Arraycom (India) Limited Vs State of Gujarat & Ors. (Gujarat High Court)
Conclusion: Input Tax Credit (ITC) availed on insurance premiums for stock, plant & machinery, and business premises (under a Standard Fire and Special Perils Policy) could not be denied by treating it as “motor vehicle insurance” under the blocked credit provisions of Section 17(5)(b).
Held: Assessee-company was a GST-registered entity engaged in manufacturing and system integration activities, claimed ITC on insurance premiums paid for stock-in-trade factory premises, and plant & equipment. The department erroneously treated the policy as motor vehicle insurance and disallowed ITC under Section 17(5), issuing DRC-07 and initiating coercive recovery by attaching assessee’s bank account. Assessee contended that the policy was a Standard Fire and Special Perils Policy covering electronic goods, machinery and premises, not motor vehicles, and that the attachment order under Section 79 was arbitrary, especially after expiry of the appeal period. The State was unable to justify the interpretation adopted in the impugned order. It was held that Insurance policies on record clearly pertained to stock and premises; Section 17(5)(b) applies only to motor vehicle insurance and was wrongly invoked. There was no provision in the GST Act that blocked ITC on general insurance taken for business assets like factories, warehouses, or inventory. Such expenditure was incurred in the “course or furtherance of business” and was fully eligible for credit under Section 16. The findings in DRC-07 were contrary to undisputed facts and suffered from non-application of mind. Consequently, the impugned order and the bank attachment notice were quashed and set aside. Disallowing eligible credit by misclassifying the asset type was held to be an error of jurisdiction.
1. Heard learned advocate Mr. Chaitanya S. Joshi for the petitioner and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondents.
