GST Notice Issued to a Non-Existent Company is Invalid: Bombay HC

Kanakia Spaces Realty Private Limited Vs Union of India (Bombay High Court)

Notice Issued to a Non-Existent Amalgamated Company under GST is Invalid: Bombay High Court Clarifies the Law

Introduction

A Show Cause Notice (SCN) is the foundation of every GST adjudication proceeding. Before the GST Department can determine any tax liability, impose a penalty, or initiate recovery proceedings, it must first issue a valid Show Cause Notice in accordance with law. If the notice itself is invalid, every action taken on its basis automatically becomes unsustainable.

In a significant judgment delivered in Kanakia Spaces Realty Private Limited v. Union of India and Others [2026 (6) TMI 1351 (Bombay High Court)], the Bombay High Court has reaffirmed this well-settled legal principle. The Court held that a Show Cause Notice issued in the name of a company that has already ceased to exist is void from its very inception. Such a notice cannot confer jurisdiction upon the GST authorities, and consequently, no valid tax demand can arise from it.

This judgment is of considerable importance for businesses undergoing mergers or amalgamations and for professionals dealing with GST litigation, including Chartered Accountants, Cost Accountants, Company Secretaries, Advocates and Tax Consultants.

Facts of the Case

The dispute arose in respect of Kanakia Supremo Construction Pvt. Ltd., which had already been amalgamated with another company under a legally approved scheme of amalgamation.

After the amalgamation:

• the transferor company ceased to exist as an independent legal entity;
• the GST Department had already been informed about the amalgamation;
• the GST registration of the transferor company had also been cancelled.

Despite being fully aware of these facts, the GST Department proceeded to issue:

• Form GST DRC-01A;
• a Show Cause Notice under Section 74 of the CGST Act; and
• an Order-in-Original raising a GST demand of approximately ₹42 crore,

all in the name of the company that had already ceased to exist.

The successor company challenged the validity of these proceedings before the Bombay High Court.

Why is a Valid Show Cause Notice Important?

A Show Cause Notice is much more than a procedural formality. It is the legal foundation upon which the entire adjudication process is built.

Only after issuing a valid SCN can the department:

• call upon the taxpayer to explain its position;
• examine the facts and evidence;
• determine the tax liability; and
• pass an adjudication order.

If the Show Cause Notice itself is legally defective, the entire proceedings lose their foundation.

The principle is simple. A building cannot stand if its foundation is weak. Likewise, GST adjudication cannot survive if the Show Cause Notice itself is invalid.

Can a Notice Be Issued to a Non-Existent Company?

The Bombay High Court answered this question with a clear No.

Once a company is amalgamated into another company, it loses its separate legal identity and ceases to exist in the eyes of law.

A company that no longer exists cannot:

• receive a legal notice;
• submit a reply;
• participate in adjudication proceedings; or
• be subjected to a fresh assessment.

Therefore, issuing a Show Cause Notice to such a company is legally meaningless.

The Court held that such a notice is void ab initio, meaning that it is invalid from the very beginning and has no legal effect.

Findings of the Bombay High Court

The Court observed that the validity of every GST proceeding depends upon the validity of the Show Cause Notice.

Since the notice itself had been issued to a non-existent company, the department never acquired the jurisdiction to proceed further.

Accordingly, the Court held that all subsequent proceedings automatically became invalid, including:

• the Show Cause Notice;
• the adjudication proceedings;
• the Order-in-Original;
• the tax demand;
• the penalty; and
• the recovery proceedings.

In short, the entire proceedings were liable to be quashed because they were founded on an invalid notice.

Clerical Mistake vs. Jurisdictional Defect

An important aspect of this judgment is the distinction made by the Court between a clerical mistake and a jurisdictional defect.

A clerical mistake may include:

• a spelling error in the company’s name;
• an incorrect address;
• a typographical error; or
• any minor mistake capable of correction.

Such defects generally do not invalidate the proceedings.

However, issuing a notice in the name of a company that has already ceased to exist is not a clerical mistake.

It is a jurisdictional defect.

