Bombay High Court Quashes Post-Merger GST Demand Against Vodafone Mobile Services

The Bombay High Court has recently held that GST proceedings initiated against Vodafone Mobile Services Ltd. after it ceased to exist due to its merger with Idea Cellular Ltd. and Vodafone India Ltd. were void ab initio.

The court set aside the adjudication order and held that the show cause notice itself was issued without jurisdiction.

A Division Bench of Justice G. S. Kulkarni and Justice Aarti Sathe observed that, “the show-cause notice itself having been issued without jurisdiction, the proceedings stand vitiated and are rendered void ab initio.”

The court further held that “post merger/amalgamation the merged entity has no status in the eyes of law, and therefore no proceedings can be initiated against it.”

The court held that once the NCLT approved the amalgamation scheme on August 30, 2018, Vodafone Mobile Services Ltd. ceased to exist as a separate legal entity. It rejected the GST Department's reliance on Section 87 of the CGST Act.

The provision, the Court said, applies only to transactions between merging companies during the limited intervening period between the effective date of the merger and the merger order. It does not permit proceedings against a non-existent company.

The case arose from GST proceedings over Vodafone Mobile Services Ltd.'s 2017 slump sale of its telecom tower business to ATC Telecom Infrastructure as a going concern. Vodafone's case was that the slump sale of the entire business was not liable to GST in the manner alleged by the department.

Vodafone Idea, the merged entity, told the Court that Vodafone Mobile Services Ltd. and Vodafone India Ltd. had merged with Idea Cellular Ltd. under an NCLT-approved scheme. This was disclosed to GST authorities when GST registration records were amended.

Despite being informed about the merger, the Directorate General of GST Intelligence went ahead with its investigation. On August 1, 2024, it issued a show cause notice demanding about ₹363 crore under Section 74 of the CGST Act, alleging that the transfer of the going concern was an exempt supply and that input tax credit had been wrongly availed. An adjudication order followed on January 29, 2025.

For Vodafone Idea, Senior Advocate Darius Shroff argued that the proceedings were fundamentally without jurisdiction because they had been initiated against an entity that had ceased to exist in law.

He relied on the Supreme Court's ruling in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd., where proceedings initiated against an amalgamating company after its merger were held to be void.

The GST Department, however, maintained that Section 87 of the CGST Act specifically deals with mergers and amalgamations, and permitted proceedings for the pre-merger period against the erstwhile GST registration

The High Court rejected this argument.

It held that Section 87 only preserves tax treatment for transactions between merging entities during the transition period before the merger order. It does not authorize the department to issue notices to a company that has ceased to exist.

The court also relied on the Delhi High Court's ruling in HCL Infosystems Ltd. v. Commissioner of State Tax.

Holding that the show cause notice was issued without jurisdiction, the Court allowed Vodafone Idea's writ petition and set aside the impugned order.

For Petitioner: Senior Counsel Darius Shroff along with Advocate Rahul Jain instructed by Alpha Chambers

For Respondents: Advocates Y. S. Bhate for Respondent No. 1, Siddharth Chandrashekhar a/w Suman Kumar Das for Respondent No.2.