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TMI Blog2025 (3) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be binding only (a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for advance ruling; (b) On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. 4. Under Section 104 (1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. Subject: GST - Appeal filed by M/s Geekay Wires Limited, Hyderabad, under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.15/2023 dated 02.09.2023 passed by the Telangana State Authority for Advance Ruling - Order-in-Appeal passed - Regarding. 1. The subject appeal has been filed under Section 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of such scrap. They have claimed input tax credit (ITC) on all the raw materials and other inputs for manufacturing of steel nails in the month they are procured, as per Section 16 of CGST Act, 2017. Since goods/inputs purchased by the appellant were used in the manufacturing of finished goods and the finished goods became unfit for being sold as such in the fire accident, they sought for advance ruling with regard to eligibility of ITC on the raw materials consumed in the manufacture of finished goods which became unfit for being sold as such. 5. Vide the impugned order, the Advance Ruling Authority has given the following advance ruling on the questions raised by the appellant: SI.No. Question raised Advance Ruling 1 When the raw materials purchased are already used in the manufacture of finished goods and the finished goods are destroyed in the fire accident completely. ITC is required to be reversed 2 When the raw materials procured are lost in the fire accident before use in manufacture of finished goods. ITC is required to be reversed 3 When the destroyed finished goods can be sold as steel scrap in the open market and output tax liability on such sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and these finished goods are not procured from any registered taxable person under the Act and therefore the question of availing input tax credit and restriction of such availed input tax credit does not arise; 7. as per Section 2 (62) of the CGST Act, 'input tax' in relation to a registered person, means the GST charged on any supply of goods or services or both made to him; that the appellant availed ITC on inputs and input services which are already used in the manufacturing process; 8. In the light of the above analysis, it emerges that there has to be a matching of the identity of goods on which credit is taken and on which credit is denied under Section 17 (5) (h). Thus, while applying the said Section, the "identity test" of the goods needs to be considered i.e. ITC can be denied only on those specific goods on which credit is taken. Once the goods on which credit is taken are consumed in the final product and lose their identity, then, ITC reversal cannot be demanded; 9. The appellant also relied up on the decision of Maharashtra Authority for Advance Ruling in General Manager Ordnance Factory Bhandara, 2019 (26) G.S.T.L. 423 (A.A.R. - GST), wherein it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on such supply of scrap has not been denied. If the sale of scrap (destroyed goods) is not entitled for corresponding ITC, of scrap (destroyed goods) is not entitled for corresponding ITC, equally the learned authority shall be deemed to have stated that even there is no liability to pay output tax on the sale of scrap. Drawing spirit from this ruling, dealers may not be paying output tax on such sales and in such circumstances. In such factual situation, appellant couldn't comprehend as to how the learned authority came to the conclusion that the appellant would not be eligible for the corresponding ITC. It is respectfully submitted that for this ground also, the impugned ruling is arbitrary, illegal and unjustifiable. 13. In view of the above grounds, appellant submits that the impugned Advance Ruling is liable to be set aside and the appellant is rightly eligible for input tax credit on the inputs and input services, which are used in the manufacture of finished goods which are destroyed in fire accident and also ITC is fully available on the inputs that are used in the scrap on which tax is paid under the provisions of the Act. Accordingly, it is prayed to set aside t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds if the same are used by him in course or furtherance of his business or the registered person has an intention to use such inputs, input services or capital goods in the course or furtherance of his business at the time of procurement of such goods/ services. 12.2 However, availment of input tax credit is subject to certain restrictions laid down in sub-section (5) of Section 17 of the Act. Section 17(5) provides a list of goods or services on which ITC is not admissible. Relevant extracts are reproduced hereunder: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely :- .........(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;" On a plain reading of the above extracted provisions it is clear that ITC shall not be available in respect of goods lost, stolen, destroyed or written off. Further, the use of non- obstante clause makes it evident that the provisions of Section 17 (5) have an overriding effect over the provisions of Section 16 (1) & Section 18 (1). As such, the averments made by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esting, to proof establishments set up under the Ministry of Defence outside the factory where such samples are completely destroyed during the testing process. Section 17 (5) (h) of the Central GST (CGST) Act, 2017 reads that "input tax credit shall not be allowed in respect of goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples." From a perusal of Section 16 it is seen that only a registered person is entitled to take credit of input tax charged on any supply which are used or intended to be used in the course or furtherance of business. Accordingly we find that goods, or services, or both are eligible for input credit in both the scenarios i.e. when they are intended to be used and when they are actually used. In the subject case the said goods are actually used in the manufacture of final goods which are then sent for testing. Hence it cannot be said that the said goods are destroyed. Goods destroyed would imply goods which are destroyed on various kinds of natural and manmade situations such as flood, fire, and destruction of expired goods (especially in the case of drugs). The interpretation as made out by the applicant that reversal of I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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