Since the department had no legal authority to issue the notice to a non-existent entity, such a defect cannot be cured later by issuing a corrigendum or by making technical corrections.

Does Participation by the Successor Company Cure the Defect?

The GST Department argued that the successor company had participated in the proceedings and filed replies. Therefore, according to the department, the original defect stood cured.

The Court rejected this argument.

It held that participation cannot create jurisdiction where none exists.

If the original Show Cause Notice is invalid, merely participating in the proceedings cannot make it valid.

In other words, an invalid notice cannot become valid simply because the taxpayer appeared before the adjudicating authority or submitted a reply.

Interpretation of Section 87 of the CGST Act

The department relied upon Section 87 of the CGST Act, which deals with the liability of companies in cases of amalgamation or merger.

The Court clarified that Section 87 merely ensures that tax liability continues even after amalgamation.

However, it does not authorize the department to initiate proceedings in the name of a company that has already ceased to exist.

Although the tax liability may survive, the proceedings must always be initiated against the legally existing successor company.

Thus, Section 87 cannot be invoked to validate an otherwise invalid Show Cause Notice.

Reliance on the Supreme Court Judgment

While deciding the case, the Bombay High Court relied upon the landmark judgment of the Supreme Court in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd.

The Supreme Court had already laid down the following principles:

• a notice issued to a non-existent company is void from the very beginning;
• participation by the successor company does not cure the defect; and
• proceedings must always be initiated against the correct legal entity.

The Bombay High Court held that these principles apply with equal force to proceedings under the GST law.

Relief Granted by the Court

After examining the facts and the applicable legal principles, the Court granted relief to the petitioner.

The Court:

• quashed the Show Cause Notice;
• set aside the Order-in-Original; and
• declared the GST demand of approximately ₹42 crore to be legally unsustainable.

However, the Court also clarified that if the statutory limitation period had not expired, the GST Department would be free to initiate fresh proceedings against the legally existing successor company in accordance with law.

Practical Importance of the Judgment

This judgment will have far-reaching implications in cases involving:

• amalgamation of companies;
• mergers;
• corporate restructuring;
• dissolution of companies;
• strike-off of companies from the Register of Companies; and
• cancellation of GST registration due to amalgamation.

Wherever the GST Department issues a Show Cause Notice in the name of a company that has already ceased to exist, taxpayers should carefully examine whether the proceedings suffer from a jurisdictional defect.

This judgment provides a strong legal basis to challenge such proceedings before the appropriate forum.

Kamthania’s Comments

This judgment once again reminds us that compliance with legal procedure is not merely a technical formality. It is an essential requirement for the exercise of jurisdiction by the tax authorities.

There is a clear distinction between the continuity of tax liability and the authority to initiate legal proceedings.

While tax liability may continue after an amalgamation, the proceedings to enforce that liability must always be initiated against the correct legal entity.

Failure to follow this basic legal requirement renders the entire proceedings invalid, irrespective of the merits of the case.

Conclusion

The Bombay High Court has reaffirmed a fundamental principle of tax jurisprudence that jurisdiction begins with a valid Show Cause Notice.

If the notice is issued to a company that has already ceased to exist, it is void from its inception. Consequently, every proceeding based upon such a notice—including adjudication, tax demand, penalty and recovery—is liable to be set aside.

The principle emerging from this judgment is clear:

“A notice issued to a non-existent company is a legal nullity. An invalid Show Cause Notice cannot create a valid GST demand.”

This decision will serve as an important precedent in future GST litigation involving amalgamations, mergers, corporate restructuring and successor liability. It is also a reminder that while tax liability may survive corporate restructuring, legal proceedings must always be initiated against the correct and legally recognised entity.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. The Order-in-Original dated 31^stDecember 2025 issued by the Respondent No. 3, i.e., Joint Commissioner, CGST & CX is under challenge in this Writ Petitioner, primarily on the ground that the impugned order has been issued on the basis of show cause notice dated 25^th June, 2025, issued by the CGST Authority under Section 74 of the Central Goods and Services Tax Act, 2017 ( ‘CGST Act’ for short) against a non-existent entity, viz., M/s. Kanakia Supremo Construction Private Limited (“KSCPL” for short).

