Facts of the case:

In this case, the petitioner was registered under the GST laws in multiple States. Pursuant to a Scheme of Amalgamation approved by the National Company Law Tribunal on 14.11.2019, another company merged into the petitioner and all assets and liabilities of the transferor entity vested in the petitioner. he unutilized Input Tax Credit (ITC) standing in the books of the transferor company primarily relating to CGST credit transitioned from the erstwhile central excise regime through TRAN-1 was also intended to be transferred to the petitioner.

When the petitioner attempted to transfer such ITC under Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules by filing Form GST ITC-02 on the GST portal, the system rejected the request with an error stating that the “Transferee and Transferor should be of the same State/U.T.” The petitioner therefore approached the High Court contending that the GST portal restriction had no statutory backing and unlawfully prevented transfer of ITC pursuant to a legally sanctioned amalgamation.

Reliance placed upon the decision of the High Court of Bombay in Umicore Autocat India (P) Ltd Vs. Union of India, which had permitted inter-State transfer of ITC in similar amalgamation circumstances. The Revenue opposed the petition, arguing that GST registrations are State-specific and inter-State transfer of ITC is not contemplated under the current framework.  The Revenue also cited a CBIC circular on apportionment of ITC in business reorganizations and pointed out that the Bombay High Court ruling had been challenged before the Supreme Court of India.

Issue:

Whether, upon an amalgamation approved by the NCLT, unutilized Input Tax Credit can be transferred from the transferor company to the transferee company located in a different State, and whether the GST portal or authorities can deny such transfer by imposing a “same State” condition not found in Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules.

Held that:

The High Court allowed the writ petition and held that Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules permits transfer of ITC in cases of amalgamation and does not impose any restriction that the transferor and transferee must be located in the same State. The endorsement inserted in Form ITC-02 on the GST portal imposing a “same State/U.T.” condition had no statutory basis and amounted to introducing a substantive restriction through a procedural mechanism.

The Court observed that statutory forms cannot be modified to incorporate conditions that are absent in the parent legislation. Any departmental opinion rejecting a statutory claim must be separately recorded through a proper order rather than being embedded into a prescribed form. The portal limitation cannot override substantive statutory rights.

Reliance placed upon reasoning in the Bombay High Court in Umicore Autocat India (P) Ltd., the Court held that seamless flow of ITC is a foundational objective of the GST framework and inter-State considerations do not justify denial of eligible CGST credit transfer pursuant to a lawful amalgamation. The Court found no compelling reason to depart from the Bombay view.

Considering that the petitioner had restricted its claim only to CGST credit and that the ITC had already been accounted for manually in its books pursuant to the NCLT scheme, the Court directed the department to permit manual filing and processing of Form ITC-02 until an appropriate system mechanism is developed.

Case Name: Emerson Process Management (India) Pvt Ltd Versus Union of India & Ors., State Of Gujarat, Deputy Commissioner Of State Tax, Assistant Commissioner of State Tax, Goods And Services Tax Network. dated 05.03.2026.