No ITC on Compensation Cess for Coal Used in Township Electricity | HC

Case Details: Bharat Aluminium Company Ltd. Versus State of Chhattisgarh (2025) 33 Centax 209 (Chhattisgarh)

Judiciary and Counsel Details

• Sanjay K. Agrawala, J.
• S/Shri Bharat Raichandani, Arjyadeep Roy & K. Rohan, Advs. for the Petitioner
• Shri Rahul Tamaskar, Govt. Adv. for the Respondent

Facts of the Case

The petitioner, an assessee engaged in the manufacture and export of aluminium products, imported coal for use in its captive power plant and paid compensation cess thereon. It filed an application seeking refund of input tax credit (ITC) of compensation cess paid on such coal, asserting that being an exporter, it was entitled to full refund of unutilised ITC under section 16 of the CGST Act read with the Chhattisgarh GST Act. A provisional refund equivalent to 90 per cent of the total claim was sanctioned; however, a show cause notice was issued proposing partial rejection of refund on the ground that electricity generated in the 540 MW power plant had been diverted for township consumption. The petitioner submitted a reply contending that the electricity was utilised in the course of furtherance of business and therefore credit could not be denied. The adjudicating authority rejected the claim, holding that ITC relatable to electricity supplied for township use was inadmissible, and this order was confirmed in appeal. Aggrieved, the petitioner approached the High Court by way of writ petition challenging the rejection of refund. 

High Court Held

The High Court held that the petitioner was not entitled to claim ITC of compensation cess attributable to coal used for generation of electricity supplied to its township. The Court observed that electricity consumed for township maintenance could not be regarded as input used in the course or furtherance of business within the meaning of section 16 of the CGST Act and the Chhattisgarh GST Act. Relying upon the ratio of the Supreme Court 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), it was held that inputs attributable to activities not integrally connected with manufacture or supply are ineligible for ITC. The Court reasoned that the petitioner’s admission in Form G that a portion of power was utilised in its township clearly established non-business consumption. Accordingly, the refund claim was held to be not admissible. 

List Of Case Cited

• Ascent Meditech Ltd. v. UOI — 2025 (93) G.S.T.L. 85/(2024) 24 Centax 405 (Guj.) — Referred [Para 11]
• CCE v. Gujarat Narmada Fertilizers Co. Ltd. — [2009] 22 STT 46 (SC) — Referred [Para 12]
• CCE, Nagpur v. Ultratech Cement Ltd. — 2010 (20) S.T.R. 577 (Bom.) — Referred [Para 11]
• Cinemax India Ltd. v. UOI — [2011] 12 taxmann.com 492/32 STT 359 (Gujarat) — Referred [Para 11]
• Commissioner of Customs & Central Excise, Hyderabad-III v. ITC Ltd. — [2013] 32 taxmann.com 334/39 STT 654 (Andhra Pradesh) — Referred [Para 11]
• Godrej & Boyce Mfg. Co. (P.) Ltd. v. Commissioner of Sales Tax — (1992) 3 SCC 624 — Referred [Para 20]
• Government of India v. Indian Tobacco Association — 2005 (187) E.L.T. 162 (S.C.) — Referred [Para 11]
• Jayam & Co. v. Asstt. Commissioner — (2016) 15 SCC 125 — Referred [Para 22]
• Maruti Suzuki Ltd. v. CCE, Delhi-III — [2009] 22 STT 54 (SC) — Referred [Para 12]
• Mysore Rolling Mills (P.) Ltd. v. CCE, Belgaum — 1987 taxmann.com 624 (SC)/1987 (28) E.L.T. 50 (SC — Referred [Para 11]
• S. Sundaram Pillai v. V.R. Pattabiraman — (1985) 1 SCC 591 — Referred [Para 11]
• S.A. Builders Ltd. v. CIT (Appeals) — 2007] 158 Taxman 74 288 ITR 1 (SC) — Referred [Para 11]
• Sembcorp Energy India Ltd. v. State of Andhra Pradesh — 2022 (65) G.S.T.L. 263 (A.P.) — Referred [Para 11]
• Sree Sankaracharya University of Sanskrit and others v. Dr. Manu — 2023 SCC OnLine SC 640 — Referred [Para 12]
• State of Karnataka v. M.K. Agro Tech (P.) Ltd. — [2017] 86 taxmann.com 123/64 GST 19/[2018] 52 GSTR 215 (SC) — Referred [Para 21]
• Tirth Agro Technology (P.) Ltd. v. UOI — [2025] 171 taxmann.com 593 (Gujarat) — Referred [Para 11]
• UOI v. VKC Footsteps India (P.) Ltd. — [2021] 130 taxmann.com 193/52 G.S.T.L. 513 (SC) — Referred [Para 41]