The Supreme Court issued notice in a Goods and Services Tax (GST) dispute concerning the refund of unutilized Input Tax Credit (ITC) following corporate amalgamation, after the Gujarat High Court ruled that such refunds cannot be claimed unless the credit is transferred strictly in accordance with the statutory GST mechanism.

The Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe issued notice in the Special Leave Petition filed by Alstom Transport India Limited against the judgment of the Gujarat High Court. The matter has been made returnable on 3 August 2026.

The controversy arose from a batch of writ petitions decided by the Gujarat High Court, where the Court examined whether an amalgamating company could retain a portion of unutilized ITC and subsequently seek refund of that credit instead of transferring the entire amount to the transferee entity through Form GST ITC-02 under Section 18(3) of the Central Goods and Services Tax Act, 2017.

The Gujarat High Court dismissed the writ petitions and held that Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules constitutes a complete statutory code governing transfer of ITC upon amalgamation. According to the Court, once a merger or amalgamation takes effect, the only legally permissible course for dealing with accumulated ITC is through statutory transfer to the transferee entity via the prescribed ITC-02 mechanism.

The High Court categorically ruled that ITC capable of being transferred under Section 18(3) cannot simultaneously be monetized through refund proceedings under Section 54 of the CGST Act. The Bench observed that although Section 18(3) appears enabling in form, it becomes mandatory in substance once amalgamation occurs.

The dispute originated from an amalgamation scheme approved by the National Company Law Tribunal on 10 August 2023 involving merger of three group entities into a single transferee company. The scheme became effective on 22 September 2023 after filing of the certified order before the Registrar of Companies.

Before amalgamation, one of the transferor entities had exported goods and accumulated substantial unutilized ITC. After the merger, a significant portion of the ITC balance was transferred to the transferee company through Form GST ITC-02. However, a balance amount remained in the electronic credit ledger of the transferor entity, for which refund applications were later filed. One such refund was initially sanctioned by the department.

Subsequently, the GST authorities exercised appellate powers under Section 107 of the CGST Act and succeeded in setting aside the refund order, leading to the writ proceedings before the Gujarat High Court.

In its judgment, the High Court undertook an extensive analysis of Sections 18, 29, 54 and 87 of the CGST Act along with Rules 20, 22 and 41 of the CGST Rules. The Court identified several compliance deficiencies relating to cancellation of registration, treatment of ITC, and procedural handling of amalgamated entities after the merger took effect.

The Bench further observed that GST law treats amalgamating entities as distinct taxable persons only until the effective date of amalgamation. Thereafter, the transferor entities are required to undergo cancellation of registration in accordance with law. 

The Court emphasized that administrative lapses or delays on the part of tax authorities in cancelling registrations or processing refund applications cannot create a substantive legal entitlement contrary to statutory provisions.

Rejecting the taxpayers’ plea for equitable relief, the High Court held that GST refunds are purely statutory benefits and must be claimed strictly within the framework prescribed by the legislature.

The Court also refused to permit fresh or manual refund applications, observing that such a course would dilute and undermine the legislative scheme governing zero-rated supplies and transfer of ITC after corporate restructuring.

Case Details

Case Title: M/S Alstom Transport India Limited Versus Additional Commissioner, CGST and Central Excise (Appeals) & Ors.

Case No.: Special Leave Petition (Civil) Nos. 16124-16130 of 2026

Date: 13 May 2026

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