Union of India & Anr. Vs Vodafone Idea Limited (Supreme Court of India)
Summary: The Supreme Court dismissed the Special Leave Petition filed by the Union of India and another against the Bombay High Court judgment concerning GST proceedings initiated against Vodafone Mobile Services Ltd. (VMSL), an entity that had ceased to exist following its merger with Idea Cellular Limited. The Supreme Court, after hearing the parties and examining the record, declined to interfere with the High Court’s order. The SLP was accordingly dismissed, thereby leaving the Bombay High Court ruling undisturbed.
Background and Bombay High Court Proceedings
VMSL and Vodafone India Limited were merged with Idea Cellular Limited pursuant to an order of the National Company Law Tribunal dated 30 August 2018, resulting in the petitioner, Vodafone Idea Limited. The merger was disclosed to the GST authorities when the GST registration of Idea Cellular Limited was amended.
Before the merger, VMSL carried on mobile telecommunication services and a tower business. On 13 November 2017, it transferred its entire tower business to ATC Telecom Infrastructure under a Business Transfer Agreement on a slump-sale basis. According to the petitioner, the transaction was not treated as a taxable supply and was not declared in GST returns.
Following an investigation commenced through summons issued under Section 70 of the CGST Act, a show-cause notice dated 1 August 2024 demanded approximately INR 363 crore under Section 74, along with penalty. The notice was issued to VMSL despite its merger. After replies were submitted, an order dated 29 January 2025 was passed.
Vodafone Idea approached the Bombay High Court under Article 226, principally seeking quashing of the impugned order and withdrawal of consequential action. The challenge to Notification No. 12/2017 was not pressed.
High Court’s Reasoning and Ruling
The petitioner contended that the impugned proceedings were a nullity because they had been initiated against a non-existent entity. Reliance was placed on the Supreme Court judgment in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. and the Bombay High Court decision in Reliance Industries Limited v. P. L. Roongta, which recognised that proceedings initiated against an amalgamating company after it had ceased to exist could be void ab initio where the Revenue had knowledge of the amalgamation.
The Revenue argued that Maruti Suzuki, being an income-tax decision, did not govern the GST proceedings. It relied particularly on Section 87 of the CGST Act, contending that the provision preserved GST liabilities relating to the period before the merger and permitted proceedings concerning the erstwhile entity.
The Bombay High Court rejected this contention. It noted that the GST authorities had been informed of the merger and that the legal effect of the NCLT order was that the amalgamating entities ceased to exist. The Court held that the principles in Maruti Suzuki were applicable and found support in Reliance Industries.
The Court also examined Section 87 of the CGST Act. It held that the provision addresses specified transactions between amalgamating or merging companies during the intervening period between the effective date of the merger and the date of the merger order. It does not authorise the Department to issue a show-cause notice against a non-existent entity after the merger.
The High Court further relied upon HCL Infosystems Ltd. v. Commissioner of State Tax and Another, where the Delhi High Court had similarly interpreted Section 87 as preserving taxable transactions and liabilities without permitting proceedings to be continued against a non-existent amalgamating company.
Consequently, the Bombay High Court held that Section 87 could not be invoked to carry forward the proceedings against VMSL. Since the show-cause notice itself had been issued without jurisdiction, the proceedings were held to be void ab initio. The petition was allowed in terms of prayer clause (a), quashing the impugned order.
Supreme Court Challenge and Final Ruling
The Union of India challenged the Bombay High Court’s decision before the Supreme Court. After condoning the delay, the Supreme Court heard the learned counsel appearing for the parties and examined the materials on record.
The Supreme Court recorded that it was not inclined to interfere with the impugned order passed by the High Court. The Special Leave Petition was therefore dismissed, and pending applications, if any, were disposed of.
The dismissal leaves the Bombay High Court’s determination intact: the GST proceedings initiated against VMSL after its merger, when the entity had ceased to exist, were not sustained under Section 87 of the CGST Act and were void ab initio. The Supreme Court did not disturb the High Court’s reasoning or its consequential quashing of the impugned order.
Cases discussed:
- Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd.;
- Reliance Industries Limited v. P. L. Roongta;
- HCL Infosystems Ltd. v. Commissioner of State Tax and Another.
Read Bombay HC Judgmment in this case: Bombay HC Quashes 138 Crore GST Demands Against Non-Existent Vodafone Entities
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are not inclined to interfere with the impugned order passed by the High Court.
3. The Special Leave Petition is, accordingly, dismissed.
4. Pending application(s), if any, shall stand disposed of.
