Initiation of GST proceedings and passing of orders against a non-existent amalgamated entity is void ab initio.

Capital First Limited (CFL) was amalgamated with IDFC First Bank Limited (the Petitioner) pursuant to an order dated 12 December 2018 passed by the NCLT, Chennai.

Consequently, CFL’s registration was cancelled in 2019.

Despite the Petitioner informing the Respondents of this merger and the fact that CFL had ceased to exist, Respondent No. 3 initiated audit proceedings, issued show cause notices (dated 30 December 2023), and passed an assessment order dated 26 April 2024 under the MGST/CGST Act in the name of the non-existent entity, CFL.

The Petitioner challenged these orders as being void ab initio.

1. Whether assessment orders and show cause notices issued in the name of a non-existent entity (post-amalgamation) are legally sustainable.

2. Whether Section 87 of the CGST Act allows the Department to initiate proceedings against a non-existent amalgamating entity after the date of the amalgamation order.

An entity loses its legal identity upon amalgamation and cannot be regarded as a "person" for the initiation of legal proceedings.

The Supreme Court’s ruling in Principal Commissioner of Income Tax v. Maruti Suzuki India Limited held that assessment against a non-existent entity is a jurisdictional defect that is not curable.

Section 87 of the CGST Act treats amalgamated companies as distinct entities only for the intervening period between the effective date and the date of the order, but does not authorize proceedings against a non-existent entity post-merger.

Once the NCLT approved the scheme of amalgamation, CFL ceased to exist in the eyes of the law.

The Respondents were explicitly informed of this fact through multiple communications and the cancellation of registration, yet they proceeded to issue notices and orders against CFL.

The Court rejected the Revenue's reliance on Section 87 of the CGST Act, clarifying that Section 87 is limited to preserving tax liability for transactions occurring between the effective date and the date of the merger order; it does not grant jurisdiction to ignore the cessation of a legal entity.

Following Maruti Suzuki, the Court held that the participation of the Petitioner in the proceedings did not operate as an estoppel against law, as the defect was jurisdictional and rendered the proceedings void ab initio.

The Court quashed and set aside the impugned Order bearing Reference No. ZD270424057770B dated 26 April 2024; The Petitions were allowed, granting Rule absolute in favor of the Petitioner, while keeping other contentions regarding potential future legal steps open for the Department.