9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 720 - HC - Income TaxAssessment order and recovery notice against a non-existent entity - scheme of amalgamation approved - HELD THAT - We find that the proposition canvassed by Petitioner is supported with the law laid down in the case of MARUTI SUZUKI INDIA LIMITED 2019 (7) TMI 1449 - SUPREME COURT and followed in City Corporation Ltd 2025 (1) TMI 1504 - BOMBAY HIGH COURT and Thermax Babcock and Wilcox Ltd 2024 (12) TMI 913 - BOMBAY HIGH COURT . We also find that the Transferor Entity had duly informed the Respondents about the amalgamation and had also surrendered its service tax registration in 2013 itself. Despite this a show cause notice and the Impugned Orders came to be issued in the name of the Transferor Entity in the year 2021 and 2022 respectively i.e. almost after 8 years. In the present case there is no dispute with regard to the amalgamation order having taken effect from 22.10.2013. Thus the Transferor Entity ceased to exist from 22.10.2013. Thus we set aside the Impugned Order and the Recovery Notice and allow the present petition. We have quashed the Impugned Order and Recovery Notice only because they were issued to a non-existing company or entity despite the Respondents knowledge of its non-existence. We have not examined or commented on the merits of the matter.
Issues Presented and Considered
The core legal questions considered by the Court in this matter were:
Issue-wise Detailed Analysis 1. Validity of Proceedings Against a Non-Existent Entity Post-Amalgamation Relevant Legal Framework and Precedents: The Court relied heavily on the precedent set by the Hon'ble Supreme Court in Principal Commissioner of Income Tax vs Maruti Suzuki India Ltd, which establishes that proceedings initiated against a non-existent entity post-amalgamation are without jurisdiction and void ab initio. This principle has been consistently followed by Coordinate Benches of the Bombay High Court and other High Courts, including in City Corporation Ltd v. ACIT and Thermax Babcock and Wilcox Ltd v. Assistant Commissioner. Court's Interpretation and Reasoning: The Court held that once a scheme of amalgamation has been sanctioned and taken effect, the Transferor Entity ceases to exist as a legal entity. Therefore, any notices, orders, or recovery actions issued against such an entity post-cessation are invalid. The Court noted that the Transferor Entity ceased to exist from 22.10.2013, the date on which the amalgamation scheme was filed with the Registrar of Companies as per the Court's earlier order dated 16.08.2013. Key Evidence and Findings: The Petitioner submitted documentary evidence including the Court's amalgamation order, correspondence informing the Respondents of the amalgamation, and the Transferor Entity's application for surrender of its service tax registration dated 19.09.2013 and a letter dated 01.01.2014. Despite this, the Respondents issued a show cause notice and an assessment order in the name of the Transferor Entity in 2021 and 2022 respectively. Application of Law to Facts: The Court applied the principle from Maruti Suzuki and related cases to the facts, concluding that the Respondents erred in issuing notices and orders to the Transferor Entity, which had ceased to exist for nearly eight years. This rendered the impugned orders and recovery notice void. Treatment of Competing Arguments: The Respondents argued that the Petitioner, as the amalgamated entity continuing the business, should have engaged with the proceedings or appealed before the CESTAT. The Court rejected this, holding that since the proceedings were initiated against a non-existent entity, the Petitioner was not obliged to participate or appeal. The Court emphasized that jurisdictional competence is a threshold issue and cannot be waived by participation. Conclusion: The issuance of notices and orders against the non-existent Transferor Entity was without jurisdiction and void ab initio. The impugned order and recovery notice were set aside accordingly. 2. Service of Notices and Procedural Compliance Relevant Legal Framework and Precedents: Proper service of notices is a fundamental procedural requirement. The Court referenced the fact that the Transferor Entity had vacated the address on which the impugned order was dispatched, indicating defective service. Court's Interpretation and Reasoning: The Court noted that the Petitioner was never served with any show cause notice, hearing notices, or the impugned order. This lack of service further invalidated the proceedings. Key Evidence and Findings: The Petitioner pointed out that the address used for dispatch of the impugned order was that of the Transferor Entity, which had ceased to exist and vacated the premises. Application of Law to Facts: Since the Transferor Entity was non-existent and the Petitioner was not served, the Court found the issuance and dispatch of notices defective and without jurisdiction. Treatment of Competing Arguments: The Respondents did not specifically dispute the service issue but argued on merits of continuation of proceedings. The Court emphasized that jurisdictional defects cannot be cured by substantive arguments. Conclusion: Defective service on a non-existent entity further contributed to the invalidity of the impugned proceedings. 3. Scope of Relief and Future Proceedings Relevant Legal Framework: The Court recognized the principle that quashing of orders on jurisdictional grounds does not preclude initiation of fresh proceedings in accordance with law. Court's Interpretation and Reasoning: The Court clarified that its order quashing the impugned order and recovery notice was strictly on jurisdictional grounds due to issuance against a non-existing entity. It did not comment on or decide the substantive merits of the underlying tax or service tax liability. Key Evidence and Findings: The Court noted the Respondents' knowledge of the amalgamation and non-existence of the Transferor Entity. Application of Law to Facts: The Court allowed the possibility for the Respondents to initiate fresh proceedings against the Petitioner, the amalgamated entity, if warranted and permitted by law. Treatment of Competing Arguments: The Petitioner sought complete dismissal of proceedings, but the Court limited relief to quashing the invalid orders, preserving the Respondents' right to proceed lawfully. Conclusion: The impugned orders were quashed; however, fresh proceedings against the Petitioner may be initiated in accordance with law. Significant Holdings The Court held:
Core principles established include the inviolability of jurisdictional competence in tax proceedings and the legal consequence of amalgamation extinguishing the identity of the Transferor Entity. The Court reaffirmed that procedural compliance, including proper service and issuance of notices to the correct legal entity, is mandatory. Final determinations on each issue were:
|
