In a significant ruling, the Karnataka High Court has canceled GST notices issued to a non-existent entity and overturned the related proceedings.
The notices in Form GST DRC-01 have been issued for various tax periods on the ground that notices have been issued to a non-existent entity, viz., M/s. Trelleborg Sealing Solutions (India) Private Limited.
It was to be noticed that in terms of the Scheme of Amalgamation approved by National Company Law Tribunal (NCLT) Bengaluru Bench, M/s. Trelleborg Sealing Solutions (India) Private Limited was amalgamated resulting in the creation of a new entity M/s. Trelleborg India Private Limited, which is the petitioner herein in terms of the order dated 13.06.2017 passed by NCLT, Bengaluru Bench.
After the amalgamation of M/s. Trelleborg Sealing Solutions (India) Private Limited with the transferee company M/s. Trelleborg Industrial Products Private Limited, the new entity underwent a change of name. Consequently, the petitioner now represents the newly formed company, as per the order dated 13.06.2017 passed by the NCLT, Bengaluru Bench.
Mr. Shamanth Naik, High Court Government Pleader (HCGP) representing the respondents, referenced an order dated June 13, 2017, issued by the NCLT Bengaluru Bench in T.P. Nos. 175/2017 and 176/2017. According to this order, the liability in question has been officially transferred to the Transferee Company.
The National Company Law Tribunal (NCLT) has approved the Scheme of Amalgamation for Trelleborg Sealing Solutions (India) Private Limited. Following this approval, the company submitted an application for the cancellation of its GST registration on November 29, 2021. The final order confirming this cancellation was issued on December 3, 2021, in Form GST REG-19, with the cancellation taking effect retroactively from November 29, 2021.
In a recent ruling, the Apex Court has clarified a crucial aspect of tax proceedings involving companies that undergo amalgamation. The decision in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (India) established that once an amalgamating entity ceases to exist upon approved Scheme of Amalgamation, the question of continuing the proceedings as regards the non-existent Company cannot be permitted. This principle was reinforced in a subsequent court order dated June 4, 2024.
Justice Sunil Dutt Yadav of the single bench ruled that notices issued to a non-existent entity, as detailed in Annexure-‘A’, were invalid. Consequently, all proceedings based on these notices have been annulled. However, the court has clarified that respondents retain the right to pursue actions against the correct entity concerning the matters outlined in Annexure-‘A’, in accordance with legal procedures. The petitions were dismissed on the grounds that legal proceedings cannot be initiated against a non-existent company.
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