2026-VIL-148-GSTAT-GZB
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SGST Tribunal

GST - Blocked credit under Section 17(5) of CGST Act, 2017 - Burden of proof under Section 155 - Show cause notice invoking Section 17(5) against various items of ITC - Appellant contended that the items are not covered by Section 17(5) and that general invocation without identifying the clause is vague - Whether the burden of proving the applicability or non-applicability of Section 17(5) lies upon the Appellant - HELD - Section 16(1) permits ITC on inward supplies used or intended to be used in the course or furtherance of business. In the present case, the test of whether an item is necessary for operating a brick kiln is too narrow - Section 17(5) begins with a non-obstante clause, so an expenditure may have a business nexus and yet remain blocked. Section 17(5) cannot be invoked as a generic residuary provision, and the particular clause must be identified, since motor vehicles, food and catering, works contracts, construction, personal consumption and gifts are governed by different clauses and tests - Clauses (a) and (b) were substituted with effect from 01.02.2019, so invoices must be tested against the law in force on their dates. Section 155 places the burden of proving eligibility on the person claiming ITC. Relying on precedents, once a supply prima facie falls within a blocked category, the claimant must prove by contemporaneous documents the factual conditions that take the case outside the block - The Appellant has failed to discharge the burden under Section 155. The appeal is dismissed - ITC on tractor, tyres and tubes - Section 17(5)(a) of CGST Act, 2017 - Appellant claimed that tyres and tubes were used on tractors, trolleys and earthmovers for moving bricks - Whether ITC on tyres and tubes is admissible - HELD - An assertion as to use cannot substitute for documentary proof of that use. The tractor was not registered in the name of the Appellant and is classified as a non-transport vehicle, and no registration documents show that it transported bricks or commercial goods - Before 01.02.2019, Section 17(5)(a) blocked motor vehicles except where used for transportation of goods, and that exception had to be established by the Appellant. Registration of the earthmover establishes only its existence. It does not prove that the disputed tyres and tubes were fitted to or consumed by it. No vehicle-wise tyre register, issue or consumption register, service or job card, or asset-wise maintenance ledger was produced to establish invoice-to-asset nexus. For transactions after 01.02.2019 the Appellant still had to prove business use and the nexus of each invoice under Section 16 read with Section 155 - ITC on tyres and tubes is not allowable - ITC on building materials for office renovation and chimney repairs - Section 17(5)(d) of CGST Act, 2017 - Substitution of plant and machinery for plant or machinery with effect from 01.07.2017 - Appellant contended that the brick kiln is a plant, relying on Safari Retreats - Whether ITC on goods received for renovation and chimney repairs is blocked - HELD - Office renovation squarely raises Section 17(5)(d), which blocks goods or services received for construction of immovable property on one's own account even where used in the course or furtherance of business - The Explanation includes renovation, additions, alterations and repairs to the extent of capitalisation. The fixed asset register, capitalisation schedule, balance sheet and depreciation schedule were within the Appellant's exclusive possession, but none was produced. For the chimney, technical drawings, asset records or an engineer's certificate were necessary to show that the goods were machinery, apparatus, foundation or structural support within the statutory definition. A bare assertion that the brick kiln is a plant is not sufficient - Section 124 of the Finance Act, 2025 retrospectively substituted plant and machinery for plant or machinery with effect from 01.07.2017, so Safari Retreats cannot be relied upon to contend broadly that the entire premises or every civil structure becomes a plant on the functionality test. Machinery fixed to earth and its qualifying foundation remains eligible, but land, buildings and other civil structures remain excluded - ITC on these materials is blocked - ITC on sarees, clothes, food, beverages and banquet expenses - Section 17(5)(h) and Section 17(5)(b) of CGST Act, 2017 - Appellant claimed that clothes were distributed as Holi and Diwali gifts to workers and that a banquet was organised for customers and employees as business promotion - Whether ITC on such expenditure is blocked - HELD - The Appellant itself described the sarees and clothes as gifts. Section 17(5)(h) specifically blocks goods disposed of by way of gift, and a business motive does not nullify the express statutory prohibition. Section 17(5)(b) specifically restricts food, beverages and outdoor catering subject to statutory exceptions. The Appellant manufactures and sells bricks and makes no outward taxable supply of food or catering, and no statutory obligation to provide the banquet was shown. Describing the banquet as business promotion does not bring it within any exception - ITC on gifts, food, beverages and banquet expenditure is inadmissible - ITC on travel, hotel, camera, photo-store and electronic items - Sections 16(1), 17(5)(g) and 155 of CGST Act, 2017 - Appellant contended that the proprietor travelled for prospective setup of an automatic plant and that the items were used for business - Whether ITC on such expenditure is admissible - HELD - Ordinary genuine business travel is not automatically blocked by Section 17(5)(b)(iii), but the Appellant must first prove under Sections 16 and 155 that the expenditure was incurred in the course or furtherance of business. No itinerary, correspondence with prospective suppliers, quotation, purchase order, meeting record or customer correspondence was produced, and an argument that a journey was undertaken for a purpose is not evidence of it. The expenditure is therefore held to be personal and falls within Section 17(5)(g) - A camera or photography service is not by itself included in Section 17(5), but eligibility does not arise merely because the invoice is in the business's name. No event record, advertisement, brochure or other contemporaneous evidence linked the items to an outward taxable activity, and the Tribunal cannot presume business use on the basis of counsel's submission - ITC on these items is not allowable on the present record - Inclusion of cess in value of supply - Royalty for soil extraction under reverse charge - Section 15(2)(a) of CGST Act, 2017 - Appellant contended that levy of GST on a value including cess amounts to tax on tax or cess and that interest and penalty on soil royalty should be set aside following Mineral Area Development Authority - Whether the amount of cess lawfully levied or recovered in connection with a taxable supply is includible in the value of supply under Section 15 - HELD - Section 15(2)(a) includes in value any taxes, duties, cesses, fees and charges levied under any law other than the GST enactments, if charged separately by the supplier. Parliament deliberately used the comprehensive expression and not only the word tax. GST is imposed on the underlying taxable supply, the value of which by statutory command includes the relevant cess, so describing the levy as GST on cess is only shorthand - UP Power Transmission Corporation concerns whether the cess itself is legally leviable, while Section 15(2)(a) answers whether a lawfully leviable cess forms part of value, and Section 15 cannot validate a cess never legally leviable. The Special Leave Petition in Udaipur Chambers of Commerce was dismissed, which shows that the High Court's finding on cess is in accordance with law - The findings of the authorities below on this point are upheld - Interest on inadmissible ITC - Section 50(3) of CGST Act, 2017 read with Rule 88B(3
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