SC quashes tax demand notice against JSW Steel in Monnet Ispat & Energy insolvency case

In a significant ruling, the Supreme Court of India has quashed tax demand notices issued by the State of Chhattisgarh against JSW Ispat Special Products Ltd (now JSW Steel Ltd.). The bench, comprising Justice BR Gavai and Justice AG Masih, allowed the contempt petition filed by JSW Steel, setting aside demands totaling approximately ₹4.36 crore under various tax statutes.​

The controversy originated in 2017 when insolvency proceedings were initiated against Monnet Ispat & Energy Ltd. JSW Steel emerged as the successful resolution applicant, with the resolution plan approved on July 24, 2018. Despite a public announcement on July 27, 2017, inviting claims, the State of Chhattisgarh did not file any claims during the insolvency process.​

Subsequently, the state issued demand notices on May 17, 2022, and December 9, 2022, seeking payments under the Chhattisgarh Value Added Tax Act, 2005, the Central Sales Tax Act, 1956, and the Entry Tax Act, 1957. JSW Steel contended that these demands violated the Supreme Court’s precedent in Ghanshyam Mishra & Sons vs. Edelweiss Asset Reconstruction Company & Ors (2021), which held that upon approval of a resolution plan, all prior claims are extinguished.​

The Supreme Court observed that the tax authorities’ actions constituted willful disobedience of its earlier judgment. While acknowledging the contemptuous nature of the conduct, the Court refrained from imposing severe penalties, accepting the unconditional apology tendered by the officials involved.​

This ruling underscores the legal principle that once a resolution plan is sanctioned, the successful applicant should not be burdened with unforeseen claims. It also serves as a reminder to government authorities to adhere to judicial precedents and the framework established under the Insolvency and Bankruptcy Code (IBC).​

JSW Steel has faced similar tax-related challenges in the past. In December 2024, the company received a ₹64.47 crore demand notice for allegedly unpaid GST on mining rights payments between July 2017 and July 2019. JSW Steel maintained that it had discharged the appropriate tax liability along with applicable interest and planned to appeal the order. ​

Additionally, in June 2022, JSW Steel approached the Supreme Court concerning a ₹2,600 crore tax dispute with the State of Odisha. The dispute centered around demands for past dues related to mining activities. ​

These instances highlight the complex tax landscape that corporations like JSW Steel navigate, emphasizing the importance of clear legal frameworks and adherence to judicial rulings in resolving such disputes.

Also See: SAT overturns SEBI decision to levy penalty on Monnet Ispat; says IBC overrides market regulator