Facts of the case:

In this case, the petitioner challenged the Order-in-Original passed under Section 74 of the CGST Act on the ground that the entire adjudication proceedings had been initiated against M/s. Kanakia Supremo Construction Private Limited (KSCPL), a company that had ceased to exist pursuant to a scheme of amalgamation approved by the Bombay High Court. 

Following the merger, KSCPL stood dissolved and its name was struck off from the records of the Registrar of Companies. Prior to the introduction of GST, KSCPL had discharged its service tax liabilities and had informed the Service Tax Department about the amalgamation and transfer of CENVAT credit. However, upon implementation of GST, its service tax registration was automatically migrated into the GST regime under Section 139 of the CGST Act, resulting in a GST registration being allotted in the name of the dissolved company. Although the petitioner repeatedly informed the GST authorities about the amalgamation, cancellation of the GST registration was effected only in February 2020. Subsequently, based on an investigation by the DGGI, the department issued Form DRC-01A and thereafter a show cause notice dated 25 June 2025 under Section 74 of the CGST Act in the name of the dissolved company, KSCPL, proposing recovery of GST, interest and penalty.

Despite the petitioner’s objection that proceedings against a non-existent entity were void, the adjudicating authority passed the Order-in-Original confirming a GST demand along with interest and penalty. Aggrieved thereby, the petitioner approached the Bombay High Court challenging the validity of the entire proceedings.

Issue:

Whether a show cause notice and consequential adjudication order issued under the CGST Act against a company that had ceased to exist on account of amalgamation are legally sustainable, particularly where the tax authorities had prior knowledge of the amalgamation. Also, whether the provisions of Section 87 of the CGST Act relating to amalgamation and merger could validate proceedings initiated against a non-existent entity.

Held That:

The Bombay High Court allowed the writ petition and held that the show cause notice issued under Section 74 of the CGST Act against KSCPL, a company that had already ceased to exist pursuant to a court-approved scheme of amalgamation, was without jurisdiction and void ab initio. The Court observed that it was undisputed that the department had been informed about the amalgamation well before the initiation of proceedings, yet the authorities consciously issued notices in the name of the dissolved company. Relying upon the Supreme Court’s decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd., as well as its own earlier judgments in Reliance Industries Ltd. v. P.L. Roongta and Vodafone Idea Ltd. v. Union of India, the Court held that proceedings initiated against a non-existent entity are legally non est and cannot be sustained merely because the tax liability may otherwise be recoverable from the successor entity.

The Court further rejected the department’s reliance on Section 87 of the CGST Act, holding that the provision merely governs the tax treatment of transactions during the intervening period between the appointed date and the date of the amalgamation order and does not authorize issuance of notices to a company that has ceased to exist after amalgamation.

Accordingly, the impugned Order-in-Original was set aside. However, the Court clarified that it had not adjudicated upon the merits of the tax demand and that the revenue authorities would remain at liberty to initiate fresh proceedings against the petitioner, being the successor company, in accordance with law if otherwise permissible.

Case Name: Kanakia Spaces Realty Private Limited Versus The Union of India, through the Revenue Secretary, Ministry of Finance Department of Revenue, New Delhi, The Commissioner, CGST & CX Mumbai, Joint Commissioner, CGST & CX Mumbai, Joint Director, DGGI, Zonal Unit Mumbai, The State of Maharashtra. dated 24.06.2026

To read the complete judgement 2026 Taxo.online 1753