TMI Blog2023 (9) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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. - SRI S.V. KASI VISWESWARA RAO, AND SRI SAHIL INAMDAR (I.R.S), [ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 AND UNDER SECTION 98(4) OF THE TEALANGANA GOODS AND SERVICES TAX ACT, 2017.] ****** 1. M/s. Geekay Wires Limited, 11-70/5, 2nd Floor, G.P Complex Shivalayam Road, Fathenagar, Rangareddy, Telangana -500 018 (36AAACG7452M1ZA) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules. 2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose as a Finished goods. 3. It is submitted by the applicant that on 17th Dec '2022 fire broke out in the applicant's factory premises and major quantities of Finished goods as stated above are destroyed and now these finished goods can be sold only as a steel scrap in the market. 4. The applicant submitted that he has already claimed the input tax credit on all the raw materials and other inputs for manufacturing of Steel Nails in the month in which they are procured from the registered taxable persons under the GST Act as per Section 16 of the CGST Act 5. The applicant submitted that according to Section 17 (5) (h) of the CGST Act, input tax credit shall not be available in respect of the goods lost, stolen, destroyed, written off or disposed of way by of gift or free samples. In the applicant's case, the goods purchased from the GST registered taxable persons are not destroyed but they are used in the manufacturing of finished goods and the finished goods are destroyed in the fire accident and these burnt finished goods can be sold only as scrap in the market and output tax liability will be paid on such supply of scrap under the GST Act. STATEMENT co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and whether the same would extend to raw material which are already consumed in the final product. 6. That to understand the scope of the phrase 'in respect of, reference is made to State of Madras Vs. Swastik Tobacco Factory AIR 1966 SC 1000 wherein the Court was examining the phrase in respect of used while granting deduction of excise duty paid in respect of goods sold. While the Revenue argued that 'in respect of here is synonymous with 'on' and narrows down the scope of the phrase to only those goods 'on' which excise duty was paid, the assessee argued that the phrase was wide enough to cover even cases where excise duty paid on raw materials can be attributed to the finished goods. The Court rejected the argument of the assessee and held that 'in respect of in the context can only mean goods 'on' which excise duty was paid and not on raw materials which are attributable to the final product. 7. That even though the above case was not pertaining to destruction of finished goods, a similar interpretation can be adopted for the purpose of 'in respect of used in Section 17(5)(h) of the CGST Act Accordingly, ITC can be disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inished goods can be sold as steel scrap in the open market and output tax liability on such supply of scrap is paid. 6. PERSONAL HEARING: The Authorized representatives of the unit namely Sri. M. Ramachandra Murthy, Advocate AR attended the personal hearing held on 20.03.2023. The authorized representatives reiterated their averments in the application. Further, the Authorised Representative/Applicant M/s. Geekay Wires Limited, Rangareddy, reiterated that their case /Similar Case is not pending in any proceedings in the applicant s case under any of the provision of the Act and have not already decided in any proceedings in the applicant s case under any of the provisions of the Act. 7. DISCUSSION FINDINGS: It is a general rule of interpretation of a statute that it must be read as a whole in its context. The Hon ble Supreme Court of India in the case of Union of India Vs Elephintstone spinning and weaving company limited (2001) 4 SCC 139 (Constitution bench) has adopted the statement from a catena of earlier case law that when the question arises as to the meaning of a certain provision in a statute, it is not only legitimate but proper to read the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or paid back. Under this statute this reversal will apply to the portion of input tax relatable to i. Inputs held in stock. ii. Inputs contained in semi-finished or finished goods in stock. iii. Capital goods. Further under Section 17(5)(h) clearly mentions that input tax shall not be availed in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples . The above 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
