GST Proceedings Against A Dissolved Company Lack Jurisdiction: Andhra Pradesh High Court

The Andhra Pradesh High Court on 3 March held that GST proceedings against a non-existent or dissolved company lack jurisdiction and cannot be sustained in law.

A Division Bench of Justices R. Raghunandan Rao and T.C.D. Sekhar set aside an assessment order passed against Tata Capital Limited, observing:

“The proceedings, which had been initiated, against the dissolved company, before the appointed date, would now have to be taken up against the petitioner company and not the dissolved company.”

Tata Capital Limited, engaged in financial services, had a subsidiary, Tata Capital Financial Services Limited, which was dissolved pursuant to a scheme of amalgamation approved by the NCLT, Mumbai on 24 November 2023, with effect from 1 April 2023.

GST audit proceedings had been initiated against the dissolved company prior to the amalgamation. Despite being informed of the amalgamation and dissolution, the department continued proceedings in the name of the dissolved entity and passed the impugned assessment order.

Challenging the order, the petitioner argued that proceedings against a non-existent entity are void ab initio and suffer from a jurisdictional defect. The department contended that the scheme of amalgamation transferred the liabilities of the dissolved company to the petitioner, and the petitioner could not be absolved of tax liability.

The High Court accepted the petitioner's argument, holding that once a company is dissolved under a scheme of amalgamation, all proceedings must continue in the name of the transferee company. The Court rejected the Department's claim that the defect was procedural or curable, noting that such proceedings go to the root of jurisdiction.

Referring to Section 87 of the CGST Act, the Bench observed:

“A reading of the said provision makes it clear that the said provision is only ensuring that the right of the Authorities to recover tax is protected and the liability of such tax would continue and would have to be discharged. This provision does not in any manner deal with the question of whether pending proceedings against a dissolved company, in a scheme of amalgamation, can be continued or not.”

Accordingly, the Court allowed the writ petition and set aside the impugned order.

For Petitioner: Vivek Chandra Sekhar S, Advocate

For Respondent: P S P Suresh Kumar, Advocate