Inter-State ITC Transfer on Amalgamation Allowed – Portal Restriction Invalid

Case Details: Emerson Process Management (India) Pvt Ltd. vs. Union of India [2026] 185 taxmann.com 141 (Gujarat)

Judiciary and Counsel Details

A.S. Supehia & Pranav Trivedi, JJ.
Uchit N Sheth for the Petitioner.
Shashvata U Shukla, Senior Standing Counsel for the Respondent.

Facts of the Case

The petitioner, a registered assessee engaged in the manufacture of safety valves and components, was registered under GST in multiple States and underwent a court-approved amalgamation under the orders of the National Company Law Tribunal (NCLT). Pursuant to the said amalgamation, the petitioner sought transfer of unutilised input tax credit by filing statutory Form GST ITC-02 as prescribed under the CGST Rules. However, while attempting online filing, the GST portal generated a restriction message stating that the transferee and transferor must be registered in the same State or Union Territory, and the department also endorsed a similar objection on the said form. The petitioner contended that such a restriction was not contemplated under the statute and that, in the absence of an enabling online mechanism, the statutory entitlement could not be defeated, thereby necessitating acceptance of manual filing of Form ITC-02. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that transfer of input tax credit upon amalgamation is expressly governed by Section 18(3) of the CGST Act, read with Rule 41 of the CGST Rules, and neither provision imposes any restriction based on the inter-State nature of amalgamation. It was observed that the portal-based restriction and the departmental endorsement, which introduced a condition not found in the statute, were without legal authority and could not override statutory provisions. The Court further held that the absence of an online facility cannot defeat a substantive right of credit transfer arising upon approved amalgamation. Accordingly, it was concluded that the petitioner was entitled to a transfer of credit, and the authorities were directed to accept and process Form ITC-02 manually in accordance with the law.