TaxTMI 
TaxTMI 
2025 (7) TMI 1188
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.... referred to as the CGST Act, 2017 for short] on the ground that the transfer is prohibited where it involve two distinct States. The Petitioner, therefore, seeks a direction to the Goods and Services Tax Network [Respondent No. 2] to allow the transfer of credit between the Transferor and the Petitioner Company that neither Section 18(3) of the CGST Act 2017 nor Rule 41 of the Central Goods and Services Tax Rules, 2017 [hereinafter referred to as the CGST Rules of 2017, for short], impose any such restriction. 2. We have heard Counsel Mr. Avinash Poddar for the Petitioner. The learned Advocate General Mr Pangam, along with Mr. Priolkar, would represent the State Tax Officer [Respondent No. 5] whereas Respondent Nos. 1 to 4 and 6 are represented by Advocate Ms. Asha Desai. Since the Petition is taken up for hearing at the stage of admission, we deem it appropriate to issue 'Rule', which is made returnable forthwith. 3. The Petitioner, a Private Limited Company situated and registered in the State of Maharashtra was formed in the wake of the scheme of amalgamation approved by the National Company Law Tribunal, Special Bench, Mumbai, [NCLT], by an order dated 26.05.2020, thereb....
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....same was rejected with an error message "Transferee and Transferor should be of the same State/UT". Pursuant thereto, the Transferor Company raised a query on the GSTN portal for the above error and received a reply that the system is showing an error due to business logic. The Transferor Company made a representation to the State Tax Officer on 17.08.2020 and received a reply on 06.10.2020 stating that they do not have the option or feature in their system to resolve the technical issues faced by it on the GSTN portal. The Petitioner, therefore, filed Writ Petition (L) No. 4263 of 2022, which was withdrawn on 17.10.2022 with the liberty to file the same before the Goa Bench. The aforesaid events resulted in the filing of the present Petition by the Petitioner. 7. Mr. Poddar, the learned Counsel for the Petitioner has invited our attention to the provisions enumerated in Chapter V of the CGST Act, 2017, pertaining to the ITC and specifically, Section 18 providing for availability of credit in special circumstances. He would rely upon sub-section (3) of Section 18, which clearly provide that where there is a change in the constitution of the registered person on account of sale, ....
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....equired to obtain more than one registration whether in one State or Union Territory or more than one State or Union Territory, in respect of each such registration be treated as distinct person for the purpose of this Act and when registration has been obtained in respect of an establishment, it shall be treated as a different establishment. 10. According to Mr Pangam the learned Advocate General, sub-section (3) of Section 18 of the CGST Act, therefore, has to be read in consonance with the scheme of the enactment, to the effect that every registered person qua the establishment for which he is registered is completely a different entity. He has specifically urged before us that the provision imposes a restriction on the transfer of the ITC on account of sale, merger, demerger, amalgamation etc. from the Transferor entity to the Transferee entity situated in another State and this interpretation is ascribed by him in the wake of concept of 'Registered Person' meaning every individual entity is distinct from the other. 11. By way of an illustration, he would submit that if a particular Company has two units in the State of Maharashtra, one in Pune and another in Solapur, in ....
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....ax Ruling before the Authority of Advance Ruling, Andhra Pradesh GST under sub-section 4 of Section 98 of the CGST Act and sub-section 4 of Section 98 of the Andhra Pradesh Goods and Service Tax Act, 2017, the Ruling as regards whether the return and transfer of un-utilized ITC, from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit would be covered by the GST and ITC-02, the Ruling is in the affirmative. 14. He would distinguish the decision of the Madras High Court in the case of MMD Heavy Machinery (supra) by submitting that it was not a case of ITC and moreover, the facts of the case reveal that the Petitioner had shut down its factory at Ambattur, Chennai in Tamil Nadu and shifted to Sri City, Andhra Pradesh much prior to implementation of the GST and the Petitioner had accumulated ITC under the Cenvat Credit Rules, 2004 which had remained un-utilized, owing to the fact that the Petitioner was engaged and it had requested the jurisdictional Assistant Commissioner of Central Excise to permit its transfer to its new factory in Sri City, Andhra Pradesh in terms of Section 10 of the Cenvat Credit Rules, 2004, which was declined. According to him what was sought to ....
