Introduction
In the case of Trelleborg India (P.) Ltd. v. State of Karnataka[i], the Karnataka High Court (‘HC’) held that GST proceedings initiated against a non-existent entity are bad in law and quashed the show cause notices (‘SCNs’) issued in the name of such non-existent entity. The HC followed the decision of the Hon’ble Supreme Court (‘SC’) in the case of Maruti Suzuki.
Brief Facts
M/s. Trelleborg Sealing Solutions (India) Private Limited (‘TSSIPL’) merged into M/s. Trelleborg Industrial Products Private Limited under a scheme of amalgamation approved by the National Company Law Tribunal vide order dated 13.06.2017. The name of the amalgamated company was changed to M/s. Trelleborg India Private Limited (‘Petitioner’).
Subsequent to the amalgamation, TSSIPL applied for the cancellation of its GST Registration. This application was accepted, and TSSIPL's GST registration was cancelled vide order dated 03.12.2021. The effective date of the cancellation was 29.11.2021.
Pre-show cause intimation in Form GST DRC-01A was issued in the name of the TSSIPL. In response, the Petitioner, by way of a written submission, informed the GST department that TSSIPL had been amalgamated. Despite such written intimation, the GST department issued an SCN in Form GST DRC-01 in the name of TSSIPL.
Aggrieved by the issuance of SCNs in the name of TSSIPL, the Petitioner filed various writ petitions before the HC for SCNs issued for different periods on the ground that the notices were issued to a company that has ceased to exist.
Held
The HC held that the fact that the SCNs were issued in the name of a non-existent entity was not in doubt. Further, relying on the SC's decision in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (India)[ii],* *the HC held that proceedings against a non-existent entity cannot continue.
The HC also relied on the decision in Rajdisle Private Limited v. Income Tax Officer[iii]*, *which took a similar view as Maruti Suzuki.
The HC further held that the GST department is at liberty to initiate proceedings against the appropriate entity in accordance with the law.
Analysis & Conclusion
The HC's decision reaffirms the well-established position in tax law that any proceeding against a non-existent entity is legally impermissible. It is noteworthy that despite written intimation to the GST department about the scheme of amalgamation and cancellation of GST registration, the SCNs were still issued in the name of the wrong entity.
The decision would benefit similar cases where assessments under GST have been made in the name of a non-existent entity. However, the decision will not be helpful in cases where there are genuine and bona fide errors and also in cases where the assessee fails to inform the GST department about the amalgamation or change in the constitution of the concerned entity.
End Notes
[i] [2024] 164 taxmann.com 383 (Karnataka).
[ii] (2020) 18 SCC 331.
[iii] W.P.No.14156/2024, Karnataka High Court, Bengaluru bench.
Authored by Eesha Rastogi of Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.
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