2023 (9) TMI 852 - AUTHORITY FOR ADVANCE RULING, TELANGANA

Reversal of Input Tax Credit - raw materials purchased are already used in the manufacture of finished goods and the finished goods are destroyed in the fire accident completely - raw materials procured are lost in the fire accident before use in manufacture of finished goods - destroyed finished goods can be sold as steel scrap in the open market and output tax liability on such supply of scrap is paid - HELD THAT:- The statutory provision of the Act has to be interpreted in the context of other statutory provisions i.e., 17(2) and 18(4) and the meaning has to be discerned by applying the principle discussed above i.e., ‘ex visceribus actus’. The scheme of the Act becomes clear from the combined reading of three provisions that input tax credit is available to a taxable person only when such taxable person makes taxable supplies. When the taxable supplies are not made input tax credit is not available under Section 17(2) and 17(5)(h). If the input tax credit is already utilized such credit needs to be paid back as given under Section 18(4).

Therefore the input tax credit to the extent of manufactured goods destroyed or inputs destroyed is not available to the applicant and the same needs to be paid back either through the credit available in the credit ledger or by cash - Scrap sold by the applicant is nothing but a destroyed goods therefore in the context of above discussion sale of scrap i.e., sale of destroyed goods are not eligible for input tax credit.