Gujarat High Court Clarifies GST Treatment Of Amalgamations, Declines IGST Refund Relief To Alstom

The Gujarat High Court on 23 January dismissed a batch of writ petitions seeking IGST refunds on exports made prior to amalgamation, while authoritatively clarifying the statutory framework governing registration, refund claims and transfer of input tax credit in cases of corporate amalgamation under the GST regime.

A Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi dismissed the petitions filed by Alstom Transport India Limited, holding that both the taxpayer and the jurisdictional officers had failed to adhere to the mandate of the Central Goods and Services Tax Act, 2017 and the Rules framed thereunder while recording concern over the manner in which GST authorities were dealing with registration issues arising from amalgamations.

Taking note of systemic lapses on the part of tax authorities, the Court directed the Revenue to"

“issue appropriate directions or instructions for scrupulously following the mandate of the statutory provisions while dealing with the registration of both the entities in case of amalgamation, in order to avoid future complications.”

The petitions arose out of IGST refund claims relating to exports made prior to amalgamation, where refund applications were filed in the name of the erstwhile company that had merged with the petitioner pursuant to an order of the National Company Law Tribunal dated 10 August 2023. The petitioner contended that since the exports had been effected by the transferor entity as a registered person, the refund claim under Section 54(3) of the CGST Act could only be made in its name.

It was submitted that the refund had initially been sanctioned by the adjudicating authority, but the Revenue succeeded in appeal, following which the petitioner faced recovery proceedings for the refunded amount. The petitioner assailed the appellate order, contending that the rejection was solely on account of registration-related technicalities arising from the amalgamation.

While examining the matter, the High Court noted that the batch of petitions involved a common question of law and proceeded to lay down authoritative principles governing amalgamations under the GST framework. The Court held that transfer of unutilised input tax credit in cases of amalgamation can only be effected in the manner prescribed under Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules, and not otherwise.

The Bench further clarified that Section 22(4) of the CGST Act mandates fresh registration of the transferee entity pursuant to an amalgamation order, and that in terms of Section 87(2), the transferor and transferee entities are to be treated as distinct persons only up to the effective date of amalgamation, after which the registration of the transferor must be cancelled in accordance with law.

The Bench further observed that "appropriate instructions were also required to be issued for taking prompt steps within the prescribed time frame as soon as they come to know about the fact of amalgamation of the entities.”

However, while applying these principles to the facts before it, the Court held that both the petitioner and the tax authorities had disregarded the statutory scheme, and since the parties were pari delicto (in equal fault), it declined to exercise writ jurisdiction.

Relying on settled principles of strict interpretation of taxing statutes, including the Supreme Court's ruling in Safari Retreats, the Bench reiterated that equitable considerations cannot override statutory mandates in tax law.

Accordingly, the writ petitions were dismissed, with no order as to costs

For the Appellants: Aditya J Pandya