1. Background & Factual Matrix

  • Three Alstom group companies, including Alstom Rail Transportation India Pvt. Ltd. (ARTIPL), were amalgamated into Alstom Transport India Ltd. (ATIL) pursuant to an order of the NCLT dated 10.08.2023.
  • The effective date of amalgamation was 22.09.2023, being the date of filing of the certified copy of the NCLT order with the Registrar of Companies.
  • Exports were effected by ARTIPL during April 2023, i.e., prior to amalgamation.

Post-amalgamation actions by ARTIPL:

  • Filed FORM GST ITC-02 on 20.10.2023, transferring ₹192.87 crore of unutilised ITC.
  • Retained ₹49.14 crore of ITC in its Electronic Credit Ledger.
  • Claimed refund under Section 54(3) of the CGST Act.
  • Refund of ₹2.56 crore was sanctioned on 28.02.2024.

Departmental action:

  • Refund was reviewed under statutory powers.
  • Refund sanction order was set aside in appeal on 08.01.2025.
  • GST registration of ARTIPL was cancelled prospectively w.e.f. 29.11.2024.

2. Core Legal Issues Before the Court

  1. Whether, post-amalgamation, the transferor company (ARTIPL) could retain part of unutilised ITC and claim refund instead of transferring the entire ITC through FORM GST ITC-02.
  2. Whether a refund of ITC can survive when statutory provisions governing amalgamation, registration, and cancellation were violated.
  3. Whether Section 18(3) of the CGST Act is mandatory or merely permissive in relation to transfer of ITC.
  4. The effect of Section 87(2) of the CGST Act on GST registration status post-amalgamation.
  5. Whether a refund can be sustained when transferor and transferee co-existed contrary to the statutory scheme.

3. Statutory Framework Analysed by the Court

(A) Section 18(3) CGST Act read with Rule 41

  • Governs transfer of unutilised ITC in cases of amalgamation.
  • Requires filing of FORM GST ITC-02.
  • Assessee argued that absence of the phrase “entire ITC” implies permissive and partial transfer.

(B) Section 54(3) CGST Act

  • Refund of unutilised ITC is purely statutory.
  • Not a vested or constitutional right.
  • Subject to strict conditions and restrictions.

(C) Sections 22, 25 & 29 CGST Act

  • Mandate registration of the transferee.
  • Mandate cancellation of registration of the transferor upon amalgamation.

(D) Section 87(2) CGST Act (Critical Provision)

For GST purposes, amalgamating companies shall be treated as distinct only up to the date of the NCLT order, and their GST registrations shall be cancelled with effect from the date of such order.

4. Key Findings of the High Court

4.1 On Registration & Cancellation

  • ARTIPL ceased to exist in law on 10.08.2023, being the date of the NCLT order.
  • GST registration ought to have been cancelled from that date and not from 29.11.2024.
  • Prospective cancellation was held to be contrary to Section 87(2).

Regarding ATIL’s registration:

  • Application was filed prior to its legal birth.
  • Registration was granted retrospectively, contrary to Section 22(4).

The Court held that both the assessee and the Department violated the statutory framework.

4.2 On Partial Transfer of ITC

  • The Court rejected the argument that Section 18(3) is merely permissive.
  • Amalgamation is a special statutory event, not an optional business decision.
  • Upon amalgamation, the entire business, assets, liabilities, and tax credits vest in the transferee.
  • The transferor cannot selectively retain ITC for encashment.

Partial transfer coupled with refund was held to be impermissible tax planning.

4.3 On Refund of Unutilised ITC

  • Relying on VKC Footsteps (Supreme Court), the Court reiterated that refund is not an inherent right and requires strict statutory compliance.
  • Refund failed because:
    • ARTIPL had lost its legal identity post-amalgamation.
    • ITC ought to have been transferred entirely to ATIL.
    • Parallel existence of two GST registrations was illegal.

The refund sanction order was therefore held to be unsustainable in law.

5. Court’s Strong Observations

  • Revenue authorities facilitated illegality by:
    • Allowing dual GST registrations to subsist.
    • Ignoring the mandate of Section 87(2).
  • An assessee cannot take advantage of its own wrong.
  • GST law does not permit parallel survival of transferor and transferee after amalgamation.

6. Final Decision

  • Appellate order setting aside the refund was upheld.
  • Writ petitions were dismissed.
  • No direction was issued for re-filing or manual refund.
  • Amount already refunded to be dealt with in accordance with law.

7. Ratio Decidendi (Binding Principle)

In an amalgamation, unutilised ITC must be transferred in entirety under Section 18(3) read with Rule 41. A transferor company cannot retain ITC post-amalgamation to claim refund, as refund is a statutory concession subject to strict compliance, and Section 87(2) mandates cessation of the transferor’s GST identity from the date of the NCLT order.

8. Practical Implications for Professionals

Do’s

  • File FORM GST ITC-02 for full ITC immediately after amalgamation.
  • Apply for cancellation of transferor GSTIN within 30 days.
  • Ensure transferee registration strictly in accordance with Section 22(4).

Don’ts

  • Do not retain ITC in the transferor’s electronic credit ledger.
  • Do not attempt refund of ITC post-amalgamation.
  • Do not rely on prospective cancellation to justify refund claims.

9. Why This Judgment Is a Landmark

  • One of the first High Court rulings comprehensively harmonising Sections 18, 29, 54 and 87 of the CGST Act.
  • Categorically rejects the theory of partial ITC retention post-amalgamation.
  • Will significantly impact corporate mergers, export-oriented entities, and GST refund litigation across India.


Sections Involved

  • Section 16(3) – IGST Act, 2017
  • Section 18(3) – CGST Act, 2017
  • Section 22(4) – CGST Act, 2017
  • Section 25 – CGST Act, 2017
  • Section 29 – CGST Act, 2017
  • Section 54(3) – CGST Act, 2017
  • Section 87(2) – CGST Act, 2017
  • Rule 20, Rule 22 & Rule 41 – CGST Rules, 2017

    LINK TO DOWNLOAD THE ORDER
    https://www.mytaxexpert.co.in/uploads/1769255132_MSALSTOMTRANSPORTINDIALIMITEDVersusADDITIONALCOMMISSIONERCGSTANDCENTRALEXCISEAPPEALSORS.pdf  

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