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2019 (10) TMI 570 - AAR - GSTInput tax credit - inputs/capital goods/input services -Section 16 and 17 of the CGST/ KGST/ IGST Act - whether the capital goods and. inputs constitute plant and machinery of the Applicant which are used in the business of Manufacturing Cement and hence not blocked input tax credit under section 17(5) of the CGST/ KGST/ IGST Act? - HELD THAT:- The applicant is entitled to credit of input tax charged on any supply of goods and/or services made to the applicant and used by the applicant in furtherance of his business. Here the electricity is produced by the solar power plant. Therefore the supplies of goods and/or services that go into the setting up of the solar power plant can be rightly construed as supplies made and used by the applicant in furtherance of his business. However this is subject to the conditions and restrictions as specified in Section 16(2) and Section 17 of the CGST Act, 2017. Input Tax Credit - items being used towards the electric energy generated from the captive power plant and transmitted to the cement manufacturing plants which are physically located at distinct locations within the State of Karnataka - section 17(1) and 17(2) of the CGST/KGST/IGST Act - permission for utilization of the credit for payment of output tax - HELD THAT:-The activity of production of electric energy is a supply to self as the electricity produced is captively used. In fact the production of electricity in a solar power plant geographically separated from the manufacturing site is an intermediate process in the manufacture of cement akin to the use of generators sets within the factory premises to produce electricity for consumption in the manufacturing process. The operation of generator sets within the factory would not constitute a separate supply. Similarly the operation of the solar power plant shall not constitute a separate supply warranting the application of Section 17(1) and /or 17(2) - the applicant shall be entitled to the eligible input credits in entirety provided the entire production is captively consumed. Reversal of Input Tax Credit - electric energy generated by it at its plant and banked with the KPTCL, GESCOM & HESCOM and which is unutilized at the end of six months from the date of banking and is deemed to be consumed by KPTCL, GESCOM and HESCOM at the end of six months - HELD THAT:- Electrical energy is an exempted item in terms of CGST-Notification 2/2017-Central Tax (Rate) dated 28.06.2017 (Serial No. 104) & KGST-Notification GD48 CSL 2017 dated 29.06.2017. The applicant also agrees to this, as per para 12 of Annexure 3 to their application. Therefore in respect of the supply of surplus electric energy it is evident that the applicant is engaged in supply of exempted goods - The applicant company is required to reverse input tax credit on the unutilized electric energy banked with KPTCL, GESCOM & HESCOM and for which the applicant receives a consideration in terms of the Wheeling and banking agreement.
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