Case Name : Trelleborg India (P.) Ltd. V/s State of Karnataka (HIGH COURT OF KARNATAKA)

Case Name : Trelleborg India (P.) Ltd. V/s State of Karnataka (HIGH COURT OF KARNATAKA) :

ORDER DATE : 02-07-2024

In the case of Trelleborg India Pvt. Ltd. vs. State of Karnataka, the Karnataka High Court addressed the issue of whether GST proceedings could continue against a company that ceased to exist due to an approved Scheme of Amalgamation. Here’s a simplified explanation with elaboration:

1. Background:
   • Trelleborg Sealing Solutions (India) Pvt. Ltd. (TSSIPL) was amalgamated as per the Scheme of Amalgamation approved by the National Company Law Tribunal (NCLT) on 13th June 2017.
   • This resulted in the creation of a new entity, Trelleborg India Pvt. Ltd., which succeeded TSSIPL.
   • Post-amalgamation, TSSIPL ceased to exist as a separate legal entity.

1. GST Proceedings:
   • Despite the amalgamation and subsequent cancellation of TSSIPL’s GST registration, Trelleborg India Pvt. Ltd. (the petitioner) received notices in Form GST DRC-01 between September 2022 and May 2024.
   • These notices were issued for tax periods ranging from 2017-18 to 2019-20.

1. Legal Challenge:
   • The petitioner challenged these notices on the grounds that they were issued to a non-existent entity, TSSIPL, which had been amalgamated and no longer existed legally.
   • The petitioner argued that once an entity ceases to exist due to an approved amalgamation, any proceedings against that entity cannot legally continue.

1. Court’s Decision:
   • The Karnataka High Court referred to the legal principle established in various judgments, including the decision in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (India) Ltd. (2020), which emphasized that proceedings cannot continue against a company that no longer exists post-amalgamation.
   • The Court held that once an amalgamating entity ceases to exist upon the approval of a Scheme of Amalgamation by the NCLT, any further proceedings against that entity are impermissible.
   • Therefore, the Court set aside the show cause notices issued to TSSIPL, considering it a non-existent entity.

1. Implications:
   • This ruling provides clarity on the legal standing of entities post-amalgamation concerning GST proceedings.
   • It reinforces the principle that legal proceedings must be initiated against the correct and existing legal entity.
   • The decision protects the rights of companies undergoing amalgamation by ensuring that they are not subjected to liabilities or proceedings meant for entities that no longer legally exist.

1. Conclusion:
   • Trelleborg India Pvt. Ltd. succeeded in its petitions as the Karnataka High Court ruled in its favor.
   • The Court’s decision ensures compliance with legal principles and safeguards the interests of companies involved in amalgamation processes under the GST framework.

In summary, the High Court’s decision in this case underscores the importance of legal continuity and entity status in GST proceedings, ensuring that only existing entities can be subject to such regulatory actions.

Reference of Section : Section 87 of CGST Act.Top of Form