The Bombay High Court ruled that GST proceedings initiated against Capital First Limited (CFL), which had merged with IDFC First Bank Limited, were void from the start. The case arose after CFL's amalgamation with IDFC was approved by the NCLT in December 2018, and CFL's GST registration was subsequently canceled in 2019. Despite the petitioner informing the GST department of CFL's non-existence, the department continued with audit and adjudication proceedings, issuing various notices and orders including ASMT-10, DRC-01A, ADT-01, DRC-01, and DRC-07, demanding significant GST payments, interest, and penalties.
The petitioner participated in hearings and submitted replies to protect its interests while consistently arguing that proceedings against CFL, a non-existent entity, were without jurisdiction. The High Court concluded that once the NCLT approved the merger, CFL ceased to exist and any subsequent notices or adjudications in its name were legally invalid. The Court relied on the Supreme Court's decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Limited, which established that an amalgamated entity loses its separate legal identity, rendering any proceedings against it void.
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The Court criticized the GST department for continuing proceedings despite being informed of the merger, showing disregard for legal principles. Additionally, the Court clarified that Section 87 of the CGST Act does not authorize proceedings against a dissolved entity post-amalgamation, as it only addresses tax treatment during the merger period, not post-merger adjudications.
Order Date - 07 May 2026
Parties: IDFC First Bank Limited Vs State of Maharashtra & Others
Facts -
- Petitioner, IDFC First Bank Limited challenged the GST adjudication order passed against Capital First Limited (CFL), which had already merged with the petitioner pursuant to an NCLT-approved amalgamation scheme in December 2018.
- After amalgamation, CFL’s GST registration was cancelled in 2019, and the petitioner repeatedly informed the GST department that CFL was no longer in existence and all proceedings against it were legally unsustainable.
- Despite these communications, the department continued audit and adjudication proceedings by issuing ASMT-10, DRC-01A, ADT-01, DRC-01 and finally DRC-07 orders in the name of CFL, raising huge GST, interest and penalty demands.
- The petitioner participated in hearings and filed detailed replies only to protect its interests, while consistently objecting that proceedings against a non-existent entity were without jurisdiction.
Issue -
- Whether GST show cause notice and adjudication proceedings can continue against an amalgamating company that has ceased to exist after merger.
Order -
- The Bombay High Court observed that once the NCLT approved the amalgamation scheme, CFL legally ceased to exist. Therefore, any notice or adjudication initiated thereafter in the name of CFL was fundamentally without jurisdiction and invalid in law.
- The Court relied heavily on the Supreme Court judgment in Principal Commissioner of Income Tax v. Maruti Suzuki India Limited and held that an amalgamated entity loses its separate legal identity. Consequently, assessment or adjudication proceedings against such non-existent entity are void ab initio.
- The Court noted that the GST department was fully aware of the amalgamation because the petitioner had repeatedly informed authorities through replies and correspondence. Even then, authorities continued proceedings in the old entity’s name, which showed complete disregard for settled legal principles.
- The Court further clarified that Section 87 of the CGST Act does not authorize authorities to continue proceedings against a dissolved entity after amalgamation. The provision only governs tax treatment of inter-se transactions during the intervening merger period and cannot revive a non-existent company for adjudication purposes.
