The Indian Supreme Court has opted not to reinstate a ₹363 crore Goods and Services Tax (GST) demand against Vodafone Idea. This decision follows a prior ruling by the Bombay High Court that quashed proceedings against an entity that had ceased to exist due to a merger. [Union of India v. Vodafone]
A bench comprising Justices JB Pardiwala and N Vinod Chandran dismissed the appeal filed by the Centre challenging the High Court’s decision. During the proceedings, the bench questioned the legitimacy of initiating legal actions against an entity that had been dissolved following its merger.
The controversy began with a GST demand associated with the transfer of Vodafone Mobile Services Limited’s telecom tower business to ATC Telecom Infrastructure in 2017. Vodafone Mobile Services had entered into a slump-sale agreement with ATC Telecom Infrastructure to sell its tower business as a going concern. This transaction was followed by the merger of Vodafone Mobile Services with Vodafone India Limited and Idea Cellular Limited, as sanctioned by the National Company Law Tribunal in August 2018. This merger was duly informed to the GST authorities.
Despite this, in August 2024, the Directorate General of GST Intelligence issued a show-cause notice to Vodafone Mobile Services demanding ₹363 crore under the Central Goods and Services Tax Act, 2017, along with penalties. The department argued that the transfer of a going concern was an exempt supply, thus disallowing the company from availing input tax credit to the extent claimed. An adjudication order followed in January 2025.
Vodafone Idea contested these proceedings before the Bombay High Court, asserting that Vodafone Mobile Services had ceased to exist due to the merger, rendering the initiation of proceedings against a non-existent entity invalid.
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In April 2026, Justices GS Kulkarni and Aarti Sathe of the Bombay High Court ruled in favor of Vodafone Idea. The court determined that the show-cause notice was issued without jurisdiction, rendering the proceedings void from the start. The tax department’s reliance on Section 87 of the CGST Act, which allows for the continuation of liabilities from before the merger, was rejected by the High Court. The court clarified that the provision did not permit the issuance of a show-cause notice to a company that had been dissolved post-amalgamation.
The Union of India was represented by Additional Solicitor General Dwarakanath in this case.