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....e variety of value added tax in the Country with huge disparity in the tax rates and dissimilar tax practises divided the Country into separate economic spheres and this ultimately, called for high compliance cost for the tax payers. It was therefore deemed appropriate that different taxes, in form of service tax, central service tax, levied by the Central Government as well as the levied by the State Government in form of value added tax, entry tax, luxury tax, purchase tax etc. to be subsumed in a single tax to be referred as "Goods and Services Tax", which shall be levied on goods or services, or both, at each stage of supply chain starting from manufacture or import and till the last retail level. It was therefore with the introduction of the new regime any tax presently levied by the Central Government or State Government on supply or goods or services was converged into GST, which proposed to be a dual levy, where the Central Government will levy and collect the tax in the form of CGST and the State Governments would levy tax and collect tax in the form of State GST on intra State supply of goods or services, or both. 18. The two legislations proposed by the Parliament wer....
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....f intra State or inter State supply though it imposed a restriction on set off of cross functional credit i.e. use of must CGST credit for SGST and vice-versa. GST was thus identified as a destination based tax and it permitted the respective State where the goods or services are finally consumed to levy SGST. 21. Upon coming into force of the regime of GST wherein in both taxes i.e. the CGST and SGST were to be levied on the base value of goods and services, it avoided any cascading effect. The introduction of IGST in the case of inter State supply, credit was allowed to flow freely from one State to another as under the GST regime, both, the CGST as well as the SGST would be used simultaneously on the base price, which would remove the tax cascading from the tax structure. The CGST Act, 2017, permitted levy of tax called as CGST on all intra State supply of goods and services, or both, except those goods specifically set out in sub-section (1) of Section 9 on the value determined under Section 15 and at such rates, as may be notified by the Government on the recommendations of the Council and collect the same in the manner prescribed to be paid by the taxable person. The co....
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....ed person, however, is not entitled to avail the benefit of ITC in respect of goods or services, or both, after expiry of one year from the date of issue of the tax invoice relating to such supply. Sub-section (3) of Section 18, is the provision with which we are concerned, which allows the transfer of un-utilized ITC and it reads thus: "(3) Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed." 25. The tax credit is the tax incentive which allows the tax payer to subtract the amount of credit which he has accrued from the total which he owes to the State and it may be a credit granted in recognition of tax already paid or in the form of a "Discount" applied in certain cases. The tax credit in other words can be described as a "Rebate". The Input Tax Credit (ITC) refer to t....
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....tilized input tax credit lying in his electronic credit ledger to the transferee: Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme. [Explanation:- For the purpose of this sub-rule, it is hereby clarified that the "value of assets" means the value of the entire assets of the business, whether or not input tax credit has been availed thereon]. (2) The transferor shall also submit a copy of a certificate issued by a practising chartered accountant or cost accountant certifying that the sale, merger, demerger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities. (3) The transferee shall, on the common portal, accept the details so furnished by the transfer or and, upon such acceptance, the un-utilized credit specified in Form GST ITC-02 shall be credited to his electronic credit ledger. (4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account. 28. Chapter V read with Rule 41 is therefore, a whole ....
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....e Company) and it seeks the transfer of the ITC from the Transferee Company which has been declined to it by displaying a message, "Transferee and Transferor should be of the same State/Union Territory". A careful reading of sub-section (3) of Section 18 along with Rule 41, however, does not impose any such restriction while it permit the transfer of un-utilized ITC in the electronic ledger to the new entity to which the business was sold, with which it was merged, amalgamated or transferred. 31. The procedure to be adopted for giving effect to such transfer is the one specified in Rule 41 which require him to furnish the details of sale, merger, demerger, amalgamation, lease or transfer of the business in form GST ITC-02 electronically, on the common portal along with the request for transfer of the un-utilized ITC lying in the electronic credit ledger to the Transferee. In addition, it is also necessary to produce a certificate issued by the practising Chartered Accountant certifying that there was a sale, merger, demerger, amalgamation, lease or transfer of business with the specific provision of transfer of liability. Thereafter, the Transferee on the common portal shall acc....
