Afr High Court · 2025
Case Details
Page 1 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} 2025:CGHC:37661 AFR HIGH COURT OF CHHATTISGARH AT BILASPUR WPT No. 14 of 2021 Order reserved on: 01/07/2025 Order delivered on: 31/07/2025 Bharat Aluminium Company Limited, BALCO Plant, Balco Nagar, Korba, District Korba, Chhattisgarh – 495684. --- Petitioner Versus 1. State of Chhattisgarh, Through the Secretary, Department of Finance, Mahanadi Bhawan, Atal Nagar (Naya Raipur), District Raipur, Chhattisgarh. 2. Joint Commissioner (Appeals), State Tax, Bilaspur, Chhattisgarh. 3. Assistant Commissioner, State Tax, Korba, Circle-2, District Korba, Chhattisgarh. --- Respondents WPT No. 15 of 2021 Bharat Aluminium Company Limited, BALCO Plant, Balco Nagar, Korba, District Korba, Chhattisgarh – 495684. ---Petitioner Versus 1. State of Chhattisgarh, Through the Secretary, Department of Finance, Mahanadi Bhawan, Atal Nagar (Naya Raipur), District Raipur, Chhattisgarh. 2. Joint Commissioner (Appeals), State Tax, Bilaspur, Chhattisgarh. Page 2 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} 3. Assistant Commissioner, State Tax, Korba, Circle-2, Chhattisgarh. --- Respondents WPT No. 16 of 2021 Bharat Aluminium Company Limited, BALCO Plant, Balco Nagar, Korba, District Korba, Chhattisgarh – 495684. ---Petitioner Versus 1. State of Chhattisgarh, Through the Secretary, Department of Finance, Mahanadi Bhawan, Atal Nagar (Naya Raipur), District Raipur, Chhattisgarh. 2. Joint Commissioner (Appeals), State Tax, Bilaspur, Chhattisgarh. 3. Assistant Commissioner, State Tax, Korba, Circle-2, Chhattisgarh. --- Respondents WPT No. 17 of 2021 Bharat Aluminium Company Limited, BALCO Plant, Balco Nagar, Korba, District Korba, Chhattisgarh – 495684. ---Petitioner Versus 1. State of Chhattisgarh, Through the Secretary, Department of Finance, Mahanadi Bhawan, Atal Nagar (Naya Raipur), District Raipur, Chhattisgarh. 2. Joint Commissioner (Appeals), State Tax, Bilaspur, Chhattisgarh. 3. Assistant Commissioner, State Tax, Korba, Circle-2, Chhattisgarh. --- Respondents AND Page 3 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} WPT No. 18 of 2021 Bharat Aluminium Company Limited, BALCO Plant, Balco Nagar, Korba, District Korba, Chhattisgarh – 495684. ---Petitioner Versus 1. State of Chhattisgarh, Through the Secretary, Department of Finance, Mahanadi Bhawan, Atal Nagar (Naya Raipur), District Raipur, Chhattisgarh. 2. Joint Commissioner (Appeals), State Tax, Bilaspur, Chhattisgarh. 3. Assistant Commissioner, State Tax, Korba, Circle-2, Chhattisgarh. --- Respondents For Petitioner
Legal Reasoning
: Mr. Bharat Raichandani, Mr. Arjyadeep Roy and For Respondents/State Mr. K. Rohan, Advocates. : Mr. Rahul Tamaskar, Government Advocate. Hon’ble Shri Justice Sanjay K. Agrawal CAV Order 1. Feeling aggrieved and dissatisfied with the impugned order dated 17-9-2020 passed by the Joint Commissioner (Appeals), State Tax, Bilaspur, the petitioner herein namely, Bharat Aluminium Company Limited (BALCO) has filed these appeals calling in question legality, validity and correctness of the same by which its appeals preferred under Section 107 of the Chhattisgarh Goods and Services Tax Act, 2017 have been dismissed affirming the order dated 6-7-2019 passed by the Page 4 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} Assistant Commissioner, State Tax, Korba, Circle-2, directing recovery of ₹ 40,14,605/-. (It is pertinent to mention here that W.P.(T)No.14/2021 relates to ITC claim for the month of February, 2019; W.P.(T)No.15/2021 relates to ITC claim for the month of August, 2019; W.P.(T)No.16/2021 relates to ITC claim for the month of January, 2019; W.P.(T)No.17/2021 relates to ITC claim for the month of December, 2018 and W.P.(T)No.18/2021 relates to ITC claim for the month of November, 2018.) 2. Since common question of law and fact is involved in these writ
Decision
