TaxTMI 
TaxTMI 
2025 (8) TMI 245
X X X X Extracts X X X X
X X X X Extracts X X X X
....ention here that W.P. (T) No. 14/2021 relates to ITC claim for the month of February, 2019; W.P. (T) No. 15/2021 relates to ITC claim for the month of August, 2019; W.P. (T) No. 16/2021 relates to ITC claim for the month of January, 2019; W.P. (T) No. 17/2021 relates to ITC claim for the month of December, 2018 and W.P. (T) No. 18/2021 relates to ITC claim for the month of November, 2018.) 2. Since common question of law and fact is involved in these writ petitions, they are being disposed of by this common order. 3. The aforesaid challenge has been made on the following factual backdrop: - 4. The petitioner is engaged in manufacture, sale and export of aluminium products and it has its factory premises at Korba, Chhattisgarh. For the purposes of its business operations, the petitioner has established two power plants of 540 MW and 1200 MW at Korba. The petitioner imports coal on due payment of Goods and Services Tax (GST) Compensation Cess and uses the same for generation of electricity using the two power plants which is further used for manufacture of aluminium products. The petitioner also claims to maintain a residential township for its employees. It is the case of the pet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n cess paid on coal attributable to 540 MW Power Plant is liable to be reversed under Rule 42 of CGST, SGST, IGST Act. 2. Sale of Duty Credit Scrips [Merchandise from India Export Scheme (MEIS) License sale] is an exempt supply under Notification No.36/2017 of IGST Act and 35/2017 of CGST Act and it should be included in Exempt Supplies as well as Total Turnover in the State for the purpose of Reversal of ITC under Rule 42 of CGST, SGST and IGST Act. 6. Questioning the order dated 6-7-2019 (Annexure P-7), the petitioner herein preferred appeal before the appellate authority under Section 107 of the Chhattisgarh Goods and Services Tax Act, 2017 before the Joint Commissioner (Appeals) and the Joint Commissioner (Appeals), State Tax, Bilaspur, by order dated 17-9-2020 (Annexure P-8), rejected the appeal of the petitioner holding firstly, that provision of electricity for consumption of residents of township is not intrinsically connected to the business activity of the petitioner; secondly, that sale of Duty Credit Scrips (DCS) is an exempt supply and quantum of ITC attributable to such exempt supplies warrants reversal; and lastly, that an amount of Rs. 40,14,605/- is recoverable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eafter, the notification dated 5-7-2022 inserting Explanation 1(d) to Rule 43 of the CGST Rules came into force with effect from 5th July, 2022 on the recommendation made by the GST Council. 11. Mr. Bharat Raichandani, learned counsel appearing for the petitioner, would submit that maintenance of township is in the course or furtherance of business and hence ITC should be refunded to the petitioner. He would refer to the term 'business' as mentioned in Section 2(17) of the CGST Act and further refer to the definition 'input' as given in Section 2(59) of the CGST Act and also refer to the definition 'input service' as given in Section 2(60) of the CGST Act. He would further submit that Section 16(1) of the CGST Act grants a substantive right to the petitioner to claim ITC of any input goods or services, or both used in the course or furtherance of business and according to the petitioner, maintenance of township is very critical since the township houses employees who are important for continuity in business operations, more so in light of the remote location of the petitioner's premises and maintenance of township being intrinsically connected with the petitioner's manufacturing o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... could have also been done by the Power Distribution Company. Therefore, it has rightly been held that provision of electricity to the residents of township is not the integral part of the business and as such, the reversal of ITC is justified. He would rely upon the decisions of the Supreme Court in the matters of Maruti Suzuki Limited v. Commissioner of Central Excise, Delhi III (2009) 9 SCC 193 and Commissioner of Central Excise v. Gujarat Narmada Fertilizers Company Limited (2009) 9 SCC 101 to buttress his submission that reversal of credit is justified to the extent of input being used for production of electricity to the township. He would further submit that the input tax credit is in the form of concession or boon and the amendment dated 5-7-2022 adding Explanation 1(d) to Rule 43 of the CGST Rules has a prospective effect, whereas amendment in other Rules by the same notification for instance through clauses 7, 9 and 10 was expressly given retrospective effect. As such, the legislature clearly wanted to give amendment to Rule 43 of the CGST Rules a prospective effect. This ground has not been raised in the writ petitions. He would further rely upon the decision of the Supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctive State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy;" 17. Sub-section (63) of Section 2 of the CGST Act defines, "input tax credit" means the credit of input tax. Chapter V of the CGST Act deals with Input Tax Credit. Section 16 of the CGST Act provides for Eligibility and conditions for taking input tax credit. Sub-section (1) of Section 16 states as under: - "16. Eligibility and conditions for taking input tax credit.-(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person." 18. A careful perusal of Section 16(1) of the CGST Act would show that it provides for input tax credit to every registered person on any supply of goods or services or bot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture, is sold, VAT would be again payable thereon. This VAT is payable on the price at which such goods are sold, costing whereof is done keeping in view the expenses involved in the manufacture of such goods plus the profits which the manufacturer intends to earn. Insofar as costing is concerned, element of expenses incurred on raw material would be included. In this manner, when the final product is sold and the VAT paid, component of raw material would be included again. Keeping in view this objective, the legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstances, is the domain of the legislature and the courts are not to tinker with the same." 22. In the matter of Jayam & Co. v. Commr. (2016) 15 SCC 125, while interpreting the provisions of Sections 19(20), 3(2) & 3(3) of the Tamil Nadu Value Added Tax Act, 2006, it has been held by the Supreme Court that ITC is a form of concession provided by the legislature, it is not admissible to all kinds of sales and certain specified sales are specifically excluded; and concession of ITC is available on certain conditions, and observed as under: - "11. From th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n consumed in the township colony for the month ending February, 2019. The competent authority by its order dated 22-6-2019 (rectification order dated 6-7-2019) held that the electricity generated by the petitioner to the extent of 1388641 KWH units has been supplied for township consumption by the taxpayer as evident from Form G provided by the taxpayer, as such, ITC of Compensation cess paid on coal attributable to 540 MW Power Plant is liable to be reversed under Rule 42 of the CGST Rules. The expression "in the course or furtherance of his business" employed in Section 16(1) of the CGST Act, has not been defined in the CGST Act and it may be referred to the activities which are integrally related to the business activity and not welfare activity. The appellate authority has held that the provision of electricity for the consumption of the residents of township is nothing but a prerequisite relying upon the decision of the Supreme Court in Maruti Suzuki Limited (supra). 25. Before this Court, the respondents have placed reliance upon the decision of the Supreme Court in Gujarat Narmada Fertilizers Company Limited's case (supra). In the connected appeal i.e. Civil Appeal No. 186....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at Narmada Fertilizers Company Limited's case (supra) and Maruti Suzuki Limited (supra). Accordingly, the first question formulated is answered against the petitioner and in favour of the respondents. 28. In view of the decisions rendered by the Supreme Court in Gujarat Narmada Fertilizers Company Limited's case (supra) and Maruti Suzuki Limited (supra), the decisions relied upon by the petitioner in ITC Limited's case (supra), Ultratech Cement Ltd.'s case (supra), Cinemax India Limited (supra) and S.A. Builders Ltd. (supra) are not applicable to the facts of the present case and are clearly distinguishable. Answer to Question No. 2 29. The petitioner uses coal for generating electricity which is in turn used for production of Aluminium products. Such products are exported and as an incentive, the petitioner gets Duty Credit Scrips. Duty Credit Scrips are incentive given to the exporters for promoting export and can be used for setting off Customs Duty. It cannot be used for setting off GST. It is considered as 'goods' with HSN 4907 and its supply is exempted from GST. The exemption has been granted by Notification No.35/2017 issued in exercise of power conferred under Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from the date of enactment of the CGST Act. 33. In this regard, it would be apposite to notice the relevant provision contained in Rule 43 of the CGST Rules which was amended and Explanation 1(d) was added with effect from 5-7-2022. Clause (d) of Explanation 1 to Rule 43 of the CGST Rules states as under: - "(d) the value of supply of Duty Credit Scrips specified in the notification of the Government of India, Ministry of Finance, Department of Revenue No. 35/2017-Central Tax (Rate), dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 1284(E), dated the 13th October, 2017." 34. Mr. Bharat Raichandani, learned counsel for the petitioner, vehemently submits that the rule-making authority of the CGST Rules has the power to make the rule with retrospective effect, therefore, this rule adding Explanation 1(d) to Rule 43 of the CGST Rules has the retrospective effect and at least, it would apply to the pending cases, as the petitioner's appeal was pending since 19-9-2019. However, it has been argued by Mr. Rahul Tamaskar, learned State counsel, that though it is an explanation, but it would have the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances; and (c) the value of supply of services by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India. (d) the value of supply of Duty Credit Scrips specified in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 35/2017-Central Tax (Rate), dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number GSR 1284(E) dated the 13th October, 2017. Thereafter, it has been brought into force with effect from 5-7-2022. 36. The effect of amendment excludes value of DCS from the aggregate value of exempt supplies. By virtue of Section 164(3) of the CGST Act, the Central Government is conferred power to give retrospective effect to the rules. It states as under: - "164. Power of Government to make rules.-xxx xxx xxx (3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....curity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve. (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." 39. In Sree Sankaracharya University of Sanskrit (supra), it has been held by the Supreme Court that merely describing a provision as an "Explanation" or a "clarification" is not decisive of its true meaning and import and it has been further held that a prerequisite for describing a provision as explanation or clarification, the pre-amended law should be vague or ambiguous.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inal provision. iv) Merely because a provision is described as a clarification/ explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively." 40. Reverting to the facts of the present case, it is quite vivid that clause (d) was enacted and inserted in Explanation 1 to Rule 43 of the CGST Rules based on the representations and recommendation made by the GST Council. Insertion of clause (d) has only expanded the scope of supplies which have to be excluded from the aggregate value of exempt supplies. Therefore, the amendment made in the explanation in shape of Rule 43, Explanation (1)(d), of the CGST Rules, is not clarificatory in nature. Though express power in Section 164(3) of the CGST Act has been conferred upon the rule-making authority, yet the rule-making authority did not choose to promulgate it with retrospective effect. ITC, as held earlier, is not the substantive right of the dealer, it is only a natur....