The reversal of ITC involving Section 17(5)(h) by the revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h).
Section 17(5)(h) of the CGST Act, 2017 – Input Tax Credit – The petitioners challenged assessment orders, which sought to reverse a portion of the ITC claimed by the petitioners, proportionate to the loss of the input, referring to the provisions of Section 17(5)(h) of the Act. The impugned assessment orders reject a portion of ITC claimed, invoking the provisions of clause (h) in relation to loss arising from manufacturing process. This relates to goods lost, stolen, destroyed, written off or disposed by way of gift or free samples. The court observed that the loss that is occasioned by the process of manufacture cannot be equated to any of the instances set out in clause (h). The situations as set out above in clause (h) indicate loss of inputs that are quantifiable, and involve external factors or compulsions. A loss that is occasioned by consumption in the process of manufacture is one which is inherent to the process of manufacture itself. The reversal of ITC involving Section 17(5)(h), in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h).
Held that:- The Hon’ble High Court set aside the impugned orders.
The reversal of ITC involving Section 17(5)(h) by the revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h).
Section 17(5)(h) of the CGST Act, 2017 – Input Tax Credit – The petitioners challenged assessment orders, which sought to reverse a portion of the ITC claimed by the petitioners, proportionate to the loss of the input, referring to the provisions of Section 17(5)(h) of the Act. The impugned assessment orders reject a portion of ITC claimed, invoking the provisions of clause (h) in relation to loss arising from manufacturing process. This relates to goods lost, stolen, destroyed, written off or disposed by way of gift or free samples. The court observed that the loss that is occasioned by the process of manufacture cannot be equated to any of the instances set out in clause (h). The situations as set out above in clause (h) indicate loss of inputs that are quantifiable, and involve external factors or compulsions. A loss that is occasioned by consumption in the process of manufacture is one which is inherent to the process of manufacture itself. The reversal of ITC involving Section 17(5)(h), in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h).
Held that:- The Hon’ble High Court set aside the impugned orders.