In the present case of M/S Trelleborg India Private Limited, a Writ Petition was filed before the Hon’ble Karnataka High Court challenging the notices/endorsement in Form GST DRC-01 issued for different tax periods to a non-existent entity i.e., M/s. Trelleborg Sealing Solutions (India) Private Limited.
The Hon’ble High Court observed that the aforementioned entity was amalgamated with the Transferee Company M/s. Trelleborg Industrial Products Private Limited resulting in the creation of a new entity M/s. Trelleborg India Private Limited. It was the contention of the respondents that the tax liability would stand transferred to the transferee company. It was also observed by the Hon’ble High Court that the scheme of amalgamation was approved by NCLT, Bengaluru vide the order dated 13.06.2017, subsequent to which an application for cancellation of registration was passed in Form GST REG-19 and the registration was cancelled on 29.11.2021.
The Hon’ble Karnataka High placed its reliance upon the Hon’ble Supreme Court’s decision in Principal Commissioner of Income Tax vs. Maruti Suzuki (India) Limited[1] wherein it was held that once an amalgamating entity ceases to exist upon an approved scheme of Amalgamation, the question of continuing the proceedings as regards the non-existent company cannot be permitted. A similar view was also taken by the Karnataka High Court in M/s. Rajdisle Private Limited v. The Income Tax Officer and Another[2]. Accordingly, the proceedings initiated by virtue of show cause notices/endorsement were set aside.
W&B Comments: Historically, under the Income Tax regime, initiating assessment proceedings against a non-existent entity has been deemed held to be jurisdictionally flawed and substantively illegal. However, under GST regime, it is the first case providing a precedent for taxpayers whose entities have ceased to exist due to amalgamation or other reasons. This judgment will be beneficial for addressing similar issues under GST.
[1] [TS-429-SC-2019]
[2] [W.P. No. 14156/2024]