Whether GST Authorities can be impleaded as parties in proceedings under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 merely on the allegation of bogus invoices.

A gavel, a statue of Lady Justice, and a book labeled 'IBC' are displayed on a wooden surface, accompanied by text discussing the involvement of GST authorities in insolvency proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016.

ISSUE:
Whether GST Authorities can be impleaded as parties in proceedings under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 merely on the allegation of bogus invoices.

RULE:
There is no provision under the Central Goods and Services Tax Act, 2017 (CGST Act) or any rule made thereunder that mandates or allows the GST Authorities to be impleaded in Section 9 IBC proceedings merely on the allegation of tax fraud, bogus invoices, or ongoing investigation.

The CGST Act, 2017 functions independently of the IBC proceedings. Section 9 of the IBC governs initiation of Corporate Insolvency Resolution Process (CIRP) by an operational creditor upon default, and does not provide for joining any third party like tax authorities unless they are necessary or proper parties to the dispute.

Additionally, there is no provision under Section 9 of CGST Act, 2017 or Rule 142A (which deals with communication between authorities and taxpayer) suggesting mandatory participation of GST authorities in corporate debt resolution cases.

APPLICATION:
In the NCLT Allahabad case M/s Sunder Engineering Works v. Machinery Limited, the applicant sought to implead GST authorities alleging that invoices relied upon in the Section 9 petition were bogus. However, the respondent clarified that the GST investigations pertained to a different entity, and proper returns had already been filed.

The Tribunal observed that GST Authorities are independent statutory authorities and their role is limited to administering and enforcing GST laws. The mere existence of an investigation or allegation of fraudulent invoices does not make the GST department a necessary party to insolvency proceedings.

The Tribunal upheld the principle of separation of jurisdictions—GST proceedings are governed by the CGST Act, while insolvency matters are adjudicated under IBC by NCLT.

CONCLUSION:
Impleading GST Authorities in Section 9 IBC proceedings is not permissible merely due to the allegation of bogus invoices. The GST authorities are not necessary or proper parties in such proceedings as their role and jurisdiction are governed independently under the CGST Act, 2017.