CBIC Circular Allowing ITC on Demo Vehicles Will Prevail Over the Order Denying the Same | HC

Case Details: Sai Service (P.) Ltd. vs. Union of India - [2025] 171 taxmann.com 356 (Bombay)

Judiciary and Counsel Details

• M. S. Karnik & Valmiki Menezes, JJ.
• Bharat Raichandani & Vibhav Amonkar, Advs. for the Petitioner.
• Ms Asha Desai, Central Govt. Standing Counsel, Devidas Pangam, Adv. General & Ms Maria Correia, Additional Govt. Adv. for the Respondent.

Facts of the Case

The petitioner, engaged in providing motor vehicle training services, was issued an order disallowing Input Tax Credit on demo vehicles. However, subsequently, the Central Board of Indirect Taxes and Customs (CBIC) GST Policy Wing issued a circular dated 10.09.2024, clarifying that ITC on demo vehicles is permissible. The petitioner sought retrospective applicability of this circular, arguing that it should override the earlier order.

High Court Held

The Bombay High Court ruled that the CBIC circular dated 10.09.2024 would prevail over the impugned order. Consequently, the petitioner was held entitled to claim ITC on demo vehicles as per the terms of the circular. This decision establishes that ITC on demo vehicles will be allowed even if an adverse order was issued before the circular’s release, benefiting suppliers engaged in vehicle training services.