High Court Sets Aside Rejection of Refund to Amalgamated Company: ITC Transfer Not Mandatory

Alstom Rail Transportation India Pvt. Ltd. (ARTIPL) was amalgamated with Alstom Transport India Ltd. pursuant to an NCLT order resulting in the dissolution of ARTIPL. Prior to the amalgamation, ARTIPL had exported goods in April 2023 and thereby satisfied all substantive conditions for claiming a refund of unutilized Input Tax Credit (ITC). In October 2023, ARTIPL transferred part of its ITC balance to the petitioner but retained approximately Rs. 49.14 crore in its Electronic Credit Ledger, in respect of which refund applications were filed.

The Appellate Authority later reversed them, holding that ARTIPL ought to have transferred the entire ITC balance to the transferee under Section 18(3) of the CGST Act, read with Rule 41. Aggrieved by this rejection, the petitioner approached the Hon’ble High Court.

Main Issue: Whether Section 18(3) of the CGST Act mandates compulsory transfer of the entire unutilized ITC to the transferee upon amalgamation and whether non-transfer results in loss of the right to claim refund for exports made before the merger.

HC’s Order: The Hon’ble High Court quashed the Orders-in-Appeal and ruled in favour of the petitioner. The Court held that Section 18(3) of the CGST Act is a permissive provision and does not impose a mandatory obligation on a transferor company to transfer its entire unutilized ITC to the transferee upon amalgamation. It was observed that ARTIPL had affected the exports while it was a validly registered entity and, therefore, a vested and enforceable right to claim a refund had already accrued under Section 16(3) of the IGST Act.

The Court further held that procedural requirements under Rule 41 cannot override substantive statutory rights, particularly when the eligibility for refund as an exporter was undisputed. Thus, the Revenue was directed to process and grant the refund to the petitioner as the successor entity.

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