ITC Refund on Electricity Supplied to Employees’ Township Not Allowed | HC

Case Details: Bharat Aluminum Company Ltd. vs. State of Chhattisgarh - [2025] 179 taxmann.com 493 (Chhattisgarh)

Judiciary and Counsel Details

• Ramesh Sinha, CJ. & Ravindra Kumar Agrawal, J.
• Bharat Raichandani & K. Rohan, Advs. for the Appellant.
• Rahul Tamaskar, Government Adv. for the Respondent.

Facts of the Case

The assessee, a manufacturer of aluminum, was engaged in the manufacture, sale, and export of aluminum products. For carrying out its industrial operations, the assessee had established two captive power plants of 540 MW and 1200 MW capacity. The assessee imported coal on payment of GST Compensation Cess and utilised the same for the generation of electricity in the said power plants. The electricity generated was used for manufacturing aluminum products, sold to State Electricity Boards and supplied to the residential township for the benefit of its employees. The assessee filed an application for a refund under Section 54(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) seeking a refund of Input Tax Credit (ITC) of the Compensation Cess paid on imported coal. However, the refund application was rejected by the Assistant Commissioner holding that ITC of Compensation Cess attributable to electricity supplied for township consumption was not eligible. The matter then reached the Chhattisgarh High Court.

High Court Held

The High Court held that ITC was a concessional benefit and was available only in accordance with the statutory scheme. The electricity consumed for township purposes was neither used within the factory for manufacturing nor for captive consumption related to the production of goods; it was supplied externally for residential consumption. The Supreme Court in Maruti Suzuki Limited (supra) and Gujarat Narmada Fertilisers Company Limited (supra) has clearly held that ITC is not admissible for electricity wheeled out or supplied externally, even if the excess electricity is used by related parties or for ancillary purposes. The supply of electricity to the township was a welfare-related activity, not integrally connected with the manufacturing or business operations of the assessee. Consequently, the claim for ITC in respect of such electricity was not permissible under the statutory framework.

List of Cases Reviewed

• Commissioner of Cus. & C. Ex. v. ITC Ltd. 2013 (32) S.T.R. 288 (Andhra Pradesh)
• Commissioner of Central Excise v. Ultratech Cement Ltd. 2010 (260) E.L.T. 369 (Bombay)
• Cinemax India Ltd. v. Union of India [2011] 12 taxmann.com 492 (Gujarat)
• S.A. Builders Ltd. v. Commissioner of Income-tax [2007] 158 Taxman 230 (SC)(para 24)
• Ascent Meditech Ltd. v. Union of India [2024] 168 taxmann.com 691/[2025] 93 GSTL 85 (Gujarat)
• Mysore Rolling Mills (P.) Ltd. v. Collector of Central Excise, Belgaum 1987 taxmann.com 624 (SC) (para 28) distinguished
• Bharat Aluminium Company Ltd. v. State of Chhattisgarh [2025] 177 taxmann.com 108 (Chhattisgarh) (para 33) affirmed

List of Cases Referred to

• Maruti Suzuki Ltd. v. CCE 2009 (240) E.L.T. 641 (SC) (para 13)
• CCE v. Gujarat Narmada Fertilisers Co. Ltd. 2009 (240) E.L.T. 661 (SC) (para 13)
• Sree Sankaracharya University of Sanskrit v. Dr. Manu 2023 SCC OnLine SC 640 (para 13)
• Pr. CCE v. Himadri Speciality Chemical Ltd. 2022 SCC OnLine Cal 3348 (para 15)
• CIT (Central)-I v. Vatika Township (P.) Ltd. [2014] 49 taxmann.com 249 (SC) (para 15)
• Jayam & Co. v. Asstt. Commissioner 2018 (19) G.S.T.L. 3 (SC) (para 21)
• State of Karnataka v. M.K. Agro Tech (P.) Ltd. [2017] 86 taxmann.com 123/64 GST 19/[2018] 52 GSTR 215 (SC) (para 21)
• Godrej & Boyce Mfg. Co. (P.) Ltd. v. Commissioner of Sales Tax (1992) 3 SCC 624 (para 21)
• S.A. Builders Ltd. v. CIT, Chandigarh [2007] 158 Taxman 230 (SC) (para 24)
• Cinemax India Ltd. v. Union of India [2011] 12 taxmann.com 492 (Gujarat) (para 24)
• CCE v. Ultratech Cement Ltd. 2010 (260) E.L.T. 369 (Bombay) (para 24)
• Commissioner of Cus. & C. Ex. v. ITC Ltd. 2013 (32) S.T.R. 288 (Andhra Pradesh) (para 24)
• Union of India v. VKC Footsteps India (P.) Ltd. [2021] 130 taxmann.com 193/52 GSTL 513 (SC) (para 26)
• Mysore Rolling Mills (P.) Ltd. v. CCE, Belgaum 1987 taxmann.com 624 (SC) (para 28)
• Ascent Meditech Ltd. v. Union of India [2024] 168 taxmann.com 691/[2025] 93 GSTL 85 (Gujarat) (para 28).