petitions, they are being disposed of by this common order. 3. The aforesaid challenge has been made on the following factual backdrop: - 4. The petitioner is engaged in manufacture, sale and export of aluminium products and it has its factory premises at Korba, Chhattisgarh. For the purposes of its business operations, the petitioner has established two power plants of 540 MW and 1200 MW at Korba. The petitioner imports coal on due payment of Goods and Services Tax (GST) Compensation Cess and uses the same for generation of electricity using the two power plants which is further used for manufacture of aluminium products. The petitioner also claims to maintain a residential township for its employees. It is the case of the petitioner that the electricity which is generated from the two power plants is used in three manners: (a) firstly, electricity from the power plants is used for manufacturing operations within the factory premises; (b) secondly, some portion of the Page 5 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} electricity is sold to State Electricity Boards; and (c) lastly, some portion of the electricity (540 MW) is supplied to the township for its employees, and the present dispute is confined to the portion of electricity which is supplied to the township of its company. 5. The petitioner herein filed an application for refund in terms of Section 54(1) of the Central Goods and Services Tax Act, 2017 (for short, ‘the CGST Act’) claiming refund of the Input Tax Credit (ITC) of the Compensation Cess paid on import of coal. The refund claimed by the petitioner was to the tune of ₹ 7,44,73,347/- for the month of February, 2019 on 1st April, 2019 on the premise that the petitioner being exporter of aluminium products is entitled for the ITC of the GST Compensation Cess paid on the inputs i.e. coal used for generation of electricity. On 6-5-2019, provisional refund of 90% of the total refund claimed was allowed to the tune of ₹ 6,70,26,012/- and show cause notice was issued to the petitioner on 7-6-2019 vide Annexure P-5 as to why the refund claimed to the extent of ₹ 51,48,531/- should not be rejected to which the petitioner filed its reply on 19-6-2019 vide Annexure P-6 clarifying the bifurcation in the usage of the two power plants by filing Form G, which is a statutory form, and stating that the electricity supplied to the township is for ‘business’ purposes, no reversal is warranted and the petitioner Page 6 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} also stated that GST Compensation Cess paid on import of coal is not attributable to the supply of Duty Credit Scrips (DCS) and no portion of the same is used for supply of DCS. In Form G – Electricity Duty, it has been mentioned that 1388641 KWH electrical energy i.e. total number of units, was consumed in the Township Colony for the month ending February, 2019. The competent authority by its order dated 22-6-2019 (Rectification order dated 6-7-2019) vide Annexure P-7 rejected the application assigning the following two reasons: - 1. Electricity generated by 540 MW Power Plant has been supplied for Township consumption by the taxpayer as evident from Form G provided by the taxpayer. Hence ITC of Compensation cess paid on coal attributable to 540 MW Power Plant is liable to be reversed under Rule 42 of CGST, SGST, IGST Act. 2. Sale of Duty Credit Scrips [Merchandise from India Export Scheme (MEIS) License sale] is an exempt supply under Notification No.36/2017 of IGST Act and 35/2017 of CGST Act and it should be included in Exempt Supplies as well as Total Turnover in the State for the purpose of Reversal of ITC under Rule 42 of CGST, SGST and IGST Act. Page 7 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} 6. Questioning the order dated 6-7-2019 (Annexure P-7), the petitioner herein preferred appeal before the appellate authority under Section 107 of the Chhattisgarh Goods and Services Tax Act, 2017 before the Joint Commissioner (Appeals) and the Joint Commissioner (Appeals), State Tax, Bilaspur, by order dated 17-9-2020 (Annexure P-8), rejected the appeal of the petitioner holding firstly, that provision of electricity for consumption of residents of township is not intrinsically connected to the business activity of the petitioner; secondly, that sale of Duty Credit Scrips (DCS) is an exempt supply and quantum of ITC attributable to such exempt supplies warrants reversal; and lastly, that an amount of ₹ 40,14,605/- is recoverable from the petitioner leading to filing of the instant writ petitions questioning the order passed by the Joint Commissioner (Appeals) affirming the order dated 6-7-2019 (Annexure P-7) passed by the Assistant Commissioner, State Tax, Korba, Circle-2. 