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....al Bench, Mumbai. 4. We have examined the books of accounts and other relevant documents/records of the Applicant and on the basis of such examination & the information and explanation furnished to us, we hereby certify that the Applicant is entitled to transfer the input tax credit aggregating Rs. 3,57,35,305/- (Rupees Three Crore Fifty Seven Lakh Thirty Five Thousand Three Hundred and Five) (detailed below) to the Transferee. Nature of Credit Amount of Matched ITC Available Amount of Matched ITC to be Transferred IGST Rs. 3,69,586/- Rs. 3,19,115/- CGST Rs. 3.52.84,105/- Rs. 3,52,80,505/- SGST Rs. 1,39,285/- Rs. 1,35,685/- Rs. 3,57,92,976/- Rs. 3,57,35,305/- This certificate has been issued in terms of Section 18(3) of the CGST/SGST Acts, 2017 read with Rule 41(2) of the CGST/ SGST Rules, 2017. 33. The Respondents through the Commissioner, CGST, Goa has filed an affidavit, raising a technical objection that the issue raised in the Petition is related to the GST portal and the Commissioner of the CGST, Panaji has no authority to make any modifications to the GST portal, which is managed by the Directorate General of....
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....Companies pursuant to an order of a High Court, Tribunal or otherwise, the Transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to the order of the High Court or Tribunal. However, while permitting the transfer of ITC under sub-section (3) of Section 18, no such stipulation has been specified. Had the legislature had any intention to cast an embargo or impose a restriction with reference to sub-section (4) of Section 22 to the effect that, unless and until the Transferee is registered, ITC cannot be availed, it should have so specified, but sub-section (3) is merely suggestive of allowing the transfer of the un-utilized ITC in the electronic credit ledger of the Transferor to the Transferee, whenever there is change in the constitution of the registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with a specific provision of transfer of liability. 36. The Petitioner has placed before us the order passed by the NCLT, Special Bench, Mumbai under the Companies Act, 2013, which sought permission for the scheme of amalgamation o....
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.... is not permissible and contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so. Equally it is unacceptable to interpret a provision by substituting some words for words which are used by the Legislature with a particular purpose and intention. Court cannot reframe the legislation as it has no power to legislate. It is not permissible to read words into an Act unless clear reason for it is to be found within the four corners of the Act itself. It is an application of the same principle that a matter which should have been, but has not provided for in the statute, cannot be supplied by Courts, as to do so would amount of legislation and not construction. Devlin, LJ in Gladstone v. Bower (1960) 3 All ER 353 (CA)., paraphrasing casus omissus, observed thus: "The court will always allow the intention of a statute to override the defects of wording but the court's ability to do so is limited by recognised canons of interpretation. The Court may, for example, prefer an alternative construction which is less well fitted to the words but better fitted to the intention of the Act. But here, there is no alternative constructio....
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.... before the Court, there was no change in constitution of the Petitioner, but it had shifted its unit from one State to another and this was not contemplated under sub-section (3) of Section 18 of the CGST Act, 2017. 41. It was also urged that in terms of Section 25 of the respective GST enactments, each unit in a different State is a distinct person, the concept of tax-free branch transfer, depot transfer or consignment sale, is thus not applicable and to claim credit in the Transferee State, the goods must be supplied with GST invoice from the Transferor State and without payment of GST, the credit available in one State, cannot be transferred to another State, even between the branches or depots or units or agents. It is in this background, the Madras High Court adjudicated and dismissed the Petition by holding that the transfer of refund of ITC (Cenvat Credit), which was transitioned by the Petitioner by filing TRAN-1, is not permissible. The facts which were taken into consideration clearly refer to sub-section (2) of Section 25 of the CGST Act, 2017 to the effect that a person having multiple places of business in a State or Union Territory may be granted a separate reg....
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....e wake of the order of the Tribunal passed under the Companies Act has been amalgamated into the Petitioner-Company under the scheme of amalgamation and undertook all the liabilities of the Transferee Company and therefore, is entitled to take benefit of sub-section (3) of Section 18 of the CGST Act, 2017. As far as the Union of India is concerned, according to us, it does not suffer any loss, even though, the ITC is permitted to be utilized in the State of Maharashtra for the reason that we know that there are two components of the GST, one is the CGST and IGST, which is to be levied by the Central Government whereas the other component is the SGST, which is levied and collected by the State. Since the imposition of GST is based on the transaction value of products and services, both components operate at the same time as they are destination based tax consumption. The intention of the law makers in bringing the legislation and providing ITC was with a specific object i.e. to provide a continuous chain of set off from original producers' point and the service providers' point up to the retailers' level and thus eliminate the burden of tax cascading. The credit of CGST outp....