The Bombay High Court has held that post-merger/amalgamation the merged entity has no status in the eyes of law, and therefore no proceedings can be initiated against it. Thus, the Department has no authority to issue a show-cause notice on a non-existent entity post-merger/amalgamation during the intervening Period.
The Court clarified that Section 87 of the CGST Act does not enable the respondent/ Department to place a non-existent entity on notice or for that matter to pass an order of assessment referable to Section 13 against such an entity. In fact, in terms of Section 87, the liabilities of the non-existent company would in any case stand transposed to be borne by the amalgamated entity. This is, therefore, not a case where the Revenue would stand to lose or be deprived of their right to subject transactions to tax.
The High Court accordingly quashed the show cause notices as well as the assessment order passed against Vodafone Idea Ltd.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe referred to the decision of the Coordinate Bench of this Court in Reliance Industries Limited v. P. L. Roongta [(2025) 479 ITR 770], which has categorically held that despite the Assessing Officer having been informed that the amalgamating company had ceased to exist pursuant to the scheme of amalgamation, any proceedings initiated against such a non-existent entity are void ab initio.
The Bench also stated that the provisions of Section 87 of the CGST Act which talks of liability in case of amalgamation or merger of companies, are not applicable to the facts of the case, inasmuch as the conditions/ingredients stipulated therein are not attracted/applicable to the facts of the present case.
Briefly, on 30th August 2018, an order came to be passed by the National Company Law Tribunal (NCLT), by which the Petitioner is the merged entity of Vodafone Mobile Services Ltd (VMSL) and Vodafone India Limited with Idea Cellular Limited. The fact of such merger was informed to the Goods Services Tax (GST) authorities at the time of amendment of the GST registration of Idea Cellular Limited.
It is the case of the Petitioner that prior to the merger, the business of VMSL was divided broadly in two distinct businesses: (i) Mobile Telecommunication Services; (ii) Renting of Tower Business; VMSL owned/leased and operated passive infrastructure at telecom sites across all circles other than the Mumbai circle.
On 13th November 2017, VMSL entered into a Business Transfer Agreement with ATC Telecom Infrastructure, under which it had sold the entire tower business with all rights and liabilities as a going concern on a slump sale basis. It is the Petitioner’s case that the slump sale could not be considered as ‘supply’ in the course of business, hence, the same was never declared in the GST returns.
Later, on 7th February 2024, the DGGI issued summons to the Petitioner under Section 70 of the CGST Act, 2017, demanding INR 363 crores under Section 74 of the CGST Act, along with penalty on the ground that the services by way of transfer of a going concern as a whole or independent part thereof is an exempted supply, and VMSL was not entitled to take Input Tax Credit (ITC) as per provisions of CGST Act.
Appearances:
Darius Shroff, Senior Counsel a/w Rahul Jain i/b. Alpha Chambers for Petitioner
Y. S. Bhate for Respondent No.1.
Siddharth Chandrashekhar a/w Suman Kumar Das for Respondent No.2.
