Notice Against Amalgamating Company Post-Merger Declared Void Ab Initio
The Hon’ble Delhi High Court in the case HCL Infosystems Ltd. v. Commissioner of State Tax & Anr [W.P.(C) 7391/2024 dated November 21, 2024], quashed a show cause notice and the subsequent final order issued in the name of an amalgamating company after it had been merged with another entity.
Key Takeaways from the Judgment
- Invalidity of Proceedings Post-Merger:
The Court held that once a company merges with another entity, the amalgamating company ceases to exist as a legal entity.
Any notice or order issued in the name of the non-existent amalgamating company is void ab initio and cannot be cured under law.
- Violation of Statutory Provisions:
The proceedings were deemed contrary to:
Section 87 of the Central Goods and Services Tax Act (CGST Act), 2017.
Section 160 of the CGST Act, 2017.
- Substantive Error:
The Court emphasized that issuing notices to a non-existent entity constitutes a substantive legal error, not a procedural one.
Judgment Summary
The Hon’ble Delhi High Court ruled that:
“The issuance of notice and the final order in the name of the amalgamating company is legally unsustainable. Such proceedings are void ab initio and cannot be continued against the merged entity.”
Implications
This judgment reinforces the principle that tax authorities must recognize legal changes, such as mergers or amalgamations, while initiating proceedings. Notices issued to entities that no longer exist due to amalgamation are invalid and cannot be upheld.
