The Bombay High Court in the case of UMICORE AUTOCAT INDIA PRIVATE LIMITED, (AFTER AMALGAMATION OF M/S UMICORE ANANDEYA INDIA PRIVATE LIMITED) VERSUS UNION OF INDIA, GOODS AND SERVICES TAX NETWORK, NEW DELHI, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, THE GOODS AND SERVICES TAX COUNCIL (GST COUNCIL), NEW DELHI, THE STATE TAX OFFICER, PANAJI, GOA, THE COMMISSIONER, CGST, PATTO vide WRIT PETITION NO. 463 of 2024 dated 10.07.2025, held that Section 18(3) and Rule 41 do not prohibit inter-State transfer of ITC where the business is transferred and liabilities assumed in an amalgamation. The “distinct person” concept under Section 25(4) does not override the statutory right to ITC transfer in such mergers. The GST portal’s technical inability to accept the transfer cannot be a ground to deny a legitimate ITC claim. In fact, Section 22(4) contemplates registration transfer in case of business succession including inter-State.

Facts of the Case:

The petitioner (Umicore Autocat India Pvt. Ltd.) is a company registered in the State of Maharashtra under the GST regime. A scheme of amalgamation under Sections 230 to 232 of the Companies Act, 2013 was sanctioned, whereby Umicore Autocat India Pvt. Ltd. (Transferee) merged with another entity that was registered under the GST law in a different State (Goa).

After the amalgamation took effect, the petitioner filed an application to transfer the unutilized Input Tax Credit (ITC) lying in the electronic credit ledger of the transferor company to the account of the transferee company, as per Section 18(3) of the CGST Act, 2017 read with Rule 41 of the CGST Rules, 2017. The transfer was attempted through Form GST ITC-02, which is the statutory form prescribed for such cases.

However, the GST portal rejected the application, displaying the system-generated message, “Transferee and Transferor should be of the same State/Union Territory”.

The Respondent relying on this error, denied the ITC transfer, asserting that under the CGST regime, distinct persons registered in different States (under Section 25(4) of the CGST Act) cannot transfer credit between themselves, even in case of an amalgamation.

The petitioner challenged this decision by filing a writ petition before the Bombay High Court, arguing that neither Section 18(3) nor Rule 41 imposes any such territorial restriction on ITC transfer.

Issue: Whether the transfer of unutilized Input Tax Credit under Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules is barred in cases of amalgamation where the transferor and transferee are registered in different States, merely because they are treated as distinct persons under Section 25(4).

Held that:

The Court held that Section 18(3) and Rule 41 clearly permit the transfer of unutilized ITC in the event of sale, merger, amalgamation, lease, or transfer of a business, and do not impose any geographical restriction requiring the transferor and transferee to be registered in the same State or Union Territory. The error message generated by the GST portal, “Transferee and Transferor should be of the same State/UT”, is unsupported by any statutory provision and cannot override the taxpayer’s substantive right under the CGST law.

The Court emphasized the principle of strict interpretation of taxing statutes, holding that, “It is a well-settled position that the intention of the Legislature shall be gathered from the language used, and attention should be paid to what has been said as well as to what has not been said.” The Court held that reading a restriction into the statute i.e requiring same-State registration for ITC transfer, would amount to judicial legislation, which is impermissible.

The Court acknowledged the legislative intent behind permitting ITC transfers during amalgamations and stated that, “The legislature was conscious of situations where a new entity comes into existence pursuant to an arrangement of amalgamation or merger, and has deliberately not included any restriction based on State registration in Section 18(3) or Rule 41.”

The Court further noted that the time limits for availing ITC under the CGST Act are procedural, and do not affect the substantive eligibility for ITC transfer under amalgamation provisions.

The Court held that there was no legal ground to deny the benefit of ITC transfer to the petitioner. The portal-based restriction has no force of law and cannot be a basis for rejecting the petitioner’s claim.

The Court allowed the petition, and directed that the petitioner be granted the benefit of ITC transfer in accordance with law.

To read the complete judgment 2025 Taxo.online 1551