Facts of the Case:
In this case, the petitioner emerged pursuant to a scheme of amalgamation approved by the NCLT , whereby Vodafone Mobile Services Ltd. (VMSL) and Vodafone India Limited were merged into Idea Cellular Limited. This fact of merger had been duly intimated to the GST authorities at the time of amendment of GST registration.
Prior to the merger, VMSL carried on two major businesses, including telecom services and tower infrastructure operations. The tower business was transferred as a going concern on a slump sale basis to another entity. Subsequently, the Directorate General of GST Intelligence initiated investigation and issued a show cause notice dated 01.08.2024 demanding substantial tax along with penalty under Section 74 of the CGST Act, primarily on the premise that transfer of a going concern constituted an exempt supply and thereby restricted Input Tax Credit (ITC).
The petitioner filed detailed replies to the show cause notice, specifically raising the issue that VMSL had ceased to exist post amalgamation and therefore any proceedings initiated in its name were without jurisdiction. Despite this, the adjudicating authority passed the impugned order in the name of the non-existent entity without considering the submissions made by the petitioner.
Aggrieved, the petitioner filed a writ petition contending that the entire proceedings were void ab initio as they were initiated against a non-existent entity and were also in violation of principles of natural justice.
Issue:
Whether proceedings initiated and adjudication order passed under the CGST Act against an entity that had ceased to exist pursuant to amalgamation are valid in law, particularly in light of Section 87 of the CGST Act and established judicial principles?
Held That:
The High Court held that the impugned proceedings were wholly without jurisdiction and void ab initio, as they were initiated and concluded against a non-existent entity. The Court observed that once a scheme of amalgamation is approved, the amalgamating entity ceases to exist in the eyes of law, and any proceedings initiated thereafter in its name are fundamentally unsustainable.
Relying on the ratio laid down by the Supreme Court in Maruti Suzuki India Ltd., the Court reiterated that jurisdictional notices issued to a non-existent entity vitiate the entire proceedings, irrespective of participation by the amalgamated entity. The Court emphasized that such a defect goes to the root of jurisdiction and is not a mere procedural irregularity.
The contention of the Revenue that Section 87 of the CGST Act permits such proceedings was rejected. The Court clarified that Section 87 only governs tax liabilities for the intervening period between the effective date of amalgamation and the date of the order, particularly for inter se transactions between merging entities. It does not authorize initiation or continuation of proceedings against a non-existent entity post amalgamation.
The Court further held that even though liabilities of the amalgamating entity may survive and can be enforced against the amalgamated entity, the proceedings must be properly instituted against the correct legal person. Issuance of show cause notice and passing of order in the name of a non-existent entity renders the entire exercise invalid.
Accordingly, the impugned order was quashed and set aside.
Case Name: Vodafone Idea Ltd. (Formerly known as Vodafone Mobile Services Ltd.) Versus Union of India & Ors. dated 29.04.2026
To read the complete judgement 2026 Taxo.online 1129