2. The facts and circumstances of the case, giving rise to the filing of this Writ Petition, in a nut-shell, as evident from the material on record, are as follows:-

(a) KSCPL was a company registered under the Companies Act, 1956. Based on the order dated 29^th November, 2016, passed by the Bombay High Court approving the scheme of amalgamation of KSCPL and another company, i.e., Kanakia King Style Construction Private Limited, merged with the Writ Petitioner, viz., Kanakia Spaces Realty Private Limited (for short “KSRPL”), which is also a company registered under the Companies Act, 1956. . The appointed dated of the merger under the scheme of amalgamation was 1^st April, 2015. Consequently, KSCPL stood dissolved and its name was struck off from the records of Registrar of Companies (“RoC”). As per the projection made in the Writ Petition, KSCPL has discharged its service tax liability on the construction services provided by it to M/s. New Monarch Builders & Contractors, whereby, around 1000 slum dwellers were rehabilitated in the buildings constructed under the Slum Redevelopment Authority(“SRA”) scheme against total FSI 28,500 sq. mtrs. KSCPL was registered under the provision of the Finance Act, 1994, vide STC No.AAECA2207JSD001 and had filed its last ST-3 return for the period from October 2016 to March 2017 ( i.e. upto November 2016). In this manner, KSCPL had paid service tax of Rs.62,78,041/- during April 2016-March 2017 by filing sales tax returns.

3. On 22^ndFebruary, 2017, KSCPL had informed the Superintendent of Central Excise, Service Tax Commissionerate-V, Mumbai, about the fact of amalgamation of the company with the Writ Petitioner and the transfer of balance unutilized CENVAT credit, as on 30^th November, 2016, in accordance with Rule 10 of the CENVAT Credit Rules, 2004. In the meantime, the GST regime was introduced in the year 2017, as a result of which, the service tax registration of KSCPL was automatically migrated into the GST and GSTIN No.27AAECK2207J1ZO came to be allotted to KSCPL. The automatic migration was apparently in terms of Section 139 of the CGST Act. However, since the migration was automatic and without any intimation to KSCPL, hence, the Petitioner claims that it was unaware of the same.

4. On 20^thJune, 2019, the Deputy Commissioner, Division-V, Mumbai (East) issued a notice in the name of KSCPL seeking clarification from it due to non filing of monthly returns in the form of GSTR-3B for the previous twelve months. On that date, KSCPL was, however, a non-existent entity due to its merger with the Petitioner company. As such, the Petitioner submitted reply dated 18^th July, 2019, informing the Department that KSCPL was already amalgamated with the Petitioner company and, therefore, it had ceased to exist. However, due to the non-availability of the authorized signatory, surrender application could not be filed.

5. On 17^thFebruary, 2020, GST registration of KSCPL was cancelled by the Sale Tax Authorities after determining NIL liability. However, it appears that based on intelligence gathered by DGGI to the effect that KSCPL and its connected entities had not discharged their liability with regard to the GST pertaining to flats/commercial properties allotted to the owners, investigation and search proceedings under Section 67 of CGST Act was initiated.

6. On 28^thOctober, 2022, the Writ Petitioner submitted details including particulars of service tax of Rs.62,78,041/- that has been paid by KSCPL along with the order dated 17^th February, 2020, cancelling the GST Registration. Notwithstanding the same, on 21^st May, 2025, the DRC-01A form was issued by Respondent No.4 under Section 74 of the CGST Act, in the name of KSCPL demanding payment of GST liability along with interest. On 28^th May, 2025, the petitioner submitted reply to the said notice denying and disputing the tax liability while informing the Department that KSCPL has ceased to exist and therefore, the proceedings ought to be in the name of the Petitioner company. However, by ignoring the same, show cause notice dated 25^th June, 2025, was issued in the name of KSCPL under Section 74 of the CGST Act, calling upon it to show cause as to why, GST amount of Rs.44,78,61,113/- along with interest and penalty of appropriate amount, should not be demanded/ recovered from it.

