HC denies ITC of compensation cess on coal used for township electricity supply

Case Details: Bharat Aluminium Company Ltd. vs. State of Chhattisgarh - [2025] 177 taxmann.com 108 (Chhattisgarh)

Judiciary and Counsel Details

• SANJAY K. AGRAWAL, J.
• Bharat Raichandani, Arjyadeep Roy and K. Rohan, Advs. for the Petitioner.
•  Rahul Tamaskar, Govt. Adv. for the Respondent.

Fact of the Case

The petitioner, an exporter of aluminium products, filed an application claiming refund of input tax credit (ITC) of compensation cess paid on import of coal on the premise that such ITC was admissible. A provisional refund of 90 percent of the total claim was granted, and a show cause notice was issued proposing rejection of part of the refund claim. In reply, the petitioner contended entitlement to ITC; however, the claim was rejected on the ground that 540 MW electricity generated in its power plant was supplied to township consumption, thereby necessitating reversal of ITC of compensation cess paid on coal attributed to the said plant. The petitioner’s appeal was dismissed, leading to the present writ petition before the High Court of Chhattisgarh.

HC Held

The High Court of Chhattisgarh held that as it was the admitted case of the petitioner that electricity generated in the 540 MW plant was used in the course of furtherance of business, and as evident from Form G, the petitioner would not be entitled to ITC on electrical energy consumed for maintenance of its township. Reliance was placed on the decisions in CCE v. Gujarat Narmada Fertilizers Co. Ltd. [2009] 22 STT 46 (SC) and Maruti Suzuki Ltd. v. CCE, Delhi-III [2009] 22 STT 54 (SC). Accordingly, the claim for ITC of compensation cess paid on coal attributed to electricity supplied for township consumption was rejected.

List Of Cases Reviewed

• CCE v. Gujarat Narmada Fertilizers Co. Ltd. [2009] 22 STT 46 (SC) and
• Maruti Suzuki Ltd. v. CCE, Delhi-III [2009] 22 STT 54 (SC), (Para 27) followed;
• Commissioner of Customs & Central Excise, Hyderabad-III v. ITC Ltd. [2013] 32 taxmann.com 334/39 STT 654 (Andhra Pradesh),
• CCE,Nagpur v. Ultratech Cement Ltd. [2010] 20 STR 577/29 STT 244 (Bombay)/2010 (260) ELT 369 (Bom.),
• Cinemax India Ltd. v. UOI [2011] 12 taxmann.com 492/32 STT 359 (Gujarat)/2011 (24) STR 3 (Guj.) and
• S.A. Builders Ltd. v. CIT (Appeals) [2007] 158 Taxman 74 288 ITR 1 (SC)/(2007) 1 SCC 781 (Para 28) distinguished

List Of Cases Referred to

• Sembcorp Energy India Ltd. v. State of Andhra Pradesh [2022] 142 taxmann.com 400/94 GST 672/65 GSTL 263 (Andhra Pradesh) (para 11),
•  Commissioner of Customs & Central Excise, Hyderabad-III v. ITC Ltd. [2013] 32 taxmann.com 334/39 STT 654 (Andhra Pradesh) (para 11),
• CCE, Nagpur v. Ultratech Cement Ltd. [2010] 20 STR 577/29 STT 244 (Bombay) (para 11),
•  Cinemax India Ltd. v. UOI [2011] 12 taxmann.com 492/32 STT 359 (Gujarat) (para 11),
• S.A. Builders Ltd. v. CIT (Appeals) 2007] 158 Taxman 74 288 ITR 1 (SC) (para 11),
• S. Sundaram Pillai v. V.R. Pattabiraman (1985) 1 SCC 591 (para 11),
• Mysore Rolling Mills (P.) Ltd. v. CCE, Belgaum 1987 taxmann.com 624 (SC)/[1987] 28 ELT 50 (SC (para 11),
• Government of India v. Indian Tobacco Association 2005 taxmann.com 1015 (SC)/[2005] 187 ELT 162 (SC) (para 11),
• Ascent Meditech Ltd. v. UOI [2024] 168 taxmann.com 691/[2025] 93 GSTL 85 (Gujarat) (para 11),
•  Tirth Agro Technology (P.) Ltd. v. UOI [2025] 171 taxmann.com 593 (Gujarat) (para 11),
• Maruti Suzuki Ltd. v. CCE, Delhi-III [2009] 22 STT 54 (SC) (para 12),
•  CCE v. Gujarat Narmada Fertilizers Co. Ltd. [2009] 22 STT 46 (SC) (para 12),
•  Sree Sankaracharya University of Sanskrit and others v. Dr. Manu 2023 SCC OnLine SC 640 (para 12),
•  Godrej & Boyce Mfg. Co. (P.) Ltd. v. Commissioner of Sales Tax (1992) 3 SCC 624 (para 20),
• 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),
• Jayam & Co. v. Asstt. Commissioner (2016) 15 SCC 125 (para 22) and UOI v. VKC Footsteps India (P.) Ltd. [2021] 130 taxmann.com 193/52 GSTL 513 (SC) (para 41).