Case Note & Summary
The petitioner, M/s Shilpa Medicare Limited, a pharmaceutical company engaged in research and development, had R&D centers in Karnataka and Andhra Pradesh. The dispute concerned the GST classification of a business transfer of its R&D undertaking from Vizianagaram, Andhra Pradesh to Bangalore, Karnataka, as a going concern for zero consideration. On 26.06.2019, the petitioner executed a Business Transfer Agreement transferring its Vizianagaram R&D unit's assets, liabilities, employees, and intangibles to the Bangalore unit for zero consideration. The petitioner sought an advance ruling from the Authority for Advance Ruling on three questions: whether the transaction is supply of goods or services or both; whether it is exempt under Sl.No.2 of Notification No.12/2017-Central Tax (Rate); and whether unutilized input tax credit can be transferred by filing GST ITC-02. The AAR, by order dated 24.02.2020 in AAR No.05/AP/GST/2020, held the transaction was a supply of services covered by the exemption notification, and allowed ITC transfer of specified amounts. The Deputy Commissioner of Central Tax, aggrieved, appealed to the Appellate Authority for Advance Ruling, which by order dated 10.11.2020 in Order/AAAR/AP/07(GST)/2020 set aside the AAR and held the transaction was a taxable supply of goods, denying ITC transfer. The petitioner then filed the present writ petition under Article 226 challenging the AAAR order as arbitrary and passed without due process of law, seeking a writ of mandamus to quash it. Interim applications were filed. The core legal issues included classification of the going concern transfer under the CGST/APGST Act, applicability of the exemption notification, eligibility to transfer unutilized ITC, and legality of the AAAR order. The petitioner contended that transfer of goods in the course of sale of entire business undertaking as a going concern is not taxable because Section 7(1) excludes such sale and there is no consideration, so Schedule I entry 2 does not apply. The petitioner also argued that the transaction is not a supply of services. The respondents' arguments were not detailed in the provided text. The court heard the matter and reserved judgment on 05.01.2026; the judgment was pronounced on 31.01.2026. The final decision and reasoning are not provided in the extract.
Headnote
A) Goods and Services Tax - Supply Classification - Transfer of Entire Business Undertaking as Going Concern - Central Goods and Services Tax Act, 2017, Section 7(1), Schedule I Entry 2 - The petitioner transferred its R&D undertaking from Andhra Pradesh to Karnataka as a going concern for zero consideration under a Business Transfer Agreement dated 26.06.2019. The petitioner contended that such transfer of goods in the course of sale of entire business undertaking is excluded from the definition of business and not a taxable supply due to absence of consideration. The Authority for Advance Ruling held it as exempt supply of services, while the Appellate Authority held it as taxable supply of goods. The High Court heard arguments on this classification dispute (Paras 2-5, 8). B) Goods and Services Tax - Exemption Notification - Sl.No.2 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - The AAR held the business transfer covered under the exemption notification and exempt from tax; the AAAR set aside this finding and held the transaction was a taxable supply of goods. The issue before the High Court included whether the exemption notification applied to the zero-consideration transfer (Paras 3-5). C) Goods and Services Tax - Input Tax Credit Transfer - Transfer of Unutilized ITC between Units - Central Goods and Services Tax Act, 2017 and Integrated Goods and Services Tax Act, 2017 - The AAR allowed transfer of unutilized input tax credit amounting to Rs.2,29,24,118 (IGST), Rs.50,50,789 (CGST) and Rs.35,40,668 (APGST) from Vizianagaram unit to Bangalore unit by filing GST ITC-02. The AAAR held the petitioner was not entitled to transfer the input tax credit. The High Court was called upon to decide this issue in the writ petition (Paras 4-5). D) Writ Jurisdiction - Challenge to AAAR Order - Arbitrariness and Due Process - Constitution of India, Article 226 - The petitioner challenged the AAAR order dated 10.11.2020 in Order/AAAR/AP/07(GST)/2020 as arbitrary and passed without following due process of law, seeking a writ of mandamus. The High Court heard the matter and reserved judgment on 05.01.2026, and pronounced judgment on 31.01.2026. Final decision not provided in the extract (Paras 1, 6-7).
Issue of Consideration
Whether the transfer of an entire business undertaking as a going concern for zero consideration constitutes a supply of goods or services or both under the CGST/APGST Act, 2017; whether it is exempt under Sl.No.2 of Notification No.12/2017-Central Tax (Rate); whether unutilized input tax credit can be transferred; and whether the AAAR order is arbitrary and without due process
Law Points
- Section 7(1) of CGST Act defines supply and may exclude sale of entire business undertaking as going concern
- supply generally requires consideration
- Schedule I deems certain transactions as supply even without consideration
- transfer of business assets as going concern may be exempt under Notification No.12/2017-Central Tax (Rate)
- input tax credit transfer between distinct units is permissible under CGST/IGST rules if conditions are met
- advance ruling orders can be challenged under Article 226 if arbitrary or passed without due process
