GAAAR Rejects Revenue’s Appeal, Upholds ITC Eligibility on Capital Goods in Form of Electrical Equipment

The appellant, Assistant Commissioner, CGST and Central Excise, Division VII, Bharuch, Vadodara-II Commissionerate, filed an appeal to challenge the advance ruling given by the Gujarat Authority for Advance Ruling (GAAR).

In its appeal, the appellant informed that the respondent, M/s Elixir Industries Private Limited, manufactures hydro entangled non-woven products. They need a 1000 KVA power demand on the 66 KV system voltage for the electricity. For this, they need to install a 66 kV feeder bay at the substation of GETCO under the deposit scheme and also lay a 750-meter new 66 KV S/cable (3+1), 630 mm square aluminium cable line from the 66 KV Palej substation of GETCO at their Palej Factory.

As per the appellant, the material was bought for installation and later given to GETCO for the installation and supervision service. The respondent sought an advance ruling on the following questions before the Gujarat AAR.

“Whether or not a manufacturer is eligible to take ITC on the capital goods in the form of wires/cables electrical equipment etc. used for transmission of electricity from power station of the DISCOM to the factory premises of the registered person which are installed outside factory premises, as per rules and policy of GETCO, Government of Gujarat Electricity distribution company.”

The GAAR held that the Elixir is eligible to claim ITC on the capital goods in the form of wires/cables and electrical equipment. The GAAR observed that there are no such rules that restrict the ITC benefit if the capital goods are handed to GETCO.

However, the Appellant (GST Department) challenged this order before the Gujarat Appellant Authority for Advance Ruling (GAAAR) and raised the following arguments:

• The installation is outside the factory and is owned by GETCO. It cannot be categorised as Plant and Machinery and is blocked under Section 17(5) of the CGST Act, 2017.
• The points under section 17(5) and 18(6) of the CGST Act, 2017, were ignored.

The Gujarat AAAR refused to interfere with the impugned ruling of GAAR as the revenue (appellant) did not submit anything. It upheld the ruling of GAAR and rejected the revenue’s appeal.