Input Tax Credit Not Admissible On Electricity Supplied To Township Maintained By Bharat Aluminium: Chhattisgarh High Court

The bench, consisting of Chief Justice Ramesh Sinha and Ravindra Kumar Agrawal stated that Input Tax Credit (ITC) is not admissible on the electricity supplied to the township maintained by Bharat Aluminium/appellant. This is because such supply cannot be said to have been made in the course or furtherance of the appellant's business, as contemplated under Sections 2(17) and 16(1) of the Central Goods and Services Tax (CGST) Act, 2017.

In this case, the appellant/writ petitioner was engaged in the manufacture, sale and export of aluminium products. For carrying out its industrial operations, the Bharat Aluminium/appellant had established two captive power plants at Korba.

The appellant imported coal on payment of Goods and Services Tax (GST) Compensation Cess and utilised the same for the generation of electricity in the said power plants, which, in turn, was used for the manufacture of aluminium products. The appellant also maintained a residential township for its employees.

The dispute before the authorities was confined only to the portion of electricity supplied to the township.

The appellant had filed an application for refund under Section 54(1) of the Central Goods and Services Tax Act, seeking a refund of ITC of the Compensation Cess paid on imported coal, amounting to ₹7,44,73,347/-.

Out of the said amount, a provisional refund of 90% was sanctioned to the tune of ₹6,70,26,012/-. Subsequently, a show cause notice was issued proposing rejection of refund to the extent of ₹51,48,531/-, to which the appellant submitted its reply, asserting that the electricity supplied to the township was for business purposes and that no reversal of ITC was warranted under Rule 42 of the CGST Rules.

However, the Assistant Commissioner rejected the refund application. Aggrieved thereby, the appellant preferred an appeal under Section 107 of the Chhattisgarh Goods and Services Tax Act, 2017, before the Joint Commissioner (Appeals), State Tax, Bilaspur, who affirmed the order of the Assistant Commissioner.

The assessee submitted that the township provides residential facilities for employees, enabling continuous supervision, emergency response, and safety management, which are critical for the smooth functioning of the manufacturing process. Denying ITC for electricity supplied to the township fails to appreciate this direct nexus between township maintenance and business operations.

The department submitted that the impugned order correctly holds that ITC is not admissible for electricity supplied to the township since such consumption is not directly in the course or furtherance of business.

The bench opined that the supply of electricity to the township is for the appellant's own consumption and is not directly connected to any taxable supply of goods or services carried out by the appellant in the course of business. Consequently, the claim for ITC in respect of such electricity is not permissible under the statutory framework.

The amendment to Explanation 1(d) of Rule 43 of the CGST Rules, 2017, effected vide Notification No. 14/2022 – Central Tax dated 05.07.2022, is prospective in nature. It does not confer any retrospective right or entitlement to claim ITC for periods prior to the date of amendment. Therefore, any claim for ITC made in respect of periods antecedent to the notification cannot be sustained, added the bench.

The bench agreed with the Single Judge that the appellant cannot rely on the amendment to justify any retrospective ITC claims.

In view of the above, the bench dismissed the appeal.

Case Title: Bharat Aluminum Company Limited v. State of Chhattisgarh

Case Number: WA No. 736 of 2025

Counsel for Appellant/Assessee: Mr. Bharat Raichandani & Mr. K. Rohan

Counsel for Respondent/Department: Mr. Rahul Tamaskar

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