Introduction
Corporate amalgamations often transfer tax liabilities to the successor entity. But can GST authorities continue proceedings in the name of a company that has legally ceased to exist? The Bombay High Court addressed this question in Kanakia Spaces Realty Private Limited v. Union of India, Writ Petition No. 2586 of 2026 vide order dated 24.06.2026, where the Hon’ble Court quashed the Order-in-Original and the underlying show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) against a company that had ceased to exist pursuant to a court-sanctioned scheme of amalgamation.
The Division Bench held that a notice issued to a dissolved company is without jurisdiction and that Section 87 of the CGST Act does not authorise the Revenue to continue proceedings merely because the erstwhile GST registration remained on record. More importantly, the judgment distinguishes liability from jurisdiction: while tax liability may survive an amalgamation and pass to the successor, jurisdiction cannot be founded on a notice issued to a person who no longer exists in law.
Factual Background
Kanakia Supremo Construction Private Limited (“KSCPL”) was amalgamated with Kanakia Spaces Realty Private Limited (“Petitioner”) under a scheme sanctioned by the Bombay High Court on 29.11.2016, with an appointed date of 01.04.2015. Upon the scheme taking effect, KSCPL stood dissolved without winding up and was struck off the records of the Registrar of Companies. The amalgamation was duly intimated to the erstwhile Service Tax Department on 22.02.2017 and to the GST authorities on 18.07.2019.
During the transition to GST, KSCPL’s service tax registration was automatically migrated into a GST registration under Section 139 of the CGST Act, 2017, despite the company having ceased to exist. Although the registration was cancelled on 17.02.2020 after determining nil liability, the GST authorities, despite being aware of the amalgamation, issued Form GST DRC-01A on 21.05.2025 and a show cause notice under Section 74 on 25.06.2025 in KSCPL’s name. The proceedings culminated in an Order-in-Original dated 31.12.2025, confirming a GST demand of approximately ₹42.65 crore, along with interest under Section 50 and penalty under Section 74. The Petitioner challenged the proceedings before the Bombay High Court, contending that the notices and consequential order were void for want of jurisdiction as they had been issued against a non-existent entity.
Issues before the Hon’ble High Court
- Whether a show cause notice and consequential adjudication order issued under the CGST Act against a company that has ceased to exist on account of amalgamation are legally sustainable, particularly where the tax authorities had prior knowledge of the amalgamation?
- Whether the provisions of Section 87 of the CGST Act, relating to the treatment of amalgamating companies, could validate the initiation and continuation of proceedings against an entity that has ceased to exist?
Contentions of the Parties
The Revenue argued that Section 87 of the CGST Act permitted continuation of proceedings against KSCPL for the pre-merger period. It contended that KSCPL’s GST registration remained active on the portal and that the Petitioner had participated in the proceedings, causing no prejudice and rendering any defect curable.
The Petitioner, however, argued that the proceedings were void ab initio, as KSCPL had ceased to exist before the issuance of the DRC-01A and show cause notice, despite the Department being repeatedly informed of the amalgamation. Relying on Maruti Suzuki India Ltd., Reliance Industries Ltd. v. P.L. Roongta, and Vodafone Idea Ltd. v. Union of India, it contended that a notice issued to a non-existent entity is a jurisdictional defect that cannot be cured by the successor’s participation, and that Section 87 does not authorise proceedings against a dissolved company.
Decision and Findings
The Division Bench held that a show cause notice issued to an amalgamating company after it has ceased to exist is without jurisdiction, rendering all consequential proceedings null and void. The Hon’ble Court observed that a valid show cause notice is the foundation of any tax proceeding, and one issued to a non-existent entity cannot sustain adjudication. It further noted that the Department had been repeatedly informed of the amalgamation, making the defect a jurisdictional error rather than a procedural oversight.
Rejecting the Revenue’s reliance on Section 87 of the CGST Act, the Court clarified that the provision governs the tax treatment of transactions during the merger period and does not authorise proceedings against a dissolved entity. Relying on Maruti Suzuki India Ltd., Reliance Industries Ltd., and Vodafone Idea Ltd., the Court reaffirmed that this principle is well settled and equally applicable under the GST regime. However, it clarified that while the impugned proceedings were invalid, the Revenue remains free to initiate fresh proceedings against the successor entity in accordance with law.
The fact that the proceedings were initiated under Section 74 of the CGST Act did not alter the Court’s conclusion. While Section 74 empowers the Department to recover tax involving fraud, wilful misstatement, or suppression of facts, it presupposes that jurisdiction has been validly assumed through a lawful notice. The provision governs the substantive power to determine tax liability; it does not cure a jurisdictional defect arising from a notice issued to a non-existent entity. Accordingly, even allegations of fraud under Section 74 cannot validate proceedings initiated without jurisdiction.
Why This Judgment Matters
This judgment goes beyond reaffirming that a notice issued to a non-existent company is invalid. It draws a crucial distinction between liability and jurisdiction: while tax liability may pass to the successor following amalgamation, jurisdiction must still be validly invoked through a notice issued to the correct legal entity. For businesses, the ruling underscores the importance of promptly updating tax authorities after restructuring and preserving records of such intimations. For the Department, it reinforces the need to verify an entity’s legal status before initiating proceedings. Ultimately, the decision strengthens procedural safeguards without preventing the Department from initiating fresh proceedings against the lawful successor in accordance with the CGST Act.
AMLEGALS Remarks
The Hon’ble Bombay High Court’s decision reinforces that while tax liability may survive an amalgamation, jurisdiction cannot be exercised through a notice issued to a non-existent entity. Companies should promptly intimate tax authorities of any amalgamation, update GST registrations, preserve merger-related documentation, and carefully verify the validity of post-merger notices before responding on merits. The decision illustrates that procedural compliance is not an obstacle to tax administration but the legal foundation upon which valid tax proceedings rest. A sustainable tax demand begins not with the existence of liability, but with the lawful assumption of jurisdiction.
The judgment reminds both taxpayers and the Revenue that while tax liability may survive corporate restructuring, jurisdiction cannot survive the disappearance of the legal person against whom it is exercised.
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