Facts of the Case:

Vodafone Idea Ltd., formerly known as Vodafone Mobile Services Ltd., challenged GST proceedings initiated against the amalgamating company after its merger, when the amalgamating entity had ceased to exist. The Bombay High Court held that proceedings initiated against a non-existent entity following its merger were void ab initio. The High Court further held that Section 87 of the CGST Act does not authorise initiation or continuation of proceedings against an entity that has ceased to exist pursuant to amalgamation and accordingly quashed the impugned order.

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?

High Court Order:

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.

Supreme Court Order:

The Supreme Court, comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran, declined to interfere with the Bombay High Court’s decision and dismissed the Revenue’s Special Leave Petition (Civil) No. 31915/2026 on 7 September 2026. The Court thereby allowed the Bombay High Court’s finding to stand that GST proceedings initiated against the amalgamating company after its merger were void ab initio, being proceedings against a non-existent legal entity.

The decision reinforces the fundamental principle that tax proceedings must be initiated against a legally existing and identifiable taxable person. A merger or amalgamation resulting in extinction of the transferor entity creates a jurisdictional impediment to initiating proceedings against that entity thereafter. The ruling also clarifies that Section 87 cannot be invoked as a statutory mechanism to validate proceedings independently initiated against a non-existent amalgamating entity. The Supreme Court’s dismissal of the SLP strengthens the Bombay High Court’s position and provides an important defence in GST proceedings issued in the name of an entity that had already ceased to exist before initiation of the proceedings.

Case Name: Union Of India & Anr. Versus Vodafone Idea Limited dated 07.09.2026 

High Court judgment 2026 Taxo.online 1129

Citation No. 2026 Taxo.online 2668