ITC Not Available On Cess For Electricity Supplied To Residential Township: Chhattisgarh High Court

Justice Sanjay K. Agrawal stated that the electricity generated is used in the course of or furtherance of his business, which is evident from Form G provided by the taxpayer(assessee), hence, the assessee would not be entitled for ITC to electrical energy consumed for maintenance of its township.

In this case, the assessee/petitioner is engaged in manufacture, sale and export of aluminium products. The assessee 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 assessee filed an application for refund in terms of Section 54(1) of the Central Goods and Services Tax Act, 2017 claiming refund of the Input Tax Credit (ITC) of the Compensation Cess paid on import of coal.

The question before the bench was whether the maintenance of township and supply of electrical energy thereof is in the course or furtherance of business in terms of Section 2(17) read with Section 16(1) of the CGST.

The assessee argued that maintenance of township is in the course or furtherance of business and hence ITC should be refunded to the assessee.

As per the assessee 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 assessee's premises and maintenance of township being intrinsically connected with the assessee's manufacturing operations is therefore 'business' in terms of Section 2(17) of the CGST Act and supply of electricity to the township is therefore business activity.

The State submitted that the supply of electricity to the township for consumption of residents is not integrally related to the business activity of the assessee.

It was further argued that the supply of electricity to the township by the assessee does not affect the business, as the same could have also been done by the Power Distribution Company. Therefore, 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.

The bench observed that ITC is a nature of benefit or concession extended to the dealer and it can be availed by the beneficiary as per the scheme of the statute subject to fulfillment of the conditions laid down in Section 16(4) of the CGST Act.

ITC is not the substantive right of the dealer, it is only a nature of benefit or concession extended to the dealer under the statutory scheme and it cannot be claimed as a matter of right, stated the bench.

The bench opined that the benefit of amendment in shape of Explanation 1(d) to Rule 43 of the CGST Rules would be available for the period after 5-7-2022.

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

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

Case Number: WPT No. 14 of 2021

Counsel for Petitioner/Assessee: Bharat Raichandani, Arjyadeep Roy and K. Rohan

Counsel for Respondent/State: Rahul Tamaskar

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