GST Department Not Empowered To Issue Notices In Name Of Non-Existent Entity Post Amalgamation: Delhi High Court

The Delhi High Court has made it clear that neither Section 160 nor Section 87 of the Central Goods and Services Tax Act, 2017 enable the Department to issue notice in the name of an entity which ceased to exist post amalgamation. A division bench of Justices Yashwant Varma and Dharmesh Sharma thus held, “Even the powers conferred by Section 160 upon the respondents under the CGST Act would not come to their rescue or enable them to salvage the notice as well as the final order which has come to be passed.” So far as Section 87 is concerned, it provides that notwithstanding an order of amalgamation coming to be approved, for the purposes of the CGST Act, the two entities would be treated as a distinct companies for the period up to the date of the order of the competent court or tribunal approving the scheme and the registration certificate of the companies being cancelled. 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,” Court said. The High Court cited Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki Limited where the Supreme Court held that all proceedings taken against a company which had come to merge with another are rendered void and a nullity; and a notice or order framed in respect of a non-existent entity would not be rectifiable in terms of Section 292B Income Tax Act.