Bombay High Court Quashes GST Proceedings Against Non-Existent Entity Post Amalgamation
In a significant ruling concerning amalgamation and GST proceedings, the Bombay High Court held that tax proceedings initiated against an entity that had ceased to exist pursuant to an approved scheme of amalgamation are invalid and without jurisdiction.
Key Ruling
The Court held that once a company stands amalgamated and ceases to exist in law, any show cause notice or adjudication order issued in the name of such entity is void ab initio.
Background
Capital First Limited had merged with IDFC First Bank pursuant to an NCLT approved scheme of amalgamation. Despite being informed about the merger and cancellation of GST registration, the department continued proceedings in the name of the erstwhile entity and eventually passed an adjudication order raising substantial tax demands.
The petitioner challenged the validity of the proceedings before the Bombay High Court.
Observations of the Court
- Once amalgamation takes effect, the amalgamating entity loses its legal existence.
- Proceedings initiated against a non-existent entity suffer from a jurisdictional defect and are liable to be quashed.
- Participation by the taxpayer in departmental proceedings does not validate defective proceedings.
- Section 87 of the CGST Act only governs the intervening period relating to amalgamation and does not authorize continuation of proceedings against a dissolved entity.
Key Takeaway
Taxpayers that have undergone amalgamation, merger, or corporate restructuring should undertake a comprehensive review of pending tax proceedings to identify notices, adjudication orders, or other actions initiated in the name of amalgamating or dissolved entities and consider invoking writ jurisdiction to challenge such proceedings as void ab initio and without jurisdiction in law.
Conclusion
The Bombay High Court quashed the GST order issued against the amalgamating company and reaffirmed the settled legal principle that proceedings against a non-existent entity are unsustainable in law.