7. Assailing the notice dated 25^thJune, 2025, the Writ Petitioner had instituted Writ Petition (L) No. 25819 of 2025 before this Court. However, since no interim order was passed in that proceeding, the Petitioner filed reply to the show cause notice denying its liability and once again asserting that the proceedings against KSCPL were null and void since the notice was issued to a non existent entity.

8. After submission of show cause reply by the Petitioner, the Respondent No.3 had issued the impugned Order-in-Original dated 31^stDecember, 2025, confirming the GST demand of Rs.42,65,34,393/-, interest under Section 50 and penalty under Section 74 of the CGST Act while dropping the demand of Rs.2,13,26,720/- towards the land value. The Order-in-Original dated 31^st December, 2025, is assailed by filing the present Writ Petitioner.

9. The facts of the case are not in dispute. The Respondents have filed their Affidavit-in-Reply to the Writ Petition dated 11^thJune 2026. The Respondents contend that the GST liability of the transferor entity i.e. KSCPL pertains to the GST regime introduced w.e.f. 1st July 2017. Accordingly, the Petitioner is liable to pay the tax dues of the transferor entity i.e. KSCPL. However, there is a specific averment in the Petition (Page no. 30 Ground B2) to the effect that the scheme of amalgamation itself provided that with the sanctioning of the scheme, the erstwhile transferor company i.e. KSCPL shall stand dissolved. To this there is no specific denial, much less, any dispute raised by the Respondents.

10. There is also no controversy about the fact that KSCPL had merged with the Writ Petitioner on the basis of order dated 29^thNovember, 2016, passed by this Court approving the merger scheme, the appointed date being 1^st April, 2015. In that view of the above, the fact that the impugned notice dated 21^st May, 2025 as well as subsequent notice dated 25^th June, 2025 were evidently issued to a non-existing entity and that too, despite having been informed about merger of the company is well established in this case. Therefore, the core question arising for consideration of this Court in the present proceeding is as to whether, the impugned Order-in-Original dated 31^st December, 2025, issued on the basis of show cause notice served on a non existent entity, would be sustainable in the eyes of law?

11. By relying upon the decisions of this Court rendered in the case of Reliance Industries Limited vs. P. L. Roongta¹ as well as Vodafone Idea Ltd. (formerly known as Vodafone Mobile Services Ltd.) vs. Union of India and Ors.², Mr. Prakash Shah, learned Senior Counsel appearing for the Petitioner, has argued that the Petitioner’s case is squarely covered by the aforesaid decisions of this Court wherein, it has been categorically held that show cause notice and consequent order issued under the GST law against an amalgamating company after it had ceased to exist, upon merger, would be void ab initio. The learned Senior Counsel, therefore, submits that the show cause notice dated 25^th June, 2025 as well as the impugned Order-in-Original dated 31^st December, 2025, are NON-EST in the eyes of law and hence, are liable to be set aside and the Writ Petition be allowed on such count alone.

12. Responding to the above submissions, Mr. S. Chandrashekhar, learned Counsel appearing for the Respondents, submits that although the factum of merger of KSCPL with the Writ Petitioner is not in dispute, yet, in view of Section 85 of the CGST Act, the recourse adopted in the present case would be permissible in the eyes of law. According to Mr. Chandrashekhar, since KSCPL had defaulted in discharging its liability, hence, by invoking powers under Sections 74 read with 85 of the GST Act, the Authority would be entitled to recover any such unpaid dues even after the merger of the transferring company.

13. We have considered the rival submissions made at the bar and have also gone through the material available on record. At the very outset, we deem it appropriate to observe herein that the core issue in this proceeding is not as to whether, the dues of KSCPL was recoverable under the law or not but whether, any proceeding for recovery of outstanding tax/GST dues, based on show-cause notice served on a non-existing entity would be maintainable in law.

