HCL Infosystems Ltd. Vs Commissioner of State Tax & Anr. (Delhi High Court)
Summary: In HCL Infosystems Ltd. v. Commissioner of State Tax & Anr., the Delhi High Court quashed a Show Cause Notice (SCN) and a final order issued in the name of an amalgamating company, Digilife Distribution and Marketing Services Limited, post-merger. The court ruled that such proceedings are void ab initio as the amalgamating company ceases to exist after its merger with the amalgamated company. The merger, approved by the National Company Law Tribunal (NCLT) effective April 1, 2022, was duly communicated to the Registrar of Companies and relevant tax authorities. Despite these disclosures, the State Tax Officer issued a second SCN in December 2023 for the financial year 2018-19, followed by a final order in April 2024, both directed at the non-existent amalgamating company. The court referred to Maruti Suzuki India Ltd. v. Principal Commissioner of Income Tax and clarified that proceedings initiated against a non-existent entity cannot be rectified under Section 160 of the CGST Act, which addresses procedural defects. It observed that substantive errors, such as issuing notices to a legally defunct entity, are incurable. While Section 87 of the CGST Act addresses liabilities during mergers, the court held it does not permit continuing proceedings against an amalgamating company. Instead, the liabilities of the amalgamating company are automatically transferred to the amalgamated entity. By upholding these principles, the court safeguarded the rights of amalgamated entities from improper administrative actions and quashed the impugned SCN and final order.
