TaxTMI 
TaxTMI 
2026 (10) TMI 72
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....090124255260Q, was issued on 29.01.2024, raising four principal allegations against the Appellant. 3. The allegations in the SCN and the responses submitted during the adjudication proceedings are set out below: Point No. 1: Discrepancy of Rs. 6,496.11 between the ITC claimed in GSTR-3B and Table 8A of GSTR-9. The Appellant admitted this difference and accepted the legal action in respect of the amount of Rs. 6,496/-. Point No. 2: Ineligibility of ITC on various goods and services alleged to constitute blocked credit under Section 17(5). The Appellant claimed this ITC under Section 17 of the CGST Act. The adjudicating authority, however, called upon the Appellant to show cause why the claimed ITC should not be treated as blocked credit under Section 17(5). The Appellant filed a detailed, item-wise response to the query raised by the adjudicating authority. Point No. 3: Differential turnover estimated on the basis of coal-consumption standards. On the basis of the coal purchased and used in the brick kiln, the Department challenged the turnover declared by the Appellant as inconsistent with the prescribed norms. The Appellant filed a detailed reply just....
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.... no mining operations and merely procured surface soil removed by local farmers for field levelling. Therefore, no mineral concession or governmental mining service was used so as to attract an RCM levy. 2. The taxability of royalty under GST is sub judice before the Hon'ble Supreme Court in SLP (Civil) No. 37326/2017, Udaipur Chambers of Commerce and Industry & Ors. v. Union of India & Ors. 3. Interest under Section 50 cannot be levied before the date of adjudication where an ITC claim is denied in a bona fide dispute, because liability, according to the Appellant, arises only upon formal adjudication. 4. Hearings in the Matter 5. The matter was listed before us on 6 August 2026, when the defects were pointed out. They were cured by the next listing on 21 August 2026. Shri Krishan Kumar Sharma, Authorised Representative, appeared on behalf of the Appellant and reiterated the grounds of appeal. S/Shri Sanjay Kumar Arya, Shanti Shekhar Singh and Jitendra Pratap Agrahari, and Smt. Vibha Singh, all departmental officers of State GST, appeared on behalf of the Department. Arguments were heard from both sides on 8 September 2026. The matter was then listed for final heari....
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.... was permissible. As regards uniforms, clothes, workers' meals and food provided to prospective builders/buyers, the Appellant submitted that the expenses were incurred strictly in the course or furtherance of business and therefore did not fall within Section 17(5)(b). 9.3 The Appellant also pointed out that neither the SCN nor the impugned orders specified the particular sub-clause of Section 17(5) applicable to each item. It relied on the decision of the Hon'ble Madras High Court in M/s Dhanalakshmi Steel v. Department (W.P. No. 38730 of 2024, dated 02.11.2025), which, according to the Appellant, held that notices and orders invoking Section 17(5) without specifying the applicable sub-clause were vague and liable to be quashed. The Appellant further submitted that the Department had disallowed these same categories of ITC for FY 2018-19 while expressly allowing them as eligible credit for the same dealer in subsequent assessment years 2019-20 and 2021-22, demonstrating arbitrary and contradictory treatment. 9.4 Regarding royalty, it was submitted that the Constitution Bench of the Hon'ble Supreme Court in Mineral Area Development Authority (MADA) v. Steel Authority of Indi....
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.... ITC is a statutory benefit available subject to statutory conditions; business purpose, by itself, cannot override an express exclusion: Jayam & Co. v. Assistant Commissioner, (2016) 15 SCC 125. 11.3 The correct legal approach is therefore, first, to determine whether Section 16 is satisfied and, second, to determine whether any specific clause of Section 17(5) nevertheless blocks the credit. Section 17(5) cannot be invoked as a generic residuary provision to disallow anything that, in the subjective opinion of the assessing officer, appears unnecessary for the taxpayer's business. We are of the considered view that the particular clause of Section 17(5) must be identified. Section 17(5) contains separate and materially different statutory exclusions. Motor vehicles, food and catering, works contracts, construction on one's own account, personal consumption and gifts are governed by different clauses and different statutory tests. 11.4 Applicable Version of Section 17(5): There is an additional statutory difficulty in the impugned order. The disputed year is 2018-19, but clauses (a) and (b) of Section 17(5) underwent substantial substitution during that financial year. The C....
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....ore find that the burden lies upon the Appellant to establish that the supplies fall within an exception to the blocked-credit categories. 13. We now consider Questions (ii) and (iii) together: whether a general invocation of Section 17(5), without identifying the applicable clause for each inward supply, can sustain the disputed demand; and whether the individual classes of expenditure in the present case are covered by any specific restriction in Section 17(5). 13.1 The question is whether the taxpayer discharged its burden of proof. We must bear in mind that Section 16(1) permits ITC on inward supplies used or intended to be used in the course or furtherance of business, but that entitlement is expressly subject to the conditions and restrictions prescribed by the Act. Section 17(5), which begins with a non-obstante clause, overrides Section 16(1) in respect of the categories specifically enumerated therein. Thus, an expenditure may have some connection with business and nevertheless constitute blocked credit under Section 17(5). 13.2 More importantly, Section 155 expressly places the burden of proving eligibility for ITC upon the person claiming it. The provision leave....
