Vodafone Idea LTD vs. The Union Of INDIA Thr The Secretary Finance And Anr

Held

The Court held that the impugned order dated January 29, 2025, passed by Respondent No. 2 is void ab initio and without jurisdiction. The primary reasoning was that the order was issued against Vodafone Mobile Services Ltd. (VMSL), which had ceased to exist as a legal entity upon its merger with the Petitioner. This principle was supported by the Supreme Court's decision in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. and a coordinate bench's decision in Reliance Industries Limited v. P. L. Roongta, which held that proceedings initiated against a non-existent entity post-amalgamation are void ab initio, particularly when the revenue has knowledge of the merger. The Court also found that Section 87 of the CGST Act, which deals with liability in case of amalgamation or merger, is not applicable to justify the issuance of a show-cause notice or order against a non-existent entity. Section 87 is intended to address transactions during an intervening period and does not grant authority to proceed against an entity that no longer exists post-merger. The Delhi High Court's interpretation in HCL Infosystems Ltd. v. Commissioner of State Tax and Another was also relied upon, stating that Section 87 does not enable the respondents to place a non-existent entity on notice or pass an assessment order against it. The Court allowed the petition in terms of prayer clause (a), quashing and setting aside the impugned order.

Facts

Vodafone Idea Ltd. (Petitioner), a merged entity, challenged an order dated January 29, 2025, passed by the Directorate General of GST Intelligence (DGGI) (Respondent No. 2). The Petitioner was formed by the merger of Vodafone Mobile Services Ltd. (VMSL) and Idea Cellular Limited. VMSL had sold its entire tower business to ATC Telecom Infrastructure via a Business Transfer Agreement on November 13, 2017. The DGGI, after a period of investigation initiated by summons under Section 70 of the CGST Act on February 7, 2024, issued a show-cause notice on August 1, 2024, demanding INR 363 crores plus penalty. The Petitioner submitted replies, but the impugned order was passed without considering them. The Petitioner argued the order was passed against a non-existent entity post-merger.

Key Issues

1. Whether the impugned order dated January 29, 2025, passed by Respondent No. 2 is void ab initio and without jurisdiction, as it was issued against a non-existent entity (VMSL) after its merger with the Petitioner, contrary to the principles laid down in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. and Reliance Industries Limited v. P. L. Roongta? 2. Whether the provisions of Section 87 of the CGST Act are applicable to the facts of the case to justify the issuance of the show-cause notice and the subsequent order against a non-existent entity? Petitioner's arguments: The impugned order is a nullity as it was passed against a non-existent entity, vitiated by a breach of natural justice because the Petitioner's submissions regarding the merger were not considered. The demand is contrary to settled law that proceedings against a non-existent entity post-merger are void ab initio, especially when the revenue had knowledge of the merger. Section 87 of the CGST Act does not empower the authorities to issue notices or pass orders against a non-existent entity. Respondents' arguments: Not recorded in the judgment.