Eligibility of Input Tax Credit vis-à-vis inherent loss of inputs during manufacture

all Law.

This podcast focuses on the interesting issue settled by the Hon’ble Madras High Court in the case of Eastman Exports Case pertaining to the reversal of ITC on the loss of inputs inherent to the process of manufacturing. The Hon’ble Court held that ITC can be claimed on the inputs which are lost in manufacture as such loss is inherent to the process of manufacture itself. To arrive at the decision, the Hon’ble Court primarily relied on the principles laid down in the JK Cotton Spinning & Weaving Mills Case. The Hon’ble Court also resorted to the principles of indispensability and commercial expediency of the inputs to arrive at the aforesaid conclusion. The Article also focuses on the ratios laid down in the subsequent decisions under diverse indirect tax legislations, wherein, similar conclusions were arrived at. The Article also compares S.19(9)(iii) of the TNVAT Act with Section 17(5)(h) of the CGST Act and opines that the Impugned Judgement might come to assistance if similar demands are raised under the GST regime. The Podcast ends on a cautious note that each claim/reversal of ITC must be independently dealt with.
Link:Eligibility of Input Tax Credit vis-à-vis inherent loss of inputs during manufacture | Lakshmikumaran & Sridharan Attorneys (lakshmisri.com)
Audio Source: An article published on the LKS website in May 2023.

Authors: Charulatha R Nimrah Ali