ITC availed on a particular outward supply can be used against a different outward supply: AAAR

Case Details: Appellate Authority for Advance Ruling, Gujarat Aristo Bullion (P.) Ltd., In re - [2022] 136 taxmann.com 46 (AAAR-GUJARAT)

Judiciary and Counsel Details

• • M.S. Torawane and Seema Arora, Member
  • Devam Sheth, CA for the Applicant.

Facts of the Case

The appellant filed an application of advance ruling to determine whether the Input Tax Credit (ITC) legitimately earned by the appellant and lying as balance in Electronic Credit Ledger can be utilised for payment of GST on an outward supply, which has no nexus with the inputs on which the ITC has been taken. The Authority for Advance Ruling (AAR) held that ITC from purchases meant for outward supply of bullion cannot be utilized towards GST liability on castor oil seed as there is no nexus between inputs and final products. It filed appeal against the order.

AAR Held

The Appellate Authority for Advance Ruling observed that if this logic of the AAR has been adopted as a principle, taxpayers selling large number of commodities would require maintaining input tax credit accounts in respect of each commodity. However, this would not be according to law. Once a taxpayer validly takes ITC on inputs, that ITC merges into common pool of ITC under the Electronic Credit Ledger, which is not being maintained commodity wise. After merging of ITC in the common pool, it would not be always possible to identify that ITC taken on which particular input has been utilised. The section 16(1) of the CGST Act only states the eligibility and conditions for taking ITC. It does not impose any restriction on utilisation of the legitimately earned ITC. Therefore, the order of AAR was liable to be set aside.

Case Review

• • Aristo Bullion (P.) Ltd., In re [Ruling No. GUJ/GAAR/R/15/2021, dated 27-1-2021] (AAR – Gujarat) (para 18) reversed.

List of Cases Referred to

• • Tally Solutions (P.) Ltd. v. CCE [2020] 41 G.S.T.L. 520 (Tri. – Bang.) (para 6.4)
  • Pipavav Shipyard Ltd. v. CCE & ST [2016] 67 taxmann.com 354 (Ahd. – CESTAT) (para 6.4)
  • Nitin Spinners Ltd. v. CCE [Final Order No. 54612 of 2016, dated 24-10-2016] (para 6.4)
  • Entraco Power Systems (P.) Ltd. v. CCE [2017] 3 G.S.T.L. 129 (Tri. – Mum.) (para 6.4)
  • CCE v. Graphite India Ltd. [2017] 3 G.S.T.L. 505 (Tri. – Mum.) (para 6.4)
  • Coca Cola India (P.) Ltd. v. CCE [2009] 22 STT 130 (Bom.) (para 6.4)
  • CCE v. Lakshmi Technology & Engineering Industries Ltd. [2012] 21 taxmann.com 296 (Chennai – CESTAT) (para 6.4)
  • Cognizance For extension of Limitation, In re [2020] 117 taxmann.com 66 (SC) (para 8.2).