Court rules GST actions post-merger void, calls for fresh proceedings against amalgamated entity
In a significant ruling, the Bombay High Court has set aside GST proceedings initiated against Kanakia Supremo Construction Private Limited (KSCPL), a non-existent entity following its merger into Kanakia Spaces Realty Private Limited (KSRPL). The division bench comprising Justices Suman Shyam and Advait M. Sethna held that the show cause notice and subsequent order were void ab initio, as they were issued to a company that had ceased to exist due to a merger.
The case stemmed from a show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017, demanding a GST amount of Rs.44,78,61,113 from KSCPL. The court found that the notice, dated 25th June 2025, and the Order-in-Original dated 31st December 2025, were unsustainable as they targeted an entity dissolved as of 1st April 2015 following a merger approved by the Bombay High Court.
Relying on precedents set in the Supreme Court's decision in the Maruti Suzuki India Ltd. case and similar rulings by the Bombay High Court in cases involving Reliance Industries Limited and Vodafone Idea Ltd., the court reaffirmed the legal position that proceedings against an amalgamating company post-merger are without jurisdiction.
The court clarified that while the impugned proceedings were void, the authorities retain the liberty to initiate fresh actions, if permissible, against the amalgamated entity, KSRPL, to recover any unpaid GST dues.
This judgment underscores the importance of legal recognition of corporate mergers and the implications for tax liabilities, reinforcing the necessity for tax authorities to address the correct legal entities in their proceedings.
Bottom line:-
GST proceedings initiated against a non-existent entity, post-merger or amalgamation, are void ab initio and without jurisdiction.
Statutory provision(s): Central Goods and Services Tax Act, 2017 - Sections 74, 87, 85
Kanakia Spaces Realty Private Limited v. Union of India, (Bombay)(DB) : Law Finder Doc id # 2929802
