Bombay HC Quashes GST Order: Capital First Ltd. Ceased to Exist After IDFC Merger, Proceedings Against Non‑Existent Company Held Void [Read Order]

In a recent ruling, the Bombay High Court set aside a ₹10.25 crore Goods and Services Tax (GST) demand raised against Capital First Limited (CFL), holding that tax proceedings initiated in the name of a company that had ceased to exist after its merger with IDFC First Bank Limited were void ab initio.

The case started in December 2018. The National Company Law Tribunal (NCLT), Chennai, approved the amalgamation of Capital First Limited , Capital First Home Finance Ltd., and Capital First Securities Ltd. into IDFC First Bank Limited. Following this, CFL’s GST registration was formally cancelled in June 2019, making CFL a non‑existent entity in law.

Despite this, the GST authorities continued to issue notices and initiate audit proceedings against CFL between 2022 and 2023, alleging discrepancies in its returns. IDFC FirstBank continuously clarified that CFL had merged and ceased to exist, but the department persisted, eventually passing a demand order in April 2024 for over ₹10 crore in GST liabilities (CGST, Maharashtra State GST, and IGST combined), along with interest and penalties, all in CFL’s name.

The petitioner, IDFC First Bank Limited, argued that the tax department’s reliance on Section 87 of the CGST Act was misplaced, as the provision only governs transactions between merging entities before the merger date, not post‑merger proceedings against a defunct company.

Petitioner also cited the Supreme Court’s decision in Maruti Suzuki India Ltd. and the Bombay HC’s own precedent in Vodafone Idea Ltd., both of which held that notices issued to non‑existent entities are legally unsustainable.

The Court held that once a merger is sanctioned, the amalgamating company “ceases to exist in the eyes of law,” and any proceedings against it are null. It also clarified that Section 87 does not empower authorities to pursue tax recovery from a non‑existent entity after amalgamation.

The division bench of Justice G. S. Kulkarni and Justice Aarti Sathe observed that the impugned order dated 26 April 2024 was issued to CFL, even though the National Company Law Tribunal, Chennai, had approved its amalgamation with IDFC First Bank on 12 December 2018, and its registration had been cancelled in June 2019.

Accordingly, the bench quashed the impugned order and allowed the writ petitions, noting that “no proceedings qua the said entity could be adopted against the petitioner.”

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