7. The petitioner filed the instant writ petitions stating inter alia that it uses coal as a raw material for production of Aluminium Products and it produces electricity using the coal which is in turn used for production of Aluminium Products and supplied to their township. In the writ petitions filed by the petitioner, the petitioner has raised question, whether the maintenance of Page 8 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} township and supply of electricity thereof is in the course or furtherance of business in terms of Section 2(17) read with Section 16 of the CGST Act and it amounts to business activity to entitle the petitioner for Input Tax Credit (ITC) under Section 16(1) of the CGST Act and argued that during the pendency of the writ petitions, the insertion of Explanation 1(d) to Rule 43 of the Central Goods and Services Tax Rules, 2017 (for short, ‘the CGST Rules’) vide Notification No.14/2022 – Central Tax dated 5th July, 2022, would also be applicable to the pending proceedings, as it would have the retrospective effect. Therefore, the order impugned passed by the appellate authority i.e. the Joint Commissioner (Appeals), State Tax, Bilaspur, affirming the order of the Assistant Commissioner, State Tax, Korba, Circle-2, directing recovery of ₹ 40,14,605/- deserves to be set aside. 8. Return has been filed opposing the averments made in the writ petitions stating inter alia that proportion of Compensation Cess attributable to coal consumed for production of electricity used in the township is not eligible for refund of ITC and the appellate authority has rightly held that sale of Duty Credit Scrips is an exempted supply, it should be added to calculate the eligible Input Tax Credit. It has further been stated that turnover generated by selling Duty Credit Scrips should be Page 9 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} included in the turnover of exempt supplies as well as total turnover. Therefore, the writ petitions deserve to be dismissed. 9. Rejoinder has been filed on behalf of the petitioner. 10. It is appropriate to notice here that the appellate authority adjudicated the appeal preferred under Section 107 of the Chhattisgarh Goods and Services Tax Act, 2017 on 17-9-2020 and thereafter, the notification dated 5-7-2022 inserting Explanation 1(d) to Rule 43 of the CGST Rules came into force with effect from 5th July, 2022 on the recommendation made by the GST Council. 11.Mr. Bharat Raichandani, learned counsel appearing for the petitioner, would submit that maintenance of township is in the course or furtherance of business and hence ITC should be refunded to the petitioner. He would refer to the term ‘business’ as mentioned in Section 2(17) of the CGST Act and further refer to the definition ‘input’ as given in Section 2(59) of the CGST Act and also refer to the definition ‘input service’ as given in Section 2(60) of the CGST Act. He would further submit that Section 16(1) of the CGST Act grants a substantive right to the petitioner to claim ITC of any input goods or services, or both used in the course or furtherance of business and according to the petitioner, maintenance of township is very critical since the township houses employees who are important for continuity in Page 10 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} business operations, more so in light of the remote location of the petitioner’s premises and maintenance of township being intrinsically connected with the petitioner’s manufacturing operations is therefore ‘business’ in terms of Section 2(17) of the CGST Act and supply of electricity to the township is therefore business activity. He would also submit that availability of credit has to be judged on the basis of commercial expediency and the ‘commercial expediency’ of an expenditure has to be judged only from the view, whether the same is incurred ‘for furtherance of business or not’. He would rely upon the decisions of High Courts and the Supreme Court in the matters of Commissioner of Customs & Central Excise, Hyderabad-III v. ITC Limited1, Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd.2, Cinemax India Limited v. Union of India3 and S.A. Builders Ltd. v. Commissioner of Income Tax (Appeals) Chandigarh and another4 to buttress his submissions. He would further submit that insertion of Explanation 1(d) to Rule 43 of the CGST Rules by Notification No.14/2022 – Central Tax dated 5th July, 2022 is applicable to the pending proceeding, as the same is clarificatory in nature and the same has been made pursuant to the recommendation made by the GST Council in its 47th GST Council Meeting dated 28-29 June, 2022. 