The Gujarat High Court in M/s Alstom Transport India Ltd. v. Additional Commissioner, CGST & Central Excise (Appeals) addressed whether unutilised Input Tax Credit (ITC) can be denied as refund merely because, after an amalgamation, the transferor company did not transfer the entire ITC through Form GST ITC-02. The Court held that refund of unutilised ITC arising from exports is a vested right that crystallises on the date of export, not on subsequent corporate events like amalgamation. Section 16(3) of the IGST Act and Section 54(3) of the CGST Act permit refund of unutilised ITC without imposing any condition that such ITC must first be transferred under Section 18(3). The Court clarified that Section 18(3) and Rule 41 are enabling provisions, not mandatory ones, and do not prohibit partial transfer of ITC. Further, delayed cancellation of GST registration cannot retrospectively negate a taxpayer’s right to refund. The department cannot impose restrictions not found in the statute. Accordingly, denial of refund was held to be unsustainable in law.
The Real Problem Behind This Case
If you’ve ever handled GST compliance during a merger or amalgamation, you know it’s messy.
Now add export refunds, ITC transfer, partial ITC lying in ledger, and delayed cancellation of GST registration that’s exactly where this case landed.
The Gujarat High Court had to answer a very practical but legally tricky question:
Can unutilised ITC be denied as refund merely because, after amalgamation, the transferor company did not transfer the entire ITC through Form ITC-02?
Short answer: No. The law does not say so.
Long answer let’s break it down properly.
Background
Who were the parties?
- ARTIPL (Alstom Rail Transportation India Pvt. Ltd.) – the exporter
- ATIL (Alstom Transport India Ltd.) – the merged entity (transferee company)
ARTIPL was exporting goods and had accumulated huge unutilised Input Tax Credit (ITC).
Later:
- ARTIPL got amalgamated into ATIL under an NCLT-approved scheme
- The effective date of amalgamation was 22 September 2023
- However, GST registration of ARTIPL was cancelled only on 29 November 2024
Yes , more than a year later
What Exactly Triggered the Dispute?
Here’s the sequence that upset the department:
1. ARTIPL exported goods in April 2023 (when it was fully registered and active)
2. It had total unutilised ITC of around ₹242 crore
3. On amalgamation:
-
- ARTIPL transferred ₹192.88 crore via Form GST ITC-02
- ₹49.14 crore remained in its electronic credit ledger
4. ARTIPL then filed refund claims for this remaining ITC under:
-
- Section 16(3) of IGST Act
- Section 54(3) of CGST Act
5. Refund was sanctioned
6. Later, the department:
-
- Reviewed the refund
- Filed appeal
Cancelled the refund, saying:
“You should have transferred the entire ITC under Section 18(3). Partial transfer is not allowed.”
That cancellation is what reached the High Court.
Key Legal Provisions Involved
Section 16(3) of IGST Act Export Refunds
This section gives exporters two options:
- Export with payment of IGST and claim refund of IGST, or
- Export under LUT and claim refund of unutilised ITC
Important point:
The right to refund arises at the time of export, not later.
In this case:
ARTIPL exported goods in April 2023 when it was a valid registered person.
So the right to refund had already crystallised.
Section 54(3) of CGST Act – Refund of Unutilised ITC
This section allows refund of ITC in cases of:
- Zero-rated supplies (exports)
- Inverted duty structure
There is no condition here saying:
“Refund is allowed only if ITC is not transferable due to amalgamation.”
That condition was read into the law by the department, not written by Parliament.
Section 18(3) of CGST Act & Rule 41 – Transfer of ITC on Amalgamation
This is where the entire fight happened.
What Section 18(3) actually says:
- A registered person may transfer unutilised ITC to the transferee company
- Transfer is done through Form GST ITC-02
What the section does NOT say:
- It does not say transfer is mandatory
- It does not say entire ITC must be transferred
- It does not bar refund of ITC retained by transferor
Rule 41 also follows the same logic:
- It prescribes the procedure
- It does not impose any penalty or restriction for partial transfer
The Court made it clear:
Section 18(3) is an enabling provision, not a compulsory one.
Section 29 Cancellation of Registration
Department argued:
“ARTIPL ceased to exist after amalgamation. So how could it claim refund?”
The Court answered this very calmly:
- Cancellation of registration is not automatic
- It requires an order by the department
- In this case:
- GST registration was cancelled prospectively
- Till 29.11.2024, ARTIPL was recognized as a registered person
- Department itself accepted returns and filings
You can’t treat a taxpayer as “existing” for compliance and suddenly say “you never existed” for refund.
A Practical Example to Understand the Court’s Logic
Imagine this:
- Company A exports goods in April
- It earns ₹10 crore of refund-eligible ITC
- In September, Company A merges into Company B
- Company A transfers ₹7 crore via ITC-02
- ₹3 crore remains unutilised
Question:
Does GST law force Company A to:
- Lose ₹3 crore?
- Transfer it compulsorily?
- Or allow refund if conditions of export refund are met?
The High Court clearly chose the third option.
What the Gujarat High Court Finally Held
Refund is a vested right once export is completed Amalgamation does not extinguish that right Partial ITC transfer is legally permissible Section 18(3) is not mandatory Department cannot create restrictions not found in law Beneficial provisions for exports must be interpreted liberally The Court also relied on earlier rulings like:
- VKC Footsteps India Pvt. Ltd. (SC)
- Macrowagon Retail Pvt. Ltd. (Guj HC)
- Tonbo Imaging India Pvt. Ltd. (Kar HC)
Final Thoughts
Export refunds depend on date of export, not post-merger events ITC transfer under amalgamation is optional, not compulsory Partial transfer of ITC is not illegal Department cannot deny refund without clear statutory backing
Delay in GST cancellation by department cannot prejudice taxpayer
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