• “24. In view of the aforesaid, we answer Question Nos.(1) and (2) in following manner:

• (1) We hold that after initiation of moratorium under Section 14, sub-section (1), no assessment proceedings can be continued by the EPFO. If after an order of liquidation is passed, Section 33, sub-section(5), does not prohibit initiation or continuation of assessment proceedings.

• (2) No claim on the basis of assessment carried during the moratorium period, which is prohibited under Section 14(1) can be pressed in the CIRP.”

# 21. Similarly, the Hon’ble NCLAT in CA Pankaj Shah v. Employee Provident Fund Organisation (EPFO) and Anr., (2025) ibclaw.in 699 NCLAT, has held that demands arising from assessments conducted during the moratorium period are not enforceable against the Corporate Debtor. The relevant portion reads as under:

• “11. Insofar as the application filed by the Resolution Professional being IA No.5 of 2024, the prayer was to seek a declaration that demand made under Section 7A, 7Q & 14B are not enforceable against the Corporate Debtor. In view of the law as laid down by this Tribunal, Resolution Professional has made out a case for issuing a direction that the said demand was unenforceable which arose on the basis of assessment made during the Moratorium. We having taken the view that the demand made by the EPFO on the basis of inspection report dated 10.05.2023 and assessment dated 25.05.2023 was not enforceable and the prayer made by the EPFO in IA No.409 of 2024 was not acceptable. It is not necessary to consider other submissions raised by EPFO challenging the direction issued by Adjudicating Authority directing the EPFO to give name of the employees with determination. We are satisfied that the order of the Adjudicating Authority passed in IA No.5 of 2024 as well as IA No.409 of 2024 is unsustainable. We do not see any necessity to consider any other submissions raised by the parties.”

# 22. In the present case, the Applicant has approached this Tribunal seeking to set aside the Order-in-Original No. PUN-CGST-001/JC-VGM-203/2024-25 dated 03.02.2025 passed by the Respondent. From the record, it is evident that the said Order-in-Original was passed during the period when the moratorium declared by this Tribunal under Section 14 of the Code was in force.

# 23. The determination of liabilities and imposition of penalties against the Corporate Debtor during the subsistence of the moratorium clearly amounts to continuation of proceedings against the Corporate Debtor, which is impermissible in view of the statutory bar contained in Section 14 of the Code.

# 24. In light of the above settled position of law, the Order-in-Original No. PUN-CGST-001/JC-VGM-203/2024-25 dated 03.02.2025 passed by the Respondent against the Corporate Debtor during the subsistence of the moratorium is not enforceable.

Accordingly, the IA(IBC) 456/2025 in CP(IB) No. 69/9/HDB/2023 is allowed and disposed of.

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