In a recent ruling, the Gujarat High Court addressed the issue of refund entitlement concerning unutilised Input Tax Credit (ITC) following a corporate amalgamation. The case involved M/s Alstom Transport India Limited, which emerged after the merger of Alstom Rail Transportation India Pvt. Ltd. into the petitioner company, as approved by the National Company Law Tribunal (NCLT). Prior to this merger, the transferor company had accumulated unutilised ITC through zero-rated exports. During the amalgamation process, only a portion of this ITC was transferred to the petitioner via Form GST ITC-02, while a refund was claimed for the remaining balance.
Initially, the refund was sanctioned, but it was later reversed by the appellate authority, which argued that the entire ITC should have been transferred during the amalgamation, as per Section 18(3) of the CGST Act. The main issue was whether the refund of unutilised ITC could be denied on the basis that not all ITC was transferred to the transferee company.
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The High Court clarified that Section 18(3) of the CGST Act and Rule 41 of the CGST Rules are not obligatory in requiring the complete transfer of ITC. The court emphasized that the right to claim a refund of unutilised ITC is established at the time of export, provided the substantive conditions are met. Procedural issues related to amalgamation or registration should not obstruct this substantive refund right. Consequently, the court found the appellate authority's decision to deny the refund based on partial ITC transfer to be erroneous, setting aside the impugned orders and restoring the refund entitlement.
Parties: M/s Alstom Transport India Limited v. Additional Commissioner, CGST & Central Excise (Appeals) & Ors.
Order Date: 23 January 2026
Facts –
- The petitioner company came into existence pursuant to an NCLT-approved scheme of amalgamation, whereby Alstom Rail Transportation India Pvt. Ltd. merged into the petitioner.
- Prior to amalgamation, the transferor company had effected zero-rated exports and accumulated unutilised ITC.
- Only a part of the unutilised ITC was transferred to the petitioner through Form GST ITC-02, while refund was claimed for the balance ITC.
- Though the refund was initially sanctioned, the appellate authority reversed it holding that entire ITC ought to have been transferred on amalgamation.
Issue –
- Whether refund of unutilised ITC can be denied on the ground that the transferor company did not transfer the entire ITC balance to the transferee upon amalgamation under Section 18(3) of the CGST Act?
Order –
- The High Court held that Section 18(3) of the CGST Act and Rule 41 of the CGST Rules are enabling provisions and do not mandate compulsory transfer of the entire ITC.
- It was observed that the right to claim refund of unutilised ITC crystallises at the time of export, provided substantive conditions are satisfied.
- Procedural aspects relating to amalgamation or registration cannot defeat a vested substantive refund right.
- The appellate authority erred in denying refund solely on the ground of partial ITC transfer.
- The impugned appellate orders were set aside and the refund entitlement was restored.
