Rs 8.1 lakh GST demand raised two years into liquidation: NCLAT says a late assessment does not reopen claims

Karnataka commercial tax officers assessed Doshion in February 2026 and filed their claim 896 days after the last date fixed by the liquidator. The Principal Bench holds that an assessment after the liquidation commencement date neither restarts the 30-day claim window nor excuses the silence since November 2023.

The National Company Law Appellate Tribunal has refused to let the Karnataka commercial taxes department bring a Rs 8,10,000 GST demand into the liquidation of Doshion Private Limited, a claim lodged 896 days after the last date for claims. The Principal Bench dismissed the appeal of the Deputy Commissioner of Commercial Taxes (Audit)-1, Mangaluru on 29 October 2026.

The judgment, authored by Naresh Salecha, Member (Technical), sitting with Justice Mohammad Faiz Alam Khan, Member (Judicial), holds that a tax authority may assess a corporate debtor in liquidation but must then claim within the time the Insolvency and Bankruptcy Code allows. An assessment order of February 2026 could not restart a claim window that closed in November 2023.

A water treatment firm and a missed date

Doshion Private Limited, registered in Ahmedabad, was in water treatment, industrial wastewater treatment and purification. It also did business in Mangaluru and was registered under the Central and Karnataka GST Acts. It entered the corporate insolvency resolution process (CIRP) on 31 August 2021.

The NCLT Ahmedabad bench ordered liquidation on 3 October 2023 and appointed Sumedha Management Solutions Private Limited as liquidator. The public announcement in Form B went out on 11 October 2023 and fixed 8 November 2023 as the last date for claims. It is undisputed that the department filed none by then.

The dues concern April 2019 to March 2020. On scrutiny, the department found that Doshion had paid IGST on works contract services under HSN 9954 although the place of supply was within Karnataka. That made them intra-State supplies attracting CGST and KGST instead.

The file moved slowly. The assessment was assigned to the Mangaluru audit office on 12 August 2024. An intimation in Form GST DRC-01A followed on 6 September 2025 and a show-cause notice in Form DRC-01 on 23 September 2025. The liquidator replied on 23 October and 14 November 2025 and told the department about the liquidation.

On 21 February 2026 the department passed an adjudication order under Section 74(9) read with Sections 50 and 122 of the GST Acts, fixing the liability at Rs 8,10,000, half CGST and half KGST. A rectification application filed on 26 February 2026 was rejected on 24 March 2026.

The claim the liquidator turned away

The department filed its proof of claim in Form C on 22 April 2026. The liquidator rejected it by email on 2 May 2026 as filed after the prescribed period.

Within fourteen days, on 15 May 2026, the department moved the NCLT under Section 60(5) read with Section 42 of the Code. It sought to set aside the rejection, condone a delay of 896 days counted from 8 November 2023, and have the claim verified and admitted.

The NCLT dismissed I.A. No. 800/AHM/2026 on 22 July 2026 for want of sufficient reasons. It also observed that the case was not one of delay in filing a claim that had crystallised at the commencement of liquidation, but of dues determined and becoming payable afterwards.

Before the appellate tribunal the department argued that the liability crystallised only on 21 February 2026, so the real delay was under 30 days. It said the NCLT had decided the application on a ground never raised in the rejection email.

It read Sundaresh Bhatt, Liquidator of ABG Shipyard v. Central Board of Indirect Taxes and Customs as letting revenue authorities assess during liquidation and then claim through the liquidator. The claim, it said, had followed promptly once the liability was determined.

It relied on N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123, for the proposition that the length of delay is not decisive, and on Bank of India v. Pacific Pipe Systems, where the NCLT Ahmedabad condoned a late provident fund claim. It sought no priority, only verification and a place in the Section 53 waterfall.

An earlier application by the same department, I.A. No. 680/AHM/2025, concerning a separate Section 73 proceeding for the same year, was dismissed on 21 November 2025. Its appeal, Company Appeal (AT) (Ins.) No. 681 of 2026, is pending, and the bench said nothing in this judgment touches it.

On 8 October 2026 both sides agreed that the appeal be decided at the admission stage without a reply. Janak Purohit appeared for the department and Kunal Vaishnav for the liquidator.

What ABG Shipyard did and did not decide

The bench framed four questions at paragraph 42, the first two being these:

One, whether a claim based on the order dated 21.02.2026 can be admitted in a liquidation that began on 03.10.2023. Two, whether the delay of 896 days deserves to be condoned. (para 42)

The others were whether ABG Shipyard helped the department, and whether the remaining objections taken by the parties called for a decision.

The bench set out the scheme. Section 38(1) requires the liquidator to receive claims within thirty days of the liquidation commencement date. Regulations 12 and 16 of the Liquidation Process Regulations fix the last date at thirty days and require claims as on the commencement date, and Regulation 30 gives the liquidator thirty days to verify them.

