Case Of: HCL Infosystems Ltd.
Issued By: Delhi High Court
Order No: W.P.(C) 7391/2024
Date: 21st November 2024
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HCL Infosystems Ltd. (Petitioner) merged with Digilife Distribution and Marketing Services Ltd. (Amalgamating Company) as per a Scheme of Arrangement approved by NCLT, effective from April 1, 2022.
Post-merger, the Petitioner sought the cancellation of the GST registration of the Amalgamating Company and transfer of ITC.
Despite the merger, a Show Cause Notice (SCN) and Final Order were issued in the name of the non-existent Amalgamating Company for FY 2017-2018 and FY 2018-2019.
The Petitioner filed a writ petition challenging the validity of these notices and orders on the basis that whether Show Cause Notices and Orders can be issued to a company that has ceased to exist due to a merger?
The Court referred to the Supreme Court’s decision in Maruti Suzuki (India) Ltd. where proceedings against a merged entity were held to be void. Noted that the Amalgamating Company, after merger, ceases to exist legally, rendering any SCN or Order in its name void ab initio.
The Court quashed the Show Cause Notice and Final Order issued in the name of the non-existent Amalgamating Company. Held that Section 87 of the CGST Act cannot be read to allow the continuation of proceedings against a dissolved entity.
The liabilities arising from the transactions of the Amalgamating Company post-merger would be transferred to the Amalgamated Company, and proceedings against the former entity were void.