14. In the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Ltd.³, the Hon’ble Supreme Court has held that if, despite being informed about the fact that the amalgamating company has ceased to exist as a result of the scheme of amalgamation, proceedings are initiated against such non existing company, then such proceedings would be void ab initio. By taking note of the decision of the Supreme Court in the Case of Maruti Suzuki India Ltd. (supra), a Co-ordinate Bench of this Court, in the case of Reliance Industries Limited vs. P. L. Roongta (supra) has categorically held that if the proceedings are initiated against a non-existent amalgamating company after it had ceased to exist pursuant to the scheme of amalgamation despite the fact that the Assessing Officer had knowledge about such amalgamation, then such proceeding would be void ab initio.

15. Since one of the contentious issue involved in this proceeding is pertaining to the applicability of Section 87 of the CGST Act, 2017 to the facts of the case, the said provision is reproduced herein-blow for ready reference:-

“ 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.”

16. Taking note of the aforementioned decisions and Section 87, another Co-ordinate Bench of this Court, in the case of Vodafone Idea Ltd. (supra), had interfered with similar order based on show notice issued to a non-existent amalgamating company, by observing that the provision of Section 87 of the CGST Act are only in respect of the intervening period from the date on which the order takes effect, till the date of the order and the same in no way, affects or give the Department the authority to issue show cause notice on a non-existent entity post merger/ amalgamation. It was further held that the show cause notice issued to a non-existent entity itself would be without jurisdiction and, therefore, the proceedings would stand vitiated and rendered void ab initio as has been held in the case of Reliance Industries Limited vs. P. L. Roongta (supra). The observations made in Vodafone Idea Ltd. (supra) on the question of applicability of Section 87, made in paragraphs 12 and 13, are reproduced herein below for ready reference:-

“12. These conditions, to our mind, 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. This in view of the fact that post merger/amalgamation the merged entity has no status in the eyes of law, and therefore no proceedings can be initiated against it. We are therefore inclined to reject the submissions made on behalf of Respondent No. 2 that the provisions of Section 87 of the CGST Act are applicable to the facts of the present case.

13. Considering the facts of the present case, we are of the opinion 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, as held in Reliance Industries Limited vs. P. L. Roongta (supra).”

17. In the above context, it would be pertinent to note herein that the contention advanced on behalf of the Department to the effect that the decision in the case of Maruti Suzuki India Ltd. (supra), having been rendered in the context of Income Tax Act, 1961, would not be applicable in a case where Section 87 of the CGST Act was attracted, was not accepted by this Court in Vodafone Idea Ltd. (supra).

18. Having regard to the facts and circumstances of the case, we are of the unhesitant opinion that the law laid down by the Hon’ble Supreme Court in the case of Maruti Suzuki India Ltd. (supra) as well as by the Bombay High Court in the cases of Reliance Industries Limited vs. P. L. Roongta (supra) and Vodafone Idea Ltd. (supra), would be squarely applicable to the facts of the present case.

19. Consequently, we hold that any show cause notice issued to a amalgamating company after the same had ceased to exist pursuant to its merger, based on the scheme of the amalgamation, would be without jurisdiction. Therefore, any proceeding initiated thereunder, would also be null and void.

20. In the result, this Writ Petition succeeds and the same is accordingly allowed. The impugned Order-in-Original dated 31^stDecember, 2025, is hereby set aside.

21. Before parting with the record, we deem it appropriate to clarify herein that in this Writ Petition, relief has been granted to the Writ Petitioner solely on the ground that the proceedings were initiated based on a show cause notice issued to a non-existent company. We have not expressed any opinion on the merit of the claims and counter claims of the parties. Therefore, this order would not come in the way of the Respondents-Authorities from initiating any proceeding, in accordance with law, for recovery of any unpaid GST dues, along with interest and penalty from the Writ Petitioner, if the same is otherwise permissible under the law.

22. The Writ Petition stands disposed of accordingly.

23. There would be no order as to costs.

Notes:

¹ [2025] 479 ITR 770

² 2026(5) TMI 162 Bombay High Court

³ [2019] 416 ITR 613