Section 42 allows a creditor to appeal to the NCLT within fourteen days of the liquidator's decision. Both ends of the process carry short, fixed limits, and the Code does this on purpose, the bench said, so that the list of stakeholders is settled early and distribution can follow.

The Regulations give the liquidator no power to accept a claim after the last date, which the department accepted. The liquidator was therefore right to reject it. The real question was what the NCLT, and now the appellate tribunal, could do about it.

Section 3(6) treats a right to payment as a claim whether or not it is fixed, disputed or reduced to judgment. Section 5(21) makes dues to a State Government an operational debt.

The tax authority is therefore an operational creditor like any other. Its dues have a place in the Section 53 waterfall, but only if they come in through the process the Code lays down.

Section 42 is a remedy against the liquidator's decision; it does not create a fresh right to file a claim the Regulations have closed. Section 60(5) is wide, but it is a power to do justice within the Code, not to rewrite its time limits.

Section 238A did not help either. The Section 42 application was in time; the difficulty was the claim itself, and the Limitation Act fixes no period for filing a claim before a liquidator.

As for ABG Shipyard, the Supreme Court there held that demand notices issued during the moratorium violate the Code and, relying on S.V. Kondaskar v. V.M. Deshpande, drew a line between assessment and recovery. The bench summed it up at paragraph 51: “The authority may assess during the moratorium, but it may not recover.”

And once it has assessed, it must claim within the time the Code allows. The judgment does not say that the time for filing a claim starts afresh on the date of assessment. If it did, the bench observed, a tax authority would have no time limit at all.

Two ways to see the claim, both fatal

The department's answer to the delay was that its liability was fixed only on 21 February 2026. The bench saw two ways of looking at that, and the department failed on both.

On the first view the claim existed from the tax period itself. Doshion's liability for 2019-20 arose from its supplies in that year; it was unquantified, but Section 3(6) says a right to payment is a claim even when not fixed. The department could have filed it by 8 November 2023 with the particulars it had.

The assignment of 12 August 2024 only showed when the department chose to look at these returns. A tax authority's own delay in scrutinising returns cannot be passed on to a liquidation running on public notice. On this view the claim is simply 896 days late.

On the second view, the department's own, the liability came into existence on 21 February 2026, more than two years after liquidation began. The tribunal has held more than once that Regulations 12 and 16 contemplate claims as on the commencement date and that a claim arising later cannot be admitted, including claims founded on later assessment orders.

The bench did not choose between the two views. On the first the claim is late with no good reason shown; on the second it lies outside Regulations 12 and 16 whatever the reason. Either way, the department could not succeed.

The argument that Section 73 and Section 74 proceedings differ, drawn from the Delhi High Court in PEI Industries v. Union of India, changed nothing. The time for filing a claim in liquidation is fixed by the Code and the Regulations, not by the GST Acts, and the kind of GST proceeding does not move the last date.

Even assuming the NCLT could condone delay under Section 60(5) read with Section 42, the bench said, that power needs sufficient cause and no harm to the time-bound working of the liquidation. A claimant 896 days late is asking for a large exception to a scheme built on short periods and must show strong reasons.

The crystallisation story explained at most the period after 21 February 2026; the claim came 29 days after the rectification rejection of 24 March 2026. It said nothing about 8 November 2023 to 21 February 2026, more than two years and three months. For that period there was no explanation at all.

Nor could the department plead ignorance. The public announcement was made on 11 October 2023, it had filed I.A. No. 680 in the same company petition by 2025, and the liquidator told it about the liquidation in October and November 2025. Waiting for the adjudication to finish was its own choice, since a disputed or unquantified claim can be filed.

Small sum, same test

Doshion has been in liquidation for three years and the process has run on the claims received by 8 November 2023. Admitting a claim now would force the liquidator to reopen verification and revise the list of stakeholders, and distribution may be affected. That is the harm the time limits exist to prevent.

“The amount is small, but the test is not the amount.” If this claim were let in, the bench said at paragraph 61, other late claimants would ask for the same, and that is not the intention of the Code.

A statutory creditor stands in the same line as other operational creditors, and Section 53 does not put the State ahead merely because it is the State. Letting it in three years late, on a liability that did not exist when the list was made, would treat it better than every creditor who obeyed the timelines.

Being a statutory authority gives the department no longer period. It has its own records of registered persons and access to public notices, and ABG Shipyard itself requires such authorities to follow the time periods in the Code strictly. Government dues find their place in Section 53, but only through the claims process.

Order

The appeal was dismissed. The NCLT was right to dismiss the application, and the liquidator's rejection of 2 May 2026 could not be faulted. The claim came 896 days after the last date, the liquidator had no power to accept it, and no sufficient cause was shown for condonation.

A claim founded on a liability fixed after the liquidation commencement date does not fit the scheme of Regulations 12 and 16, the bench held. There was no order as to costs, and all pending interlocutory applications stand closed.