2013 (32) STR 288 (AP) 1 2 2010 (260) ELT 369 (Bom.) 3 2011 (24) STR 3 (Guj.) 4 (2007) 1 SCC 781 Page 11 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} He would further rely upon the decisions of the Gujarat High Court, Andhra Pradesh High Court and the Supreme Court in the matters of Ascent Meditech Ltd. v. Union of India and others5, M/s Tirth Agro Technology Pvt. Ltd. and another v. Union of India and others6, Sembcorp Energy India Ltd. v. State of Andhra Pradesh7, S. Sundaram Pillai and others v. V.R. Pattabiraman and others8, Mysore Rolling Mills (P) Ltd. v. Collector of Central Excise, Belgaum9 and Government of India and others v. Indian Tobacco Association10 in support of his contention and prayer has been made to grant the writ petitions and to set-aside the order passed by the appellate authority. 12. Mr. Rahul Tamaskar, learned Government Advocate appearing on behalf of the State/respondents, would submit that the supply of electricity to the township for consumption of residents is not integrally related to the business activity of the petitioner and according to him, the supply of electricity to the township by the petitioner does not affect the business, as the same could have also been done by the Power Distribution Company. Therefore, it has rightly been held that provision of electricity to the residents of township is not the integral part of the business and as such, the reversal of ITC is justified. He
Decision
order ii) subsequent order/provision/amendment to be considered as clarificatory of the previous law, the pre-amended law ought to have been vague or ambiguous. It is only when it would be impossible to reasonably interpret a provision unless an amendment is read into it, that the amendment is considered to be a clarification or a declaration of the previous law and therefore applied retrospectively. iii) An explanation/clarification may not expand or alter the scope of the original provision. iv) Merely because a provision is described as a clarification/ explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively.” 40. Reverting to the facts of the present case, it is quite vivid that clause (d) was enacted and inserted in Explanation 1 to Rule 43 of the CGST Rules based on the representations and recommendation made by the GST Council. Insertion of clause (d) has only expanded the scope of supplies which have to be excluded from the aggregate value of exempt supplies. Therefore, the amendment made in the explanation in shape of Page 31 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} Rule 43, Explanation (1)(d), of the CGST Rules, is not clarificatory in nature. Though express power in Section 164(3) of the CGST Act has been conferred upon the rule-making authority, yet the rule-making authority did not choose to promulgate it with retrospective effect. ITC, as held earlier, is not the substantive right of the dealer, it is only a nature of benefit or concession extended to the dealer under the statutory scheme and it cannot be claimed as a matter of right as held by their Lordships of the Supreme Court in Jayam & Co. (supra). As such, it cannot be held that it was retrospective in nature and would not apply to the present pending cases. Accordingly, the learned appellate authority has rightly dismissed the appeals of the petitioner. The second question is also answered against the petitioner and in favour of the State/ respondents. 41. The judgment relied upon by the petitioner in Ascent Meditech Ltd. (supra) delivered by the High Court of Gujarat is completely distinguishable as in that case amendment to Rule 89(5) of the Central/Gujarat Goods and Services Tax Rules, 2017 was brought after direction of the Supreme Court in the matter of Union of India and others v. VKC Footsteps India Private Limited18 wherein after noticing the anomalies in the formula it was specifically directed by their Lordships of the Supreme Court to remove the anomalies and to take decision in 18 (2022) 2 SCC 603 Page 32 of 32 {W.P.(T)Nos.14/2021, 15/2021, 16/2021, 17/2021 & 18/2021} accordance with law. Similarly, the decision relied upon in Mysore Rolling Mills (P) Ltd. (supra) and other decisions, are clearly not applicable to the facts of the present case and are distinguishable. 42. In that view of the matter, the benefit of amendment in shape of Explanation 1(d) to Rule 43 of the CGST Rules would be available for the period after 5-7-2022 and no case for interference in the order impugned passed by the Joint Commissioner (Appeals) deciding both the issues against the petitioner, would be made out. 43. Consequently, I do not find any merit in the petitions and all the writ petitions stand dismissed leaving the parties to bear their own cost(s). Sd/- (Sanjay K. Agrawal) JUDGE Soma