The Gujarat High Court has delivered a significant ruling on GST compliance in corporate amalgamations, particularly addressing transfer of unutilized Input Tax Credit (ITC) and eligibility for export refunds. In Alstom Transport India Ltd. v. Additional Commissioner, CGST, the Court examined whether a company undergoing amalgamation can partially transfer ITC and seek refund for the remaining balance.
The judgment provides authoritative clarity on Sections 18(3), 54(3), and 87 of the CGST Act, Rule 41, and the mandatory nature of procedural compliance in GST law.
Background of the Case: Alstom Transport India Ltd. v. Additional Commissioner, CGST
Alstom Transport India Limited (ATIL) emerged as the transferee company following an NCLT-approved amalgamation of three entities, including Alstom Rail Transportation India Pvt. Ltd. (ARTIPL). The amalgamation became effective once the certified NCLT order was filed with the Registrar of Companies on 22 September 2023.
Prior to amalgamation, ARTIPL had exported goods in April 2023, resulting in a substantial accumulation of unutilized ITC amounting to ₹242.02 crore.
ITC Transfer and Refund Claim Structure
Post-amalgamation:
- ARTIPL transferred ₹192.88 crore of unutilized ITC to ATIL through FORM GST ITC-02
- ₹49.14 crore was retained in ARTIPL’s electronic credit ledger
- ARTIPL filed refund applications for the retained ITC under Section 54(3) for zero-rated supplies
- A refund of ₹2.56 crore was initially sanctioned
Subsequently, the refund was set aside in appeal, leading to writ petitions before the High Court.
Key Legal Issues Before the Court
The Court examined four core issues:
- Whether partial transfer of ITC is permissible in amalgamation
- Whether a transferor company can seek refund of retained ITC post-amalgamation
- Impact of registration and cancellation irregularities
- Nature of refund as a statutory right
Registration and Cancellation Failures
Simultaneous Existence of Transferor and Transferee
The Court found serious procedural violations:
- ATIL applied for GST registration before it legally came into existence
- ARTIPL failed to apply for timely cancellation of GST registration after amalgamation
- Authorities cancelled ARTIPL’s registration prospectively, not from the NCLT order date
- Both entities co-existed simultaneously, which is impermissible under GST law
Section 87(2) CGST Act Ignored
Under Section 87(2):
- Amalgamating companies are treated as distinct only until the date of the NCLT order
- Their registrations must be cancelled from the date of the order
The Court held that allowing ARTIPL to continue as a registered person after amalgamation was contrary to statute.
Interpretation of Section 18(3) and Rule 41
Mandatory Transfer of Entire Unutilized ITC
The Court decisively ruled that:
- Section 18(3) permits transfer of ITC that “remains unutilized”
- Rule 41 operationalizes this through FORM GST ITC-02
- In an amalgamation, the statutory scheme requires transfer of the entire unutilized ITC
Partial transfer, followed by a refund claim, was held to defeat the statutory mechanism.
Refund of ITC Is Not a Constitutional Right
Relying on Supreme Court precedent, the Court reaffirmed that:
- Refund is a statutory benefit, not a constitutional entitlement
- The legislature defines when, how, and to whom refund is available
- Strict compliance with statutory procedure is mandatory
Since ATIL did not itself export goods, it could not directly claim refund. Its entitlement was limited to utilizing ITC after proper transfer.
Rejection of “Permissive” Interpretation Argument
The argument that Section 18(3) is merely enabling was rejected:
- The Court applied strict construction of taxing statutes
- Absence of the word “entire” does not allow partial transfer in amalgamation
- Reading flexibility into the provision would amount to judicial legislation
Doctrine of Pari Delicto Applied
A crucial aspect of the ruling is the application of pari delicto:
- Both ARTIPL and the jurisdictional officers were at fault
- Procedural lapses were mutual and substantial
- Courts will not grant relief where parties are equally in breach of law
As a result, ATIL could not seek equitable relief outside the statutory framework.
Final Outcome of the Case
- All writ petitions dismissed
- Refund denial upheld
- No interference with appellate order dated 08 January 2025
- Revenue directed to issue administrative instructions for handling amalgamation cases properly
- No order as to costs
Key Takeaways for GST and Corporate Restructuring
1. Entire ITC Must Be Transferred in Amalgamation
Partial ITC transfer with refund of balance is not permitted
2. Refund Route Cannot Bypass ITC Transfer Mechanism
Export refunds must flow through FORM GST ITC-02, not workaround methods
3. Registration Timelines Are Critical
Incorrect registration or delayed cancellation can invalidate substantive claims
4. Refund Depends on Statutory Compliance
Even vested export activity does not override procedural requirements
5. Mutual Irregularities Bar Relief
Where all parties are at fault, courts will not intervene
Conclusion
The Gujarat High Court’s ruling in the Alstom Transport India Ltd. case sets a clear and strict precedent for GST treatment in amalgamations. The judgment reinforces that ITC is a statutory construct, and its transfer or refund must strictly follow the procedure laid down by law.
For businesses undergoing restructuring, this decision underscores the importance of timely GST registration, cancellation, and complete ITC transfer to avoid irreversible tax consequences.
Gujarat HC Judgement dated 23/01/2026: Alstom Transport India Ltd. v. Additional Commissioner, CGST