ITC would be available on invisible loss of inputs caused during manufacturing process: HC

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GST Input tax credit - Invisible loss of input during process of manufacturer

Case Details: R.K. Ganapathy Chettiar v. Assistant Commissioner (ST), Kangeyam - [2021] 133 taxmann.com 259 (Madras)

Judiciary and Counsel details

    • Dr. Anita Sumanth, J.
    • R.L. Ramani, Sr. Counsel and B. Raveendran for the Petitioner. 
    • T.M.C. Kaushik, Government Adv. for the Respondent.

Facts of the Case

The petitioner was engaged in the manufacturing activity and there was a loss of a small portion of the inputs, inherent to the manufacturing process. The order was issued by the department 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 GST Act. It challenged the order for reversal of ITC and filed writ petition.

High Court Held

The Honorable High Court observed that impugned assessment orders rejected a portion of ITC claimed. But the situations as set out in clause (h) of Section 17(5) 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 by invoking Section 17(5) (h) by the revenue, in cases of loss by consumption of input inherent to manufacturing loss was misconceived. Therefore, it was held that ITC would be available on total quantity and value of inputs that went into making of final product and order was liable to be set aside.

Case Review

List of Cases referred to

Income Tax Returns 2021-22

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