Allahabad HC quashes GST Demands on Merged Max Ventures, Rules Proceedings against Non-Existent Entities Invalid [Read Order]

In a recent judgment, the Allahabad High Court quashed the GST demands issued against Max Ventures and Industries Limited after its merger with Max Estates Limited, ruling that tax demands made against a company that had ceased to exist due to merger are invalid.

Max Estates Limited had filed a writ petition challenging tax demand orders issued under Section 73(9) of the Goods and Services Tax Act, 2017, for the financial years 2017-18, 2018-19, and 2019-20. The orders were issued in the name of Max Ventures and Industries Limited (MVIL), which had merged with the petitioner company pursuant to an order by the National Company Law Tribunal (NCLT) on July 21, 2023. 

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After the merger, the petitioner applied for the surrender of MVIL’s GST registration, which was suspended effective October 10, 2023 but in January 2025, the petitioner received a notification regarding a pending tax demand linked to MVIL.

The petitioner’s counsel argued that since MVIL had ceased to exist upon merger, the tax orders were invalid. They relied on precedents set by the Supreme Court and various High Courts, including Pr. Commissioner of Income Tax vs. Maruti Suzuki India Limited (2019), where the Supreme Court held that tax notices issued to a non-existent entity were legally untenable. 

The department counsel relied on Section 87 of the GST Act, arguing that proceedings could still continue against the transferor company despite the merger. They also argued that the liability of the merged entity could still be enforced under existing tax laws.

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The bench comprising Chief Justice Arun Bhansali and Justice Kshitij Shailendra, rejected the department argument, ruling that the tax demands were issued against a company that no longer existed, making them legally unsustainable. The court held that once a company is dissolved due to merger, any proceedings initiated in its name are void.

The court referred to the Supreme Court's decision in Maruti Suzuki India Limited, which clarified that upon an approved scheme of amalgamation, the amalgamating company ceases to exist, rendering any subsequent proceedings against it invalid.

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The court further observed that the Delhi High Court, in HCL Infosystems Ltd., had already examined Section 87 of the GST Act and found that it did not justify continuing tax proceedings against a non-existent company. Therefore, the Allahabad High Court ruled that the GST orders dated November 29, 2023, April 27, 2024, and August 26, 2024, must be set aside. 

The court allowed the government to pursue tax proceedings against the appropriate entity, Max Estates Limited, if permissible under the law.

To Read the full text of the Order CLICK HERE

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