ITC on Construction | HC Remands Case to AAR After Law Change

Case Details: Konkan LNG Ltd. vs. Commissioner of State Tax - [2025] 175 taxmann.com 605 (Bombay)

Judiciary and Counsel Details

• M. S. Sonak & Jitendra Jain, JJ.
• Arnab Roy, Shammi Kapoor, Ms Swati Agarwal & Ankit Trivedi for the Petitioner.
• Ms Jyoti Chavan, Addl. G.P., Jitendra B. Mishra & Dhananjay B. Deshmukh for the Respondent.

Facts of the Case

The petitioner, having filed a writ petition, challenged the order of the Authority for Advance Ruling (AAR) which held that the petitioner was ineligible to claim input tax credit (ITC) on the construction and reconstruction of a breakwater wall. The wall was used for protecting vessels from tidal forces while unloading liquefied natural gas (LNG) and not directly for making outward supplies of goods or services. The Co-ordinate Bench of the High Court had dismissed the petition.

However, the Hon’ble Supreme Court, in Chief Commissioner of Central Goods and Services Tax v. Safari Retreaders Pvt. Ltd., ((2025) 1 SCC 350), set aside the High Court’s dismissal and restored the writ petition for adjudication in light of its authoritative ruling. Subsequently, Section 17 of the CGST Act was amended retrospectively by the Finance Act, 2023, which further impacted the legal framework governing blocked credits on construction of immovable property. In view of these significant legal developments, both parties jointly submitted that the original AAR order required reconsideration in light of the Supreme Court’s ruling and the retrospective legislative amendment. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that, in view of the retrospective amendment to Section 17 of the CGST Act, 2017 brought by the Finance Act, 2023, and the authoritative interpretation laid down by the Supreme Court in Chief Commissioner of Central Goods and Services Tax v. Safari Retreaders Pvt. Ltd. ((2025) 1 SCC 350), the legal foundation of the original ruling of the AAR stood materially altered. Since the AAR had not considered either the subsequent judicial pronouncement or the retrospective legislative change, it was appropriate that the matter be reconsidered in its entirety. Accordingly, the matter was to be remanded to the AAR for fresh consideration of the petitioner’s claim to input tax credit on the construction and reconstruction of the breakwater wall, in light of the amended statutory provisions and binding judicial precedent.

List of Cases Referred to

• Chief Commissioner of Central GST v. Safari Retreats Pvt. Ltd. (2025) 30 Centax 350 (SC) (para 2).