MAY 06, 2026

You Must Exist to Be Taxed

By Vijay Kumar

LAW is stubborn about one thing: you must exist before it can do anything to you. That may sound metaphysical, but in tax administration it is a jurisdictional rule with teeth. The Bombay High Court's recent decision in Vodafone Idea Ltd. v. Union of India - 2026-TIOL-635-HC-MUM-GST reads like a crisp judicial rebuke to bureaucratic fantasy: you cannot validly serve a tax notice on a company that has ceased to exist. The Court did not merely apply precedent; it excised a phantom demand for Rs. 363 crores.

On 30th August 2018, an order was passed by the National Company Law Tribunal (NCLT), by which the Petitioner is the merged entity of Vodafone Mobile Services Ltd (VMSL) and Vodafone India Limited with Idea Cellular Limited. The fact of such merger was informed to the Goods Services Tax (GST) authorities at the time of amendment of the GST registration of Idea Cellular Limited.

Before the merger, VMSL ran two distinct businesses: mobile telecommunication services and a tower - rental business that operated 10,004 towers.

On 13th November 2017, VMSL entered into a Business Transfer Agreement with ATC Telecom Infrastructure, under which it had sold the entire tower business with all rights and liabilities as a going concern on a slump sale basis.

It is the Petitioner's case that the slump sale, which was a sale of the entire business, could not be considered as 'supply' in the course of business, or furtherance of business and sale of entire business cannot be so, hence, the same was never declared in the GST returns.

On 1st August 2024, a show-cause notice was issued to the Petitioner, demanding INR 363 crores under the CGST Act, along with penalty.

The Petitioner submitted detailed replies but on 29th January 2025, an order (impugned order) was passed without considering its submissions.

And the petitioner is before the Bombay High Court praying for quashing and setting aside the impugned Order dated 29.1.2025.

The Petitioner's Counsel submitted:

1. The impugned order is a nullity passed against a non-existent entity wholly without jurisdiction.

2. The order is vitiated by breach of the principles of natural justice, as none of the petitioner's submissions have been considered.

3. The demand against a non-existent entity is contrary to the settled principles of law laid down by the supreme court in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. - 2019-TII-30-SC-TP

4. Once the proper officer was duly informed of the merger and its consequences that the amalgamating company ceased to exist upon the approval of the scheme of amalgamation/merger, the officer lacked jurisdiction to issue the notice.

5. This would go to the root of the matter, as the very basis for invoking jurisdiction is fundamentally at odds with the legal principle that an amalgamating entity ceases to exist upon approval of the scheme, as recognized in the Supreme Court decision.

6. This very High Court had in Reliance Industries Limited v. P. L. Roongta - 2025-TIOL-334-HC-MUM-IT, applying the principles laid down by the Supreme Court in Maruti Suzuki held:

the proceedings against an amalgamating company post the amalgamation orders are void ab initio if the revenue had knowledge of the amalgamation prior to the proceedings.

The Counsel for Respondent GST contended:

1. The decision in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. is not applicable in the present case, inasmuch as the same is rendered in the context of the Income Tax Act.

2. In the facts of the present case, the provisions of Section 87 of the CGST Act are attracted.

The High Court observed that the present case would squarely be governed by the principles of law laid down by the Supreme Court in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd wherein it was held that:

1. The consequence of the scheme of amalgamation approved under Section 394 of the Companies Act 1956 is that the amalgamating company ceased to exist.

2. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity.

3. Upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed.

If the amalgamated company does not exist, how did it come to defend itself in a litigation with Government?

The Supreme Court had in the above Maruti case answered that question.

Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law.

The High Court was of the view that the provisions of Section 87 of the CGST Act are not applicable to the facts of the case, inasmuch as the conditions/ingredients stipulated therein are not attracted/applicable to the facts of the present case.

Section 87 of the CGST Act reads as: -

87. Liability in case of amalgamation or merger of companies.-

(1) When two or more companies are amalgamated or merged in pursuance of an order of court or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods or services or both to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly.

(2) Notwithstanding anything contained in the said order, for the purposes of this Act, the said two or more companies shall be treated as distinct companies for the period up to the date of the said order and the registration certificates of the said companies shall be cancelled with effect from the date of the said order.

The High Court found that Section 87 is applicable on fulfilment of the following conditions/ingredients: -

1. When two or more companies have amalgamated or merged and the order of amalgamation or merger is to take effect from a date earlier to the date of order of amalgamation or merger, and if in that intervening period, the two companies have supplied or received any goods or services or both to or from each other, then such transaction of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they will be liable to pay tax.

2. The two companies which have amalgamated/merged will be treated as distinct companies for the period up to the date of the order and the registration certificate of the said companies would stand cancelled from the date of the order of amalgamation/merger.

These conditions are only in respect of the intervening period from the date on which the order takes effect till the date of the order, and in no way affect or give the Department the authority to issue a show-cause notice on a non-existent entity post-merger/amalgamation.

Since post-merger/amalgamation the merged entity has no status in the eyes of law, no proceedings can be initiated against it.

The Court held that the conditions/ingredients of Section 87 of the CGST Act cannot be invoked to carry forward the proceedings as contemplated in the show-cause notice dated 1st August 2024.

The show-cause notice itself having been issued without jurisdiction, the proceedings stand vitiated and are rendered void ab initio.

This is not mere rhetoric. It is the legal scalpel that cuts through administrative improvisation.

Jurisdiction presupposes a legal person. A notice is not a mystical incantation; it must be addressed to someone who, in law, can be assessed, prosecuted, or otherwise bound (at least found). If it no longer exists, the notice lacks a proper subject and therefore lacks jurisdictional foundation.

The State cannot invent a person to tax.

One of Maruti's most important clarifications is that participation does not create jurisdiction. The successor's presence in proceedings may be relevant to the merits, but it cannot retroactively create the jurisdiction that was absent at the outset.

That is a stern rebuke to administrative convenience.

Courts will not permit the revenue to proceed in the name of a non-existent entity, especially where the revenue had notice of the merger. Knowledge of the merger and continued insistence on proceeding in the name of the transferor is not a harmless procedural quirk; it is a jurisdictional defect that goes to the root of the proceedings.

If the Revenue wants to collect tax, it must do so against a living legal person or follow the statutory route that transposes liabilities. That is not a lack of imagination; it is the rule of law.

Law insists on a modest demand: address your notices to someone who exists. That is not a high bar. It is a basic requirement of jurisdiction, fairness, and legal coherence. The court's language - blunt, precise, and unamused - is a salutary reminder that the machinery of tax administration must operate within the bounds of legal reality.

You cannot validly tax what no longer exists - and that, in the ledger of legal truths, is a line item the Revenue must respect.