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....ayer seeks to establish that a supply otherwise subject to restriction falls within an exception in Section 17(5), the taxpayer must produce contemporaneous material establishing the necessary factual ingredients of the exception. 13.6 In Ecom Gill Coffee, the Supreme Court emphasised that the burden relating to ITC cannot be discharged merely through an assertion, an invoice or a payment entry. The claimant must establish the transaction and the relevant factual ingredients through cogent material. This principle is fortified by Hari Chand Shri Gopal, in which the Supreme Court held that a person invoking an exemption, concession or exception must establish that the statutory conditions are satisfied. Dilip Kumar & Co. reiterates that the burden of establishing the applicability of an exemption clause rests on the assessee. 14. Item-wise Consideration of the Appellant's Case and the Corresponding Legal Provisions 15. Tractor, tyres and tubes The Appellant contends that tyres and tubes were used on tractors, trolleys, JCBs and other equipment for moving bricks and materials. Its reply contains an assertion to that effect. However, an assertion as to use cannot substitut....
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..../job card, machinery register, asset-wise maintenance ledger or corresponding invoice identification has been produced to connect the disputed credit satisfactorily with the earthmover. Accordingly, even the earthmover's registration, standing alone, cannot prove the eligibility of the disputed ITC. III. Building materials The Appellant's own reply states that cement, iron, pipes and other building materials were used for office renovation and chimney repairs. Office renovation squarely raises the issue under Section 17(5)(d), which blocks ITC on goods or services received for the construction of immovable property on one's own account, even where that property is used in the course or furtherance of business. The Explanation expressly includes renovation, additions, alterations and repairs, to the extent of capitalisation. If the Appellant sought to contend that these were merely revenue repairs and had not been capitalised, the best evidence was within its exclusive possession: the fixed asset register, capitalisation schedule, balance sheet and depreciation schedule. However, on a perusal of the entire record, we find that no such documents form part of the rec....
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....ngs and other civil structures remain expressly excluded. 1. Sarees and clothes This issue admits of little controversy. The Appellant itself stated in its reply that sarees and clothes were distributed as Holi clothes and Diwali dresses to workers and others, and described them as gifts. Section 17(5)(h) specifically blocks ITC on goods disposed of by way of gift or free samples. The expenditure may have been motivated by employee welfare or goodwill, but a business motive does not nullify the express statutory prohibition. ITC on sarees and clothes is therefore clearly inadmissible under Section 17(5)(h). 1. Food, beverages and banquet expenditure The Appellant states that a banquet (bhoj) was organised for customers/builders and employees and characterises it as business promotion. Section 17(5)(b) specifically restricts ITC on food and beverages and outdoor catering, subject to the statutory exceptions. The Appellant is engaged in the manufacture and sale of bricks. It does not make an outward taxable supply of food or catering of the same category, and no statutory obligation requiring it to provide the promotional banquet has been shown. Ac....
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....el's submission. Consequently, ITC is not allowable on the present record. 16. Summary 16.1 The disputed claims broadly fall into three classes: 1. Expressly blocked credit: food/catering under Section 17(5)(b), gifts under Section 17(5)(h), and applicable construction/renovation expenditure under Section 17(5)(d); 2. Claimed statutory exceptions that have not been proved, particularly the claimed use of tractor-related expenditure for the transportation of goods during the period governed by the pre-amended Section 17(5)(a); and 3. Items for which the basic business nexus itself has not been proved, including travel/hotel, photography/electronics, vehicle-related services and residual expenses, attracting Sections 16 and 155 and, where applicable, Section 17(5)(g). 16.2 The Appellant's written reply did contain an item-wise explanation, but an explanation unsupported by the necessary books, registrations, asset-use records or other contemporaneous documents cannot discharge the statutory burden. The fact that detailed assertions were made before the authorities does not convert those assertions into evidence. The appeal itself records that the d....
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.... the provision to a "tax." It has deliberately and comprehensively used the expressions "taxes, duties, cesses, fees and charges." The legislative mandate is therefore that a statutory cess falling within Section 15(2)(a), though imposed under another enactment, forms part of the assessable value of the taxable supply. 17.5 Section 15 determines the value of the underlying taxable supply. Once a particular amount is statutorily required to be included in that value, the charging provision operates on the value so determined. The legal sequence is therefore: taxable supply; determination of value under Section 15; inclusion of a cess falling within Section 15(2)(a); and application of the appropriate GST rate to the resulting taxable value. Consequently, describing the levy as "GST on cess" is convenient shorthand but is not technically precise. In law, GST is imposed on the underlying taxable supply, the value of which, by statutory command, includes the relevant cess. 17.6 Reliance may also be placed on Uttar Pradesh Power Transmission Corporation Ltd. & Anr. v. CG Power and Industrial Solutions Ltd. & Anr., (2021) 6 SCC 15. The Hon'ble Supreme Court held that a contractor e....