2024 (12) TMI 398 - HC - GST

Denial of Input Tax Credit availed on goods purchased by the petitioner for sales promotion of the goods manufactured by the petitioner for the respective Assessment Years - stock variation - HELD THAT - Section 16(1) of the respective GST enactments provides credit to an assessee, who is entitled to take credit of input tax charged on any supply of goods or services or both which are used or intended to be used in the course of furtherance of his/her business and that the said amount shall be credited to the Electronic Credit Ledger of such person - The credit that is available under Rule 16(1) of the respective GST enactments is subject to such conditions/restrictions as may be prescribed and in the manner specified in Section 49 of the respective GST enactments - Section 17(5) is an exception to not only Section 16(1) of the respective GST enactments but also Section 18(1) of the respective GST enactments. In this case, this Court is not concerned with the situations contemplated under Section 18(1) of the respective GST enactments. As per Section 17(5) of the respective GST enactments, notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the supplies as stipulated in sub-clause (a) to (i) of Section 17 (5) of the respective GST enactments. Sub-clause (h) to Section 17(5) of the respective GST enactments makes it clear that no input tax credit shall be available in respect of the goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples - The expression goods disposed by way of gift or free samples will specifically apply to the goods whether manufactured or traded by an assessee under the provisions of the respective GST enactments. Therefore, it cannot be said that the petitioner is entitled to input tax credit for the items meant for sales promotional activities - Be that as it may, since the provisions of the respective GST enactments are clear in terms of Section 17(5)(h) of the Act, the petitioner was not entitled to avail the input tax credit on T-Shirts and Gold Coins purchased for Sales Promotional Activity. Petition dismissed.

Summary

Issues:
Challenging Impugned Orders dated 31.08.2021 by the Appellate Commissioner under TNGST Act, 2017 regarding denial of Input Tax Credit on goods purchased for sales promotion and stock variation.

Analysis:

1. Denial of Input Tax Credit for Sales Promotion Goods:
The petitioner contested the denial of Input Tax Credit on goods like "Gold Coins" and "T-shirts" purchased for sales promotion activities. The petitioner argued that under Section 16(1) of the GST Enactments, they were entitled to claim Input Tax Credit for goods used in the course of business. The petitioner emphasized that sales promotional activities had been recognized under previous tax regimes and supported by Supreme Court decisions. However, the respondents relied on Section 17(5)(h) of the CGST Act, 2017, which prohibits claiming Input Tax Credit for goods disposed of by way of gift or free samples. The court upheld this restriction and dismissed the petitioner's claim for Input Tax Credit on sales promotion goods.

2. Stock Variation Issue:
In addition to the sales promotion matter, the petitioner raised concerns about stock variation following an inspection on 28.08.2019. The petitioner argued that the inspection did not adhere to standard stock audit principles, challenging the denial of Input Tax Credit based on the stock difference. The court found that the petitioner failed to establish grounds for interference in this regard. The court held that the Order affirming the denial of Input Tax Credit on stock variation for the Assessment Year 2019-2020 was justified and did not warrant any intervention.

3. Legal Interpretation and Precedents:
The court analyzed Section 16(1) and Section 17(5)(h) of the GST Enactments to determine the eligibility for Input Tax Credit. It clarified that Section 17(5) acts as an exception to Sections 16(1) and 18(1) of the respective GST Acts. The court emphasized that the restriction under Section 17(5)(h) applied specifically to goods disposed of as gifts or free samples, not covered by previous tax laws. The court referenced conflicting views from Advance Ruling Authorities but ultimately upheld the restriction on Input Tax Credit as per the clear provisions of the GST Acts.

4. Dismissal of Writ Petitions:
Considering the arguments presented by both parties, the court dismissed the Writ Petitions challenging the Impugned Orders. The court concluded that the petitioner was not entitled to Input Tax Credit for goods used in sales promotion activities or for stock variations based on the legal provisions and precedents cited. The dismissal was without costs, and connected Miscellaneous Petitions were closed, bringing an end